M/s. Vinod Commodities Ltd., JODHPUR V. ACIT, Circle-3, JODHPUR

ITA 135/JODH/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5789 (ITAT-JODHPUR)
• Duration Of Justice: 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K C BADHOK
• Keywords: Reopening of assessment; Unexplained investment; Share purchase agreement; Source of fund; Application of stay; Question of law; Tangible material; Wrong claim; Difference of opinion; Accommodation entries; Penny stocks; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction; Set aside
• Section: 143(3); 133(6); 143(1); 32; 147; 131; 68; 27; 148; 6; 263; 12; 28; 10; 11; 15

Judgement Text

1 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI N.K.SAINI, VICE PRESIDENT AND SHRI A. T. VARKEY, JUDICIAL MEMBER S.A. NO.07/JODH/2019 IN ITA NO.135/JODH/2019 (ASSESSMENT YEAR-2009-10) & ITA NO.135/JODH/2019 (ASSESSMENT YEAR-2009-10) M/S. VINOD COMMODITIES LTD. (PAN:AAECS9380A) C/O, RAJENDRA JAIN, ADVOCATE, 106 AKSHAY DEEP COMPLEX, 5 TH B. ROAD, SARDARPURA, JODHPUR VS ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-3, JODHPUR, RAJASTHAN (APPELLANT) (RESPONDENT) APPELLANT BY SHRI RAJENDRA JAIN, ADVOCATE RESPONDENT BY SH. K. C. BADHOK, CIT, DR DATE OF HEARING 07.05.2019 DATE OF PRONOUNCEMENT 09.05.2019 O R D E R PER A. T. VARKEY, J.M. BOTH THIS STAY APPLICATION AS WELL AS THE APPEAL PR EFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, JODHPUR DATED 30.11.2018 FOR AY 2010-11. 2. BOTH SIDES AGREED TO HEAR THE APPEAL ITSELF, SO STAY APPLICATION IS DISMISSED. COMING TO APPEAL, AT THE OUTSET ITSELF, THE LD. AR OF THE ASSESSEE DREW OUR ATTENTION TO THE LEGAL ISSUE THAT HAS BEEN RAISED BY THE ASSESSEE AS GROUND NOS. 1 AND 2 WHEREIN THE REOPENING U/S. 147/148 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER RE FERRED TO AS THE ACT) OF THE AO HAS BEEN CHALLENGED BY THE ASSESSEE, THEREFORE, WE ARE INCLINED TO ADJUDICATE FIRST THE LEGAL ISSUE 2 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 RAISED BEFORE US, BECAUSE IF THERE IS MERIT ON THE LEGAL ISSUE THEN IT GOES TO THE ROOT OF THE REASSESSMENT ORDER FRAMED PURSUANT TO REOPENING ITS ELF. 3. THE BRIEF FACTS OF THE CASE NECESSARY FOR ADJUDI CATION OF THE LEGAL ISSUE ARE THAT THE ASSESSEE HAD FILED THE ORIGINAL RETURN OF INCOME ON 03.07.2009 FOR AY 2009-10. SINCE THE TIME PERIOD EXPIRED FOR ISSUANCE OF NOTICE U/S. 143 (2) OF THE ACT, THEREFORE ORIGINALLY, NO SCRUTINY ASSESSMENT WAS FRAMED. THEREFORE, THE RETU RN OF INCOME FILED BY ASSESSEE STOOD ACCEPTED BY THE DEPARTMENT. THEREAFTER, THE AO ON 30.03.2016 ISSUED NOTICE U/S. 148 OF THE ACT FOR REOPENING THE ASSESSMENT, AND THE REASS ESSMENT ORDER WAS PASSED ON 28.12.2016. SINCE THE LEGAL CHALLENGE IS IN RESPECT OF THE VERY ACTION OF THE AO TO INVOKE THE JURISDICTION TO REOPEN THE ASSESSMENT, AS STATED ABOVE, WE WOULD LIKE TO FIRST DISPOSE OF THE SAID LEGAL GROUND. 4. THE LD. AR ASSAILED THE DECISION OF THE AO TO R EOPEN THE ASSESSMENT BASED ON LETTER FROM THE ADIT (INV.), THANE. ACCORDING TO LD. COUN SEL, THE AO WITHOUT APPLICATION OF MIND HAS PROCEEDED TO REOPEN THE ASSESSMENT ONLY ON THE BASIS OF A INVESTIGATION REPORT GIVEN BY THE ADIT (INV.), THANE IN RESPECT OF ACCOM MODATION ENTRIES GIVEN IN THE FORM OF SHARE CAPITAL BY COMPANIES FLOATED BY SHRI VIKAS JA IN AND FAMILY. ACCORDING TO LD. COUNSEL, BEFORE THE AO DECIDES TO REOPEN THE ASSESS MENT, HE HAS TO SATISFY THE CONDITION PRECEDENT TO ASSUME JURISDICTION AND FOR THAT HE TO OK OUR ATTENTION TO THE EXPRESSION USED IN SEC. 147 OF THE ACT WHICH USES THE EXPRESSION THAT AO SHOULD HAVE REASON TO BELIEVE ESCAPEMENT OF INCOME. ACCORDING TO LD COUNSEL, TH E EXPRESSION REASON TO BELIEVE POSTULATES A FOUNDATION BASED ON INFORMATION AND BE LIEF BASED ON REASONING. ACCORDING TO LD COUNSEL, EVEN AFTER THERE IS A FOUNDATION BASED ON INFORMATION IS THERE, STILL THERE MUST BE SOME REASONS WARRANT HOLDING A BELIEF THAT INCOME C HARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE LD. AR REMINDED US THAT THE EXPRES SION USED BY PARLIAMENT IS REASON TO BELIEVE WHICH IS STRONGER THAN THE EXPRESSION SATISFIED AND IN THE PRESENT CASE SUCH REQUIREMENT AS CONTEMPLATED BY LAW HAS NOT BEEN MET IN THE REASON RECORDED BY THE AO BEFORE VENTURING TO RE-OPEN THE ASSESSMENT WHICH VI TIATES THE ASSUMPTION OF JURISDICTION BY AO TO REOPEN THE ASSESSMENT ITSELF. 3 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 5. FURTHER, THE LD. COUNSEL SUBMITTED THAT EVEN IF THE INFORMATION GIVEN BY THE ADIT (INV.) THANE IS ADVERSE AGAINST THE ASSESSEE, AT T HE MOST IT MAY TRIGGER REASON TO SUSPECT ; THEN THE AO HAS TO MAKE REASONABLE ENQUIRY AND COLL ECT MATERIAL WHICH WOULD MAKE HIM BELIEVE THAT THERE IS IN FACT AN ESCAPEMENT OF INCO ME. WITHOUT DOING SO, THE JURISDICTIONAL FACT NECESSARY TO USURP JURISDICTION TO REOPEN THE REGULAR ASSESSMENT CANNOT BE INVOKED BY THE AO. FOR THE SAID PROPOSITION, THE LD. AR DREW OUR ATTENTION TO FOLLOWING CASE LAWS: A) META PLAST ENGINEERING P. LTD. (ITAT DEL.), B) BALAJI HEALTH CARE PVT.LTD. (ITAT,JAIPUR), C) HADOTI PUNJI VIKAS LTD. (ITAT,JAIPUR), D) KANCHANINDIA (P) LTD. (ITAT, JAIPUR) E) SBS REALTORS (P) LTD. (ITAT, DEL.) F) BRIJPAL SINGH TOMAR (ITAT, DEL.) G) NUPOWER RENWABLES PVT. LTD. (BOM. HIGH COURT) H) M/S. KAPIS IMPEX PVT. LTD. IN ITA NO. 4929/DEL/2 017 DATED 15.03.2018 I) SMT.NEERU MEHRA, ITA NO. 467(ASR)/2017 DATED 21. 06.2018 J) M/S.BABA BHOOTNATH TRADE & COMMERCE LTD., ITA NO . 1494/KOL/2017 DATED 05.04.21019 K) M/S. S.B. PIGMENTS PVT. LTD. ITA NO. 324/KOL/201 4 DATED 30.04.2019 L) HOLY FAITH INTERNATIONAL IN ITA NO. 181/ASR/2017 DATED 15.01.2019 M) KHATRI PROJECTS PVT. LTD. IN ITA NO. 4353/DEL/20 16 DATED 16.12.2016 N) TARUN INTERNATIONAL LTD. IN ITA NO. 5136/DEL/201 2 DATED 05.11.2015 O) PCIT VS. MEENAKSHI OVERSEAS LTD. 395 ITR 677(DEL .) P) DCIT VS. GREAL WALL MARKETING PVT. LTD. ITA NO.6 60/KOL/2011 Q) SHRI RAJ KUMAR GOEL VS. ITO ITA NO.1028/KOL/2017 R) CLASSIC FLOUR & FOOD PROCESSING PVT. LTD. VS. CI T ITA NOS. 764 TO 766/KOL/2014 S) PCIT VS. SHODIMAN INVESTMENTS (P) LTD. (2018) 93 TAXMANN.COM 153 (BOM) T) KSS PETRON PVT. LTD. VS. ACIT ITA NO. 224/MUM/2 014 U) PCIT VS. TUPPERWARE INDIA PVT. LTD. (2016) 236 T AXMAN 494 V) DCIT VS. NATIONAL BANK FOR AGRICULTURE AND RURA L DEVELOPMENT ITA NO.4964/MUM/2014 W) CIT VS. INSECTICIDES (INDIA) LTD. (2013) 357 ITR 330 (DEL.) X) HONBLE CALCUTTA HIGH COURT IN THE CASE OF PR. C IT VS. G4G PHARMA INDIA LTD. IN ITA 545/2015 VIDE ORDER DATED 08.10.2015 6. THE LD. AR DREW OUR ATTENTION TO THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN ACIT VS. MEENAKSHI OVERSEAS (P) LTD. (2017) 82 TAXM ANN.COM 300 (DEL) WHEREIN IT HAS BEEN HELD AS UNDER: 4 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 22. AS RIGHTLY POINTED OUT BY THE ITAT, THE 'REASO NS TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIONS, ONE AFTER THE OTHER. THE EXPRESSI ON 'ACCOMMODATION ENTRY' IS USED TO DESCRIBE THE INFORMATION SET OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUSION. THE STATEMENT THAT THE SAID ENTRY WAS GIVEN TO THE ASSESSEE ON HIS PAYING 'UNACCOUNTED CASH' IS ANOTHER CONCLUSION THE BASIS FOR WHICH IS NOT DI SCLOSED. WHO IS THE ACCOMMODATION ENTRY GIVER IS NOT MENTIONED. HOW HE CAN BE SAID TO BE 'A KNOWN ENTRY OPERATOR' IS EVEN MORE MYSTERIOUS. CLEARLY THE SOURCE FOR ALL THESE CONCLU SIONS, ONE AFTER THE OTHER, IS THE INVESTIGATION REPORT OF THE DIT. NOTHING FROM THAT REPORT IS SET OUT TO ENABLE THE READER TO APPRECIATE HOW THE CONCLUSIONS FLOW THEREFROM. 23. THUS, THE CRUCIAL LINK BETWEEN THE INFORMATION MADE AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS ABSENT. THE REASONS MUST BE SELF EVIDE NT, THEY MUST SPEAK FOR THEMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE BASIS FOR THE BEL IEF THAT INCOME HAS ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING OF THE REASONS. THE ENTIRE MATERIAL NEED NOT BE SET OUT. HOWEVER, SOMETHING THEREIN WHICH IS CRITICAL TO THE FORMATION OF THE BELIEF MUST BE REFERRED TO. OTHERWISE THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 IS A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINLY CANNOT BE INVOKED CASUALLY OR MECHANICALLY. THE HEART OF THE PROVISION IS THE FORMATION OF BELIEF BY THE AO THAT INCOME HA S ESCAPED ASSESSMENT. THE REASONS SO RECORDED HAVE TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING THE REASONS. IT CANNOT BE SUPPLIED SUBSEQUENTLY EIT HER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPENING ARE CONSIDERED OR EVEN DURING THE ASSESSMENT PROCEEDINGS THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SINC E THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT, AND NOT SECTION 143 (3) OF THE ACT, THE PROVISO TO SECTION 147 WILL NOT APPLY. IN OTHER WORDS, EVEN THOUGH THE RE OPENING IN THE PRESENT CASE WAS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A Y, IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRU LY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 26. THE FIRST PART OF SECTION 147 (1) OF THE ACT REQUIRES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT. IT IS THUS FORMATION OF REASON TO BELIEVE THAT IS SUBJECT MATTER OF EXAMINATION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A SUBJECTIVE SATISFACTION IND EPENDENTLY ON AN OBJECTIVE CRITERIA. WHILE THE REPORT OF THE INVESTIGATION WING MIGHT CONSTITU TE THE MATERIAL ON THE BASIS OF WHICH HE FORMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVIN G AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. THE RECO RDING OF REASONS TO BELIEVE AND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEE N THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 27. EACH CASE OBVIOUSLY TURNS ON ITS OWN FACTS AND NO TWO CASES ARE IDENTICAL. HOWEVER, THERE HAVE BEEN A LARGE NUMBER OF CASES EXPLAINING THE LE GAL REQUIREMENT THAT REQUIRES TO BE SATISFIED BY THE AO FOR A VALID ASSUMPTION OF JURIS DICTION UNDER SECTION 147 OF THE ACT TO REOPEN A PAST ASSESSMENT. 28.1 IN SIGNATURE HOTELS PVT. LTD. V. INCOME TAX OFFICER (SUPRA), THE REASONS FOR REOPENING AS RECORDED BY THE AO IN A PROFORMA AND PLACED BEFORE THE CIT FOR APPROVAL READ THUS: 5 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 '11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.- INFORMATION IS RECEIVED FROM THE DIT (INV.-1), NEW DELHI THAT THE ASSESSEE HAS I NTRODUCED MONEY AMOUNTING TO RS. 5 LAKH DURING THE F.Y. 2002-03 RELATING TO A.Y. 2003-04. D ETAILS ARE CONTAINED IN ANNEXURE. AS PER INFORMATION AMOUNT RECEIVED IS NOTHING BUT ACCOMMOD ATION ENTRY AND ASSESSEE IS A BENEFICIARY.' 28.2 THE ANNEXURE TO THE SAID PROFORMA GAVE THE NAM E OF THE BENEFICIARY, THE VALUE OF ENTRY TAKEN, THE NUMBER OF THE INSTRUMENT BY WHICH ENTRY WAS TAKEN, THE DATE ON WHICH THE ENTRY WAS TAKEN, NAME OF THE ACCOUNT HOLDER OF THE BANK FROM WHICH THE CHEQUE WAS ISSUED, THE ACCOUNT NUMBER AND SO ON. 28.3 ANALYSING THE ABOVE REASONS TOGETHER WITH THE ANNEXURE, THE COURT OBSERVED: '14. THE FIRST SENTENCE OF THE REASONS STATES THAT INFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PETITIONER H AD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING FINANCIAL YEAR 2002-03 AS PER THE DETAI LS GIVEN IN ANNEXURE. THE SAID ANNEXURE, REPRODUCED ABOVE, RELATES TO A CHEQUE RECEIVED BY T HE PETITIONER ON 9TH OCTOBER, 2002 FROM SWETU STONE PV FROM THE BANK AND THE ACCOUNT NUMBER MENTIONED THEREIN. THE LAST SENTENCE RECORDS THAT AS PER THE INFORMATION, THE AMOUNT REC EIVED WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. 15. THE AFORESAID REASONS DO NOT SATISFY THE REQUIR EMENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFERRED TO IS EXTREMEL Y SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT ANNEXURE, WHIC H HAS BEEN QUOTED ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT P RIMA FACIE SHOWS OR ESTABLISHES NEXUS OR LINK WHICH DISCLOSES ESCAPEMENT OF INCOME. ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND M ATERIAL OF THE INFORMATION. THE ASSESSING OFFICER ACCEPTED THE PLEA ON THE BASIS OF VAGUE INF ORMATION IN A MECHANICAL MANNER. THE COMMISSIONER ALSO ACTED ON THE SAME BASIS BY MECHAN ICALLY GIVING HIS APPROVAL. THE REASONS RECORDED REFLECT THAT THE ASSESSING OFFICER DID NOT INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TA X (INVESTIGATION) AND ARRIVE AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT.' 28.4 THE COURT IN SIGNATURE HOTELS PVT. LTD. V. INCOME TAX OFFICER (SUPRA) QUASHED THE PROCEEDINGS UNDER SECTION 148 OF THE ACT. THE FACTS IN THE PRESENT CASE ARE MORE OR LESS SIMILAR. THE PRESENT CASE IS THEREFORE COVERED AGAI NST THE REVENUE BY THE AFOREMENTIONED DECISION. 29.1 THE ABOVE DECISION CAN BE CONTRASTED WITH THE DECISION IN AGR INVESTMENT V. ADDITIONAL COMMISSIONER OF INCOME TAX (SUPRA), WHERE THE 'REASONS TO BELIEVE' READ AS UN DER: 'CERTAIN INVESTIGATIONS WERE CARRIED OUT BY THE DIR ECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI IN RESPECT OF THE BOGUS/ACCOMMODATION ENT RIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES. THE NAME OF THE ASSESSEE FIG URES AS ONE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS GIVEN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. IN THE SAID INFORMATION, IT HAS BEEN INTER-ALIA REPORT ED AS UNDER: 'ENTRIES ARE BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE P URPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC., IN THE FORM OF GIF TS, SHARE APPLICATION MONEY, LOANS ETC. 2. TO INFLATE EXPENSE IN THE TRADING AND PROFIT AND LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREBY PAY LESS TAXES. 6 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 IT HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAV E BEEN RECEIVED BY THE ASSESSEE:....' 29.2 THE DETAILS OF SIX ENTRIES WERE THEN SET OUT I N THE ABOVE 'REASONS'. THESE INCLUDED NAME OF THE BENEFICIARY, THE BENEFICIARY'S BANK, VALUE OF T HE ENTRY TAKEN, INSTRUMENT NUMBER, DATE, NAME OF THE ACCOUNT IN WHICH ENTRY WAS TAKEN AND TH E ACCOUNT FROM WHERE THE ENTRY WAS GIVEN THE DETAILS OF THOSE BANKS. THE REASONS THEN RECORD ED: 'THE TRANSACTIONS INVOLVING RS. 27,00,000/-, MENTIO NED IN THE MANNER ABOVE, CONSTITUTES FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFIC IARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOM E/INCOME FROM OTHER SOURCES OF THE ASSESSEE COMPANY, WHICH HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE TILL ITS RETURN FILED. ON THE BASIS OF THIS NEW INFORMATION, I HAVE REASON TO BELIEVE THAT THE INCOME OF RS. 27,00,000/- HAS ESCAPED ASSESSMENT AS DEFINED BY SECTION 147 OF THE INCOME TAX ACT. THEREFORE, THIS IS A FIT CASE FOR THE ISSUANCE OF T HE NOTICE UNDER SECTION 148 .' 29.3 THE COURT WAS NOT INCLINED TO INTERFERE IN THE ABOVE CIRCUMSTANCES IN EXERCISE OF ITS WRIT JURISDICTION TO QUASH THE PROCEEDINGS. A CAREFUL PE RUSAL OF THE ABOVE REASONS REVEALS THAT THE AO DOES NOT MERELY REPRODUCE THE INFORMATION BUT TA KES THE EFFORT OF REVEALING WHAT IS CONTAINED IN THE INVESTIGATION REPORT SPECIFIC TO T HE ASSESSEE. IMPORTANTLY HE NOTES THAT THE INFORMATION OBTAINED WAS 'FRESH' AND HAD NOT BEEN O FFERED BY THE ASSESSEE TILL ITS RETURN PURSUANT TO THE NOTICE ISSUED TO IT WAS FILED. THIS IS A CRUCIAL FACTOR THAT WENT INTO THE FORMATION OF THE BELIEF. IN THE PRESENT CASE, HOWEV ER, THE AO HAS MADE NO EFFORT TO SET OUT THE PORTION OF THE INVESTIGATION REPORT WHICH CONTAINS THE INFORMATION SPECIFIC TO THE ASSESSEE. HE DOES NOT ALSO EXAMINE THE RETURN ALREADY FILED TO A SCERTAIN IF THE ENTRY HAS BEEN DISCLOSED THEREIN. 30.1 IN COMMISSIONER OF INCOME TAX, NEW DELHI V. HIGHGAI N FINVEST (P) LIMITED (2007) 164 TAXMAN 142 (DEL) RELIED UPON BY MR. CHAUDHARY, THE REASONS TO BELIEVE READ AS UNDER: 'IT HAS BEEN INFORMED BY THE ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT VII, NEW DELHI VIDE LETTER NO. 138 DATED 8 TH APRIL 2003 THA T THIS COMPANY WAS INVOLVED IN THE GIVING AND TAKING BOGUS ENTRIES/ TRANSACTIONS DURING THE F INANCIAL YEAR 1996-97, AS PER THE DEPOSITION MADE BEFORE THEM BY SHRI SANJAY RASTOGI, CA DURING A SURVEY OPERATION CONDUCTED AT HIS OFFICE PREMISES BY THE INVESTIGATION WING. THE PART ICULARS OF SOME OF THE TRANSACTION OF THIS NATURE ARE AS UNDER: DATE PARTICULARS OF CHEQUE DEBIT AMT. CREDIT AMT 18.11.96 305002 5,00,000 THROUGH THE BANK ACCOUNT NO. CA 4266 OF M/S. MEHRAM EXPORTS PVT. LTD. IN THE PNB, NEW ROHTAK ROAD, NEW DELHI. NOTE: IT IS NOTED THAT THERE MIGHT BE MORE SUCH ENT RIES APART FROM THE ABOVE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-9 8 WAS FILED BY THE ASSESSEE ON 4TH MARCH 1998 WHICH WAS ACCEPTED UNDER SECTION 143 (1) AT THE DECLARED INCOME OF RS. 4,200. IN VIEW OF THESE FACTS, I HAVE REASON TO BELIEVE THAT THE A MOUNT OF SUCH TRANSACTIONS PARTICULARLY THAT OF RS. 5,00,000 (AS MENTIONED ABOVE) HAS ESCAPED THE A SSESSMENT WITHIN THE MEANING OF THE PROVISO TO SECTION 147 AND CLAUSE (B) TO THE EXPLANATION 2 OF THIS SECTIO N. SUBMITTED TO THE ADDITIONAL CIT, RANGE -12, NEW DEL HI FOR APPROVAL TO ISSUE NOTICE UNDER SECTION 148 FOR THE ASSESSMENT YEAR 1997-98, IF APPROVED.' 30.2 THE AO WAS NOT MERELY REPRODUCING THE INFORMAT ION RECEIVED FROM THE INVESTIGATION BUT TOOK THE EFFORT OF REFERRING TO THE DEPOSITION MADE DURING THE SURVEY BY THE CHARTERED 7 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 ACCOUNTANT THAT THE ASSESSEE COMPANY WAS INVOLVED I N THE GIVING AND TAKING OF BOGUS ENTRIES. THE AO THUS INDICATED WHAT THE TANGIBLE MATERIAL WA S WHICH ENABLED HIM TO FORM THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IT W AS IN THOSE CIRCUMSTANCES THAT IN THE CASE, THE COURT CAME TO THE CONCLUSION THAT THERE WAS PRI MA FACIE MATERIAL FOR THE AO TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD NOT MADE A FULL AN D TRUE DISCLOSURE OF ALL THE MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. 31. IN COMMISSIONER OF INCOME TAX V. G&G PHARMA (SUPRA) THERE WAS A SIMILAR INSTANCE OF REOPENING OF ASSESSMENT BY THE AO BASED ON THE INFO RMATION RECEIVED FROM THE DIT (I). THERE AGAIN THE DETAILS OF THE ENTRY PROVIDED WERE SET OU T IN THE 'REASONS TO BELIEVE'. HOWEVER, THE COURT FOUND THAT THE AO HAD NOT MADE ANY EFFORT TO DISCUSS THE MATERIAL ON THE BASIS OF WHICH HE FORMED PRIMA FACIE VIEW THAT INCOME HAD ESCAPED ASSESSMENT. THE COURT HELD THAT THE BASIC REQUIREMENT OF SECTION 147 OF THE ACT THAT THE AO SHOULD APPLY HIS MIND IN OR DER TO FORM REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSME NT HAD NOT BEEN FULFILLED. LIKEWISE IN CIT-4 V. INDEPENDENT MEDIA P. LIMITED (SUPRA) THE COURT IN SIMILAR CIRCUMSTANCES INVALIDATED THE INITIATION OF THE PROCEEDINGS TO RE OPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. 32. IN ORIENTAL INSURANCE COMPANY LIMITED V. COMMISSION ER OF INCOME TAX 378 ITR 421 (DEL) IT WAS HELD THAT 'THEREFORE, EVEN IF IT IS AS SUMED THAT, IN FACT, THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, THE AO WOULD HAVE NO JURISDICTI ON TO ASSESS THE SAME IF HIS REASONS TO BELIEVE WERE NOT BASED ON ANY COGENT MATERIAL. IN A BSENCE OF THE JURISDICTIONAL PRE-CONDITION BEING MET TO REOPEN THE ASSESSMENT, THE QUESTION OF ASSESSING OR REASSESSING INCOME UNDER SECTION 147 OF THE ACT WOULD NOT ARISE.' 33. IN RUSTAGI ENGINEERING UDYOG (P) LIMITED (SUPRA ), IT WAS HELD THAT '...THE IMPUGNED NOTICES MUST ALSO BE SET ASIDE AS THE AO HAD NO REA SON TO BELIEVE THAT THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS HAD ESCA PED ASSESSMENT. CONCEDEDLY, THE AO HAD NO TANGIBLE MATERIAL IN REGARD TO ANY OF THE TRANSA CTIONS PERTAINING TO THE RELEVANT ASSESSMENT YEARS. ALTHOUGH THE AO MAY HAVE ENTERTAINED A SUSPICION TH AT THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, SUCH SUSPICION COULD NOT FORM THE BASIS OF INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT. A REASON TO BELIEVE - NOT REASON TO SU SPECT - IS THE PRECONDITION FOR EXERCISE OF JURISDICTION UNDER SECTION 147 OF THE ACT. ' 34. RECENTLY IN AGYA RAM V. CIT (SUPRA), IT WAS EMPHASIZED THAT THE REASONS TO BEL IEVE 'SHOULD HAVE A LINK WITH AN OBJECTIVE FACT IN THE F ORM OF INFORMATION OR MATERIALS ON RECORD...' IT WAS FURTHER EMPHASIZED THAT 'MERE ALLEGATION IN REASONS CANNOT BE TREATED EQUIVALENT TO MATERIAL IN EYES OF LAW. MERE RECEIPT OF INFORMATIO N FROM ANY SOURCE WOULD NOT BY ITSELF TANTAMOUNT TO REASON TO BELIEVE THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENTS.' 35. IN THE DECISION OF THIS COURT DATED 16TH MARCH 2016 IN W.P. (C) NO. 9659 OF 2015 ( RAJIV AGARWAL V. CIT ) IT WAS EMPHASIZED THAT 'EVEN IN CASES WHERE THE A O COMES ACROSS CERTAIN UNVERIFIED INFORMATION, IT IS NECESSARY FOR HIM TO TAKE FURTHER STEPS, MAKE INQUIRIES AND GARNER FURTHER MATERIAL AND IF SUCH MATERIAL INDICATES THA T INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT, FORM A BELIEF THAT INCOME OF THE ASSESS EE HAS ESCAPED ASSESSMENT.' 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE RE ASONS TO BELIEVE CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THER E IS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE TANGIBLE MATERIAL WHICH FORMS THE BAS IS OF THE REASONS TO BELIEVE THAT INCOME HAS 8 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 ESCAPED ASSESSMENT. THE CONCLUSIONS OF THE AO ARE A T BEST A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT. INDEED IT IS A 'BORROWED SATISFACTION'. THE REASONS FAIL TO DEMONSTRATE THE LINK BETWEEN TH E TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SA TISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMITTED BY THE ITA T 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 REQUIR EMENT 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. 7. THE LD. AR TOOK OUR ATTENTION TO THE COORDINATE BENCH OF THIS TRIBUNAL OF KOLKATA IN ITA NO. 660/KOL/2011 FOR AY 2002-03 IN THE CASE OF DCIT VS. GREAT WALL MARKETING (P) LTD. VIDE ORDER DATED 03.02.2016 HAS HELD AS UNDER: 9. WE HAVE GIVEN A CAREFUL CONSIDERATION OF THE S UBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. IT IS CLEAR FROM THE REASONS RECO RDED BY THE AO THAT THE AO ACTED ONLY ON THE BASIS OF A LETTER RECEIVED FROM INVESTIGATION W ING, NEW DELHI. THE REASONS RECORDED DOES NOT GIVE AS TO WHO HAS GIVEN THE BOGUS ENTRIES TO T HE ASSESSEE. THE REASONS RECORDED ALSO DOES NOT MENTION AS TO ON WHICH DATES AND THROUGH W HICH MODE THE BOGUS ENTRIES WERE MADE BY THE ASSESSEE. THE REASONS RECORDED WHICH ARE EXT RACTED IN THE EARLIER PART OF THE ORDER DOES NOT SHOW, WHAT WAS THE INFORMATION GIVEN BY DI T(INV.),NEW DELHI. THE DATE OF THE INFORMATION RECEIVED BY THE AO WERE NOT SPELT OUT I N THE REASONS RECORDED. THE INVOLVEMENT OF THE ASSESSEE IS ALSO NOT SPELT OUT, EXCEPT MENTI ONING THE CORPORATE BODIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE WER E NON-EXISTENT AND NOT CREDITWORTHY. ON IDENTICAL FACTS THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS INSECTICIDES (INDIA) LTD (SUPRA) HAS TAKEN A VIEW THAT THE REASONS RECORDED WERE VAGUE AND UNCERTAIN AND CANNOT BE CONSTRUED AS SATISFACTION ON THE BASIS OF THE RELEV ANT MATERIAL ON THE BASIS OF WHICH A REASONABLE PERSON CAN FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE HON'BLE DELHI HIGH COURT HAS ALSO COME TO THE CONCLUSION THAT THE REASONS RECORDED DID NOT DISCLOSE THE AO'S MIND REGARDING ESCAPEMENT OF INCOME. THE HON'B LE DELHI HIGH COURT ULTIMATELY HELD THAT INITIATION OF PROCEEDINGS U/S 148 OF THE ACT W AS NOT VALID AND JUSTIFIED IN THE EYES OF LAW. THE FACTS AND CIRCUMSTANCES IN THE PRESENT CASE ARE IDENTICAL TO THE CASE DECIDED BY THE HONBLE DELHI HIGH COURT. FOLLOWING THE SAID DECIS ION WE HOLD THAT INITIATION OF RE- ASSESSMENT PROCEEDINGS IS NOT VALID. ON THIS GROUN D, THE ASSESSMENT IS LIABLE TO BE ANNULLED. 8. THE HONBLE BOMBAY HIGH COURT IN PR.CIT VS. SHOD IMAN INVESTMENTS (P) LTD. (2018) 93 TAXMANN.COM 153 (BOM) IT HAS BEEN HELD AS UNDER: 9. WE FIND THAT AT THE TIME OF RE-OPENING OF THE ASSESSMENT, THE ASSESSING OFFICER DID NOT PROVIDE THE REASONS RECORDED IN SUPPORT OF THE RE-O PENING NOTICE IN ITS ENTIRETY, TO THE RESPONDENT-ASSESSEE. THIS WAS CONTRARY TO AND IN DE FIANCE OF THE DECISION OF THE APEX COURT IN GKN DRIVESHAFTS V. ITO [2002] 125 TAXMAN 963/ [2 003]259 ITR 19. THE ENTIRE OBJECTS OF REASONS FOR RE- OPENING NOTICE AS RECORDED BEING MA DE AVAILABLE TO AN ASSESSEE, IS TO ENABLE 9 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 THE ASSESSING OFFICER TO HAVE A SECOND LOOK AT HIS REASONS RECORDED BEFORE HE PROCEEDS TO ASSESS THE INCOME, WHICH ACCORDING TO HIM, HAS ESCA PED ASSESSMENT. IN FACT, NON FURNISHING OF REASONS WOULD MAKE AN ASSESSMENT ORDER BAD AS HE LD BY THIS COURT IN CIT V. VIDESH SANCHAR NIGAM LTD. [2012] 21 TAXMANN.COM 53, 340 IT R 66. IN FACT, PARTIAL FURNISHING OF REASONS WILL ALSO NECESSARILY MEET THE SAME FATE I. E. RENDER THE ASSESSMENT ORDER ON RE- OPENING NOTICE BAD. THEREFORE, ON THE ABOVEGROUND I TSELF, THE QUESTION AS PROPOSED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW AS IT IS COVERED BY THE DECISION OF THIS COURT IN VIDESH SANCHAR NIGAM LTD.S CASE (SUPRA) AGAINST T HE REVENUE IN THE PRESENT FACTS. 10. BESIDES, THE SUBMISSIONS MADE ON BEHALF OF THE REVENUE THAT IN VIEW OF THE DECISION OF THE APEX COURT IN RAJESH JHAVERI STOCK BROKERS (P) LTD.'S, CASE (SUPRA), THE ASSESSING OFFICER IS ENTITLED TO RE-OPEN THE ASSESSMENT FOR W HATEVER REASONS AND THE SAME CANNOT BE SUBJECTED TO JURISDICTIONAL REVIEW, IS PREPOSTEROUS . FIRST OF ALL, TAKING OUT A WORD OR SENTENCE FROM THE ENTIRE JUDGMENT, DIVORCED FROM THE CONTEXT AND RELYING UPON IT, IS NOT PERMISSIBLE (SEE CIT V. SUN ENGG. WORKS (P) LTD. [L992] 64 TAXM AN 442/198 ITR 297 (SC). IT MAY BE USEFUL TO REPRODUCE THE CONTEXT IN WHICH THE SENTEN CE IN RAJESH JHAVERI STOCK BROKERS (P) LTD. 'S CASE (SUPRA) BEING RELIED UPON BY THE REVEN UE TO SUPPORT ITS CASE, WAS MADE. THE CONTEXT, IS AS UNDER: 'THE SCOPE AND EFFECT OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM APRIL 1, 1989, AS ALSO SECTIONS 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FRO M THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUBSTITUTIONS. UNDER THE OLD PROVISIONS OF SECTION 147, SEPARATE CLAUSES (A) AND (B) LAID DOWN THE CIRCUMSTANCES UNDER WHICH INCOME ESCAPING ASSES SMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED TO CONFER JURISDICT ION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED: FIRSTLY THE ASSESSIN G OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO, INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAP EMENT HAS OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THE SE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTIO N TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECT ION 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES.' . THEREFORE, THE SENTENCE BEING RELIED UPON WAS MADE IN THE CONTEXT OF THE CHANGE IN LAW THAT UNDER THE AMENDED PROVISION 'REASON TO BELIEVE' THA T IN CASE OF ESCAPED ASSESSMENT, IS SUFFICIENT TO RE-OPEN THE ASSESSMENT. THIS UNLIKE T HE EARLIER PROVISION OF SECTION 147(A) OF THE ACT WHICH REQUIRED TWO CONDITIONS I.E. FAILURE TO D ISCLOSE FULLY AND TRULY ALL FACTS NECESSARY FOR ASSESSMENT AND REASON TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT THUS, THE OBSERVATIONS BEING RELIED UPON MUST BE READ IN THE CONTEXT IN WHICH IT RENDERED. ON SO READING THE SUBMISSION, WILL NOT SURVIVE. 11. FURTHER, A READING OF THE ENTIRE DECISION, IT IS CLEAR THAT THE REASONABLE BELIEF ON THE BASIS OF TANGIBLE MATERIAL COULD BE, PRIMA FACIE, F ORMED TO CONCLUDE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. MR. MOHANTY, LEARNE D COUNSEL IS IGNORING THE FACT THAT 6THE WORDS WHATEVER REASONS IS QUALIFIED BY THE WORDS HAVING REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE WORDS WHATEVER REASON S ONLY MEANS ANY TANGIBLE MATERIAL WHICH WOULD ON APPLICATION OF THE FACTS ON RECORD L EAD TO REASONABLE BELIEF THAT INCOME CHARGEABLE, TO TAX HAS ESCAPED, ASSESSMENT THIS MAT ERIAL WHICH, FORMS THE BASIS, IS NOT RESTRICTED, BUT THE MATERIAL MUST LEAD TO THE FORMA TION OF REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT MERE OBTAI NING, OF MATERIAL BY ITSELF DOES NOT RESULT IN REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IN FACT, THIS WOULD BE EVIDENT FROM THE FACT THAT IN PARA 16 OF THE DECISION IN RA JESH JHAVERI STOCK BROKERS (P) LTD. 'S, CASE 10 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 (SUPRA), IT IS OBSERVED THAT THE WORD 'REASON' IN T HE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. THEREFORE, IT CAN ONLY BE THE BASIS OF FORMING THE BELIEF. HOWEVER, THE BELIEF MUST BE INDEPENDENTLY FORMED IN THE CONTEXT OF THE MATERIAL OBTAINED THAT THERE IS AN ESCAPEMENT OF INCOME. OTHERWISE, NO MEANING IS BEIN G GIVEN TO THE WORDS 'TO BELIEVE' AS FOUND IN SECTION 147 OF THE ACT. THEREFORE, THE WOR DS 'WHATEVER REASONS' IN RAJESH JHAVERI STOCK BROKERS (P) LTD.'S, CASE (SUPRA), ONLY MEANS WHATEVER THE MATERIAL, THE REASONS RECORDED MUST INDICATE THE REASONS TO BELIEVE THAT INCOME HAS, ESCAPED ASSESSMENT. THIS IS SO AS REASONS AS RECORDED ALONE GIVE THE ASSESSING OFFICER POWER TO RE-OPEN AN ASSESSMENT, IF IT REVEALS/INDICATE, REASONS TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 12. THE RE-OPENING OF AN ASSESSMENT IS AN EXERCISE OF EXTRA-ORDINARY POWER ON THE PART OF THE ASSESSING OFFICER, AS IT LEADS TO UNSETTLING TH E SETTLED ISSUE/ASSESSMENTS. THEREFORE, THE REASONS TO BELIEVE HAVE TO BE NECESSARILY RECORDED IN TERMS OF SECTION 148 OF THE ACT, BEFORE RE-OPENING NOTICE, IS ISSUED. THESE REASONS, MUST I NDICATE THE MATERIAL (WHATEVER REASONS) WHICH FORM THE BASIS OF RE-OPENING . ASSESSMENT AND ITS REASONS WHICH WOULD EVIDENCE THE LINKAGE/NEXUS TO THE CONCLUSION THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT THIS IS A SETTLED POSITION AS OBSERVED BY THE SUPREME CO URT IN S. NARAYANAPPA V. CIT [1967] 63 ITR 219, THAT IT IS OPEN TO EXAMINE WHETHER THE REA SON TO BELIEVE HAS RATIONAL CONNECTION WITH THE FORMATION OF THE BELIEF. TO THE SAME EFFEC T, THE APEX COURT IN ITO V. LAKHMANI MERWAL DAS [1976] 103 ITR 437 HAD LAID DOWN THAT TH E REASONS TO BELIEVE MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF BELIEF I.E. THERE MUST BE A LIVE LINK BETWEEN MATERIAL COMING THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF BELIEF REGARDING ESCAPEMENT OF INCOME. IF THE AFORE SAID REQUIREMENT ARE NOT MET, THE ASSESSEE IS ENTITLED TO CHALLENGE THE VERY ACT OF R E-OPENING OF ASSESSMENT AND ASSUMING JURISDICTION ON THE PART OF THE ASSESSING OFFICER. 13. IN THIS CASE, THE REASONS AS MADE AVAILABLE TO THE RESPONDENT- ASSESSEE AS PRODUCED BEFORE THE TRIBUNAL MERELY INDICATES INFORMATION RE CEIVED FROM THE DIT (INVESTIGATION) ABOUT A PARTICULAR ENTITY, ENTERING INTO SUSPICIOUS TRANS ACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON TO COME TO THE CONCLUS ION THAT THE RESPONDENT-ASSESSEE HAS INDULGED IN ANY ACTIVITY WHICH COULD GIVE RISE TO R EASON TO BELIEVE ON THE PART OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS FOR THIS REASON THAT THE RECORDED REASONS EVEN DOES- NOT INDICATE T HE AMOUNT WHICH ACCORDING TO THE ASSESSING OFFICER, HAS ESCAPED ASSESSMENT. THIS IS AN EVIDENCE OF A FISHING ENQUIRY AND NOT A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 14. FURTHER, THE REASONS CLEARLY SHOWS THAT THE ASS ESSING OFFICER HAS NOT APPLIED HIS MIND TO THE INFORMATION RECEIVED BY HIM FROM THE DDIT (INV. ). THE ASSESSING OFFICER HAS MERELY ISSUED A RE-OPENING NOTICE ON THE BASIS OF INTIMATI ON REGARDING RE-OPENING NOTICE FROM THE DDIT (INV.) THIS IS CLEARLY IN BREACH OF THE SETTLE D POSITION IN LAW THAT RE- OPENING NOTICE HAS TO BE ISSUED BY THE ASSESSING OFFICE ON HIS OWN SAT ISFACTION AND NOT ON BORROWED SATISFACTION. 15. THEREFORE, IN THE ABOVE FACTS, THE VIEW TAKEN B Y THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FOUND FAULT WITH. THIS VIEW OF THE TRIBUN AL IS IN ACCORDANCE WITH THE SETTLED POSITION IN LAW. '\ 16. THEREFORE, THE QUESTION; AS FRAMED DOES NOT GIV E RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED.' 11 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 9. THE COORDINATE BENCH OF THIS TRIBUNAL OF KOLKATA IN ITA NOS. 764 TO 766/KOL/2014 IN M/S. CLASSIC FLOUR & FOOD PROCESSING PVT. LTD. V S. CIT FOR AY 2009-10, 2007-08 AND 2008-09 VIDE ORDER DATED 05.04.2017 HAS HELD AS UND ER: 7. AS FAR AS THE ADDITIONAL GROUNDS OF APPEAL RAI SED BY THE ASSESSEE ARE CONCERNED, IT CAN BE SEEN FROM THE ADDITIONAL GROUNDS THAT THE ASSESSEE WANTS TO CONTEND THAT THE VERY INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WAS BAD IN LAW AND T HEREFORE PROCEEDINGS U/S 263 OF THE ACT CANNOT BE INITIATED ON AN ORDER WHICH IS INVALID IN LAW. IT IS THE FURTHER CONTENTION OF THE ASSESSEE THAT IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENTS U/S 147 OF THE ACT, THE AO HAS MENTIONED THAT THERE WAS UNEXPLAINED INVESTM ENT IN CONSTRUCTION OF HOTEL AND RESORTS AT MANDARMONI, PURBA MIDNAPORE AND SUCH UNEXPLAINED INVESTMENT IN THE CONSTRUCTION WHICH OUGHT TO HAVE BEEN BROUGHT TO TAX AS INCOME OF THE ASSESSEE HAS ESCAPED THE ASSESSMENT. IT IS THE CASE OF THE ASSESSEE THAT IN THE ASSESSMENT ORD ER PASSED U/S 147 OF THE ACT, THE AO DID NOT MAKE ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTM ENT IN CONSTRUCTION. IT IS THE PLEA OF THE ASSESSEE THAT WHEN NO ADDITION IS MADE ON THE GROUN DS ON WHICH RE-ASSESSMENT PROCEEDINGS ARE INITIATED THEN NO OTHER ADDITION CAN BE MADE IN SUCH REASSESSMENT PROCEEDINGS. 8. THE FIRST ASPECT WHICH NEEDS TO BE EXAMINED IS A S TO WHETHER THE ASSESSEE IS ENTITLED TO CHALLENGE THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IN THE PRESENT APPEALS IN WHICH HE HAS CHALLENGED THE VALIDITY OF ORDER PASSE D U/S 263 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT IT IS OPEN TO AN ASSESSEE IN AN APPEAL AGAINST THE ORDER U/.S 263 OF THE ACT WHICH SEEKS TO REVISE AN ORDER PASSE D U/S 147 OF THE ACT, TO CHALLENGE THE VALIDITY OF THE ORDER PASSED U/S.147 OF THE ACT AS WELL AS INITIATION OF PROCEEDINGS U/.S 147 OF THE ACT. IN THIS REGARD THE LD. COUNSEL FOR THE ASS ESSEE PLACED BEFORE US TWO DECISIONS ONE RENDERED BY LUCKNOW BENCH OF ITAT IN THE CASE OF IN DER KUMAR BACHANI (HUF) VS ITO 99 ITD 621 (LUCK) AND ITAT MUMBAI G BENCH IN THE CAS E OF M/S. WESTLIFE DEVELOPMENT LTD. VS PRINCIPAL C.I.T. IN ITA NO.688/MUM/2016. IN BOTH TH E DECISIONS A VIEW HAS BEEN TAKEN BY THE TRIBUNAL THAT WHEN AN ASSESSMENT ORDER PASSED U/S 1 47 OF THE ACT WAS ILLEGAL THE CIT CANNOT INVOKE THE JURISDICTION U/S 263 OF THE ACT AGAINST SUCH VOID OR NON-EST ORDER. IN THE SECOND DECISION CITED THE HONBLE MUMBAI BENCH OF THE TRIB UNAL HAS SPECIFICALLY FRAMED THE FOLLOWING QUESTIONS :- 1.WHETHER THE ASSESSEE CAN CHALLENGE THE VALIDITY OF AN ASSESSMENT ORDER DURING THE APPELLATE PROCEEDINGS PERTAINING TO EXAMINATION OF VALIDITY OF ORDER PASSED U/S 263? 2. WHETHER THE IMPUGNED ASSESSMENT ORDER PASSED U/ S 143(3) DATED 24-10-2013 WAS VALID IN THE EYES OF LAW OR A NULLITY AS HAS BEEN C LAIMED BY THE ASSESSEE? 3. IF THE IMPUGNED ASSESSMENT ORDER PASSED U/S 143( 3) WAS ILLEGAL OR NULLITY IN THE EYES OF LAW, THEN, WHETHER THE CIT HAD A VALID JURI SDICTION TO PASS THE IMPUGNED ORDER U/S 263 TO REVISE THE NON EST ASSESSMENT ORDER? 9. ON QUESTION NO. 1 AND 3 WHICH IS RELEVANT TO TH E PRESENT CASE THE HONBLE MUMBAI BENCH OF THE TRIBUNAL HAS TAKEN THE VIEW THAT WHEN THE ORIGI NAL ASSESSMENT PROCEEDINGS ARE NULL AND VOID IN THE EYES OF LAW FOR WANT OF PROPER ASSUMPTI ON OF JURISDICTION THEN SUCH VALIDITY CAN BE CHALLENGED EVEN IN COLLATERAL PROCEEDINGS. THE MUMB AI BENCH TOOK THE VIEW THAT THE PROCEEDINGS U/S 147 OF THE ACT ARE PRIMARY PROCEEDI NGS AND PROCEEDINGS U/S 263 OF THE ACT ARE COLLATERAL PROCEEDINGS AND IN SUCH COLLATERAL P ROCEEDINGS, THE VALIDITY OF INITIATION OF THE ORIGINAL PROCEEDINGS U/S 147 OF THE ACT CAN BE CHAL LENGED. THE MUMBAI BENCH OF THE TRIBUNAL 12 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 IN THIS REGARD HAS PLACED RELIANCE ON SEVERAL DECIS IONS, THE PRINCIPAL DECISION BEING THAT OF THE HONBLE SUPREME COURT IN THE CASE OF KIRAN SINGH & ORS. V. CHAMAN PASWAN & ORS. [1955] 1 SCR 117 WHEREIN THE HONBLE SUPREME COURT OBSERVE D AS FOLLOWS :- IT IS A FUNDAMENTAL PRINCIPLE WELL-ESTABLISHED TH AT A DECREE PASSED BY A COURT WITHOUT JURISDICTION IS A NULLITY, AND THAT ITS INV ALIDITY COULD BE SET UP WHENEVER AND WHEREVER IT IS SOUGHT TO BE ENFORCED OR RELIED UPON , EVEN AT THE STAGE OF EXECUTION AND EVEN IN COLLATERAL PROCEEDINGS. A DEFECT OF JURISDI CTION, WHETHER IT IS PECUNIARY OR TERRITORIAL, OR WHETHER IT IS IN RESPECT OF THE SUB JECT-MATTER OF THE ACTION, STRIKES AT THE VERY AUTHORITY OF THE COURT TO PASS ANY DECREE AND SUCH A DEFECT CANNOT BE CURED EVEN BY CONSENT OF PARTIES.' 10. THE ITAT MUMBAI BENCH MADE A REFERENCE TO ANOT HER DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SUSHIL KUMAR MEHTA VS GOBIND R AM BOHRA, (1990) 1 SCC 193 AND THE DECISIONS IN THE CASE OF INDIAN BANK VS MANILAL GOV INDJI KHONA (2015) 3 SCC 712. THE ITAT MUMBAI BENCH ALSO HELD THAT IF ORDER OF ASSESSMENT PASSED U/S 147 OF THE ACT WAS ILLEGAL AND NULLITY IN THE EYES OF LAW THEN THAT ORDER CANNOT B E REVISED BY INVOKING POWERS U/S 263 OF THE ACT BY CIT. THE MUMBAI BENCH HAS IN THIS REGARD PLA CED RELIANCE ON THE DECISION OF HONBLE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF KRISHNA KUMAR SARAF VS CIT IN ITA NO.4562/DEL/2007 ORDER DATED 24.09.2015 WHEREIN IT WAS HELD AS FOLLOWS :- 17. THERE IS NO QUARREL WITH THE PROPOSITION ADVA NCED BY ID. DR THAT THE PROCEEDINGS U/S 263 ARE FOR THE BENEFIT OF REVENUE AND NOT FOR ASSESSEE. 18. HOWEVER, U/S 263 THE ID. COMMISSIONER CANNOT RE VISE A NON EST ORDER IN THE EYE OF LAW. SINCE THE ASSESSMENT ORDER WAS PASSED IN PURSU ANCE TO THE NOTICE U/S 143(2), WHICH WAS BEYOND TIME, THEREFORE, THE ASSESSMENT OR DER PASSED IN PURSUANCE TO THE BARRED NOTICE HAD NO LEGS TO STAND AS THE SAME WAS NON EST IN THE EYES OF LAW. ALL PROCEEDINGS SUBSEQUENT TO THE SAID NOTICE ARE OF NO CONSEQUENCE. FURTHER, THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F CIT VS. GITSONS ENGINEERING CO. 370 ITR 87 (MAD) CLEARLY HOLDS THAT THE OBJECTI ON IN RELATION TO NON SERVICE OF NOTICE COULD BE RAISED FOR THE FIRST TIME BEFORE TH E TRIBUNAL AS THE SAME WAS LEGAL, WHICH WENT TO THE ROOT OF THE MATTER. 19. WHILE EXERCISING POWERS U/S 263 ID. COMMISSIONE R CANNOT REVISE AN ASSESSMENT ORDER WHICH IS NON EST IN THE EYE OF LAW BECAUSE IT WOULD PREJUDICE THE RIGHT OF ASSESSEE WHICH HAS ACCRUED IN FAVOUR OF ASSESSEE ON ACCOUNT OF ITS INCOME BEING DETERMINED. IF ID. COMMISSIONER REVISES SUCH AN ASS ESSMENT ORDER, THEN IT WOULD IMPLY EXTENDING/ GRANTING FRESH LIMITATION FOR PASS ING FRESH ASSESSMENT ORDER. IT IS SETTLED LAW THAT BY THE ACTION OF THE AUTHORITIES T HE LIMITATION CANNOT BE EXTENDED. BECAUSE THE PROVISIONS OF LIMITATION ARE PROVIDED I N THE SAME. 20. IN VIEW OF ABOVE DISCUSSION GROUND NO.3 IS ALLO WED AND REVISION ORDER PASSED U/S 263 IS QUASHED. 11. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A ). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE ARE OF THE VIEW THAT THE VALIDITY O F THE ORDER U/S 147 OF THE ACT DEPENDS UPON THE AO ASSUMING JURISDICTION TO MAKE AN ORDER OF AS SESSMENT U/S 147 OF THE ACT AFTER FULFILLING THE CONDITIONS LAID DOWN IN THE SAID SECTION NAMELY REASON TO BELIEVE THE INCOME CHARGEABLE TO TAX FOR THAT ASSESSMENT YEAR HAS ESCAPED ASSESSMENT . IF THIS CONDITION IS NOT SATISFIED THEN IT CANNOT BE SAID THE AO HAS VALIDLY ASSUMED JURISDICT ION U/S 147 OF THE ACT. IF THE VALIDITY OF PROCEEDINGS U/S 147 OF THE ACT HAS NOT BEEN CHALLEN GED BY THE ASSESSEE BY FILING APPEAL AGAINST THE ORDER U/S.147 OF THE ACT, CAN IT BE CHA LLENGED IN THE APPEAL AGAINST AN ORDER U/S 13 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 263 OF THE ACT REVISING THE INVALID ORDER U/S 147 O F THE ACT. THIS ISSUE HAS BEEN ANALYSED BY THE HONBLE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF M/S. WESTLIFE DEVELOPMENT LTD. (SUPRA) AND 147 PROCEEDINGS HAS BEEN EQUATED TO PRIMARY PRO CEEDINGS AND THE PROCEEDINGS U/S 263 PASSED EQUATED TO COLLATERAL PROCEEDINGS. IT HAS FU RTHER BEEN HELD BASED ON VARIOUS JUDICIAL PRONOUNCEMENTS OF THE HONBLE SUPREME COURT THAT IF THE PRIMARY PROCEEDINGS ARE NON-EST IN LAW OR VOID ON THE GROUND OF LACK OF JURISDICTION T HEN THE VALIDITY OF SUCH PROCEEDINGS CAN BE CHALLENGED EVEN IN AN APPEAL ARISING OUT OF COLLATE RAL PROCEEDINGS. WE HAVE ALREADY SET OUT THE RATIO LAID DOWN IN THESE DECISIONS AND WE DO NO T WISH TO REPEAT THE SAME. SUFFICE IT TO SAY THE LAW IS WELL SETTLED THAT INVALIDITY OF THE PRIM ARY PROCEEDINGS FOR WANT OF PROPER JURISDICTION CAN BE CHALLENGED EVEN IN APPELLATE PR OCEEDINGS ARISING OUT OF A COLLATERAL PROCEEDING. IN VIEW OF THE AFORESAID LEGAL POSITION WE ADMIT THE ADDITIONAL GROUNDS FOR ADJUDICATION. 12. AS FAR AS THE MERITS OF THE VALIDITY OF INITIA TION OF PROCEEDINGS U/S 147 OF THE ACT FOR A.Y.2007-08 AND 2008-09 ARE CONCERNED THE QUESTION FOR CONSIDERATION IS AS TO WHETHER ON THE BASIS OF THE REASONS RECORDED IT CAN BE SAID THAT T HERE CAN ARISE ANY BELIEF ON THE PART OF THE AO THAT INCOME CHARGEABLE TO TAX FOR THE RELEVANT A SSESSMENT YEARS HAS ESCAPED ASSESSMENT. IN THIS REGARD THE REASONS RECORDED BY THE AO FOR I NITIATING PROCEEDINGS U/.S 147 OF THE ACT FOR A.Y.2007-08 AND 2008-09 HAS ALREADY BEEN SET OUT BY AN ORDER IN THE EARLIER PART OF THIS ORDER. THE GIST OF THE REASONS RECORDED BY THE AO I S THAT THE ASSESSEE HAD MADE INVESTMENTS OF ABOUT RS.4 CRORE IN CONSTRUCTION OF HOTEL/RESORT AT MANDARMONI, PURBA MIDNAPORE. IT IS THE FURTHER ALLEGATION IN THE REASONS RECORDED THAT TO A NOTICE U/S 133(6) OF THE ACT, THE ASSESSEE HAD IN REPLY ADMITTED INVESTMENT OF ONLY RS.3.38 CR ORES IN CONSTRUCTION OF HOTEL AND THAT SOURCE OF FUNDS FOR SUCH CONSTRUCTION WAS OUT OF SH ARE CAPITAL AND SECURED LOAN. IT IS ALSO NOT DISPUTED THAT THE VALUE OF INVESTMENTS AS STATED BY THE ASSESSEE IN ITS REPLY TO THE NOTICE U/S 133(6) OF THE ACT, WAS DULY SHOWN AS THE INVESTMENT IN CONSTRUCTION OF HOTEL WITH THE BALANCE SHEET OF THE ASSESSEE. THE AO HAS HOWEVER INFERRED THAT THERE IS A DIFFERENCE IN THE VALUE OF INVESTMENT IN CONSTRUCTION OF HOTEL AS SHOWN IN THE BOOKS OF ACCOUNT AND AS PER THE INFORMATION IN POSSESSION OF THE AO WHICH IS A SUM OF RS.4 CRORES. ANOTHER REASON GIVEN BY THE AO IS THAT THE DIFFERENCE IN THE AMOUNT OF INVE STMENT IN CONSTRUCTION MIGHT HAVE BEEN MET BY THE ASSESSEE OUT OF INCOME NOT DISCLOSED. IT HAS ALSO BEEN MENTIONED THAT THE SOURCE OF INVESTMENT WITH REGARD TO THE ACTUAL COST OF CONSTR UCTION REQUIRES INVESTIGATION. 13. IN THIS REGARD IT CAN BE SEEN THAT IN ITS REPLY DATED 26.07.2010 TO THE NOTICE U/S 133(6) OF THE ACT THE ASSESSEE HAS GIVEN THE FOLLOWING DETAIL S :- KINDLY REFER TO YOUR ABOVE LETTER DATED 18.06.201 0 CALLING FOR INFORMATION U/S. 133(6) OF THE INCOME TAX ACT, 1961 REGARDING INVEST MENT IN HOTEL AJOY MINAR SITUATED IN MANDARMONI, DIST. - PURBA MEDINIPUR. AS ASKED FOR, WE ARE FURNISHING THE INFORMATION ALO NG WITH ENCLOSURES FOR YOUR KIND PERUSAL.- I. TOTAL AMOUNT INVESTED UP TO 31.03.2010 IS RS. 3,38, 43,644.00 AND SOURCE OF FUND IS GIVEN HEREUNDER: - SHARE CAPITAL RS. 1,88,30,000.00 UNSECURED LOAN . RS. 1.65.16,005.00 TOTAL RS. 3,53,46,005.00 WE ARE ENCLOSING HEREWITH THE LIST OF SHARE HOLDER S AND LOANERS UP TO 31.03.2010 SHOWING NAMES, ADDRESS AND PAN OF THE RESPECTIVE PARTIES FO R YOUR READY REFERENCE. THE FIGURES RELATING TO 2009-10 INCLUDED WITH THE ABOVE ARE SUB JECT TO AUDIT. 14 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 THE ABOVE TWO LISTS ARE THE CLEAR EVIDENCE IN SUPPO RT OF CREDIT WORTHINESS OF OUR COMPANY, 2. A SEPARATE YEAR WISE LIST OF INVESTMENT IN HOTEL AJOY MINAR IS ENCLOSED AS ASKED FOR. 3 WE ARE ENCLOSING HEREWITH PHOTO COPY OF AUDITED BALANCE SHEET FOR THE YEARS 2006-07, 2007-08 & 2008-09. THE AUDIT OF ACCOUNTS FOR THE YE AR ENDING 31ST MARCH2010 IS UNDER PROGRESS. THE SAME, IF REQUIRED, WILL BE FURNISHED WHEN THE SAME WILL BE SIGNED BY THE AUDITOR. 4 THE PHOTO COPIES OF TWO BANK ACCOUNTS ARE ENCLOS ED FOR YOUR KIND PERUSAL. 14. IN THE LIGHT OF THE AFORESAID REPLY THE QUESTI ON THAT NEEDS TO BE ANSWERED IS AS TO HOW DID THE AO GET INFORMATION THAT THE ASSESSEE HAD INVEST ED RS.4 CRORES IN HOTEL AT MANDARMONI, PURBA MEDINIPUR. APPARENTLY THERE APPEARS TO BE NO BASIS FOR THIS CONCLUSION ARRIVED AT BY THE AO IN THE REASONS RECORDED. THE LD. DR HOWEVER SOUGHT TO DEFEND THE ACTION OF THE AO BY SUBMITTING THAT THERE WAS A SURVEY IN THE BUSINESS PREMISES OF THE ASSESSEE AND IN SUCH SURVEY THERE WAS EVIDENCE TO SHOW THAT THE ASSESSEE HAD IN VESTED A SUM OF RS.4 CRORES IN CONSTRUCTION OF A HOTEL AT MANDARMONI. WE ARE OF THE VIEW THAT T HIS SUBMISSION OF THE LD. DR CANNOT BE ACCEPTED. THE LAW IS WELL SETTLED THAT THE REASONS RECORDED BY THE AO HAVE TO BE TESTED ON THE BASIS OF SPECIFIC WORDINGS OF THE REASONS SO RECORD ED. NO EXTERNAL MATERIAL CAN BE SHOWN TO JUSTIFY THE CONCLUSION ARRIVED AT IN THE REASONS RE CORDED UNLESS THESE MATERIALS ARE SPECIFICALLY REFERRED TO OR INCORPORATED IN THE REASONS RECORDED . IN THE REASONS RECORDED THE AO HAS NOT DISCLOSED THE BASIS OF THIS CONCLUSION THAT THE ASS ESSEE MADE AN INVESTMENT OF RS. 4 CRORES IN THE CONSTRUCTION OF A HOTEL AT MANDARMONI. WE FIND THAT IN THIS REGARD THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD., VS. R.B.WADKAR (2004) 268 ITR 0332 THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORD ED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE R EASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HI S REASONS. IT IS FOR THE AO TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE AO TO FORM HIS OPINION. IT IS FOR HIM TO PU T HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOU S AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS M IND. REASONS ARE THE MANIFESTATION OF MIND OF THE AO. THE REASONS RECORDED SHOULD BE SELF -EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE AO, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLO SED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, S O AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGU ARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE A O CANNOT BE SUPPLEMENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHICH WERE LACKING IN THE MATERIAL PARTICULARS WOULD GET SUPPLEMENTED BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. 15. WE ARE ALSO OF THE VIEW THAT AS RIGHTLY CONTEN DED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE REASONS RECORDED ARE VAGUE AND BELIEF REGARDING ESCAPEMENT OF INCOME IS ON MERE PRETENCE. IN THIS REGARD THE DECISION OF ITAT KOLKA TA BENCH IN ITA NO.671/KOL/2015 DATED 18.09.2015 IN THE CASE OF DR.PAPIYA DUTTA VS ITO IS RELEVANT AND IT HAS BEEN HELD IN THE AFORESAID DECISION AS FOLLOWS :- IT IS CLEARLY EVIDENT FROM THE REASONS RECORDED B Y THE ASSESSING OFFICER THAT THERE WAS ACTUALLY NO REASON FOR HIM TO HAVE FORMED A BEL IEF ABOUT THE ESCAPEMENT OF ANY 15 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 INCOME OF THE ASSESSEE FROM THE ASSESSMENT, BUT THE ASSESSMENT WAS REOPENED BY HIM TO VERIFY OR EXAMINE CERTAIN PARTICULARS FURNISHED BY THE ASSESSEE IN THE RETURN OF INCOME, WHICH ACCORDING TO THE ASSESSING OFFICER, M IGHT HAVE POSSIBLY INVOLVED INTRODUCTION OF HER UN ACCOUNTED MONEY BY THE ASSES SEE. IT IS THUS CLEAR THAT THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER ON THE BASIS OF SUSPICION AND IN ORDER TO MAKE FISHING AND ROAMING ENQUIRIES, WHICH, IN MY OPINION, IS NOT PERMISSIBLE. IT IS A SETTLED POSITION OF LAW THAT THE ASSESSMENT CAN BE REOPENED UNDER SECTION 147/148 ON THE BASIS OF 'REASON TO BELIEVE' AND NOT 'REASON TO SUSPECT'. AS HELD BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DE PUTY DIRECTOR OF INC ME TAX (INTERNATIONAL TAXATION )-21, MUMBAI -VS.- SOCIETE INTERNATIONAL DE TELECOMMUNICATION ( SUPRA) CITED BY THE ID. COUNSEL FOR THE ASSESSEE, UNLESS THE REASONS TO BELIEVE ABOUT THE ESCAPEMENT OF INCOME E XIST, NO RECOURSE CAN BE TAKEN TO THE PROVISIONS OF SECTION 147. IT WAS HELD THAT WHE RE AN ASSESSING OFFICER VENTURES TO INITIATE REASSESSMENT PROCEEDINGS WITH AN OBJECT OF FINDING SOME MATERIAL ABOUT THE ESCAPEMENT OF INCOME, SUCH REASSESSMENT CANNOT LEGA LLY STAND AND THE LAW DOE S NOT PERMIT THE ASSESSING OFFICER TO CONDUCT INQUIRIES A FTER THE INITIATION OF REASSESSMENT ITA NO. 671 / KOL/2015 ASSESSMENT YEAR: 2008 - 2009 PROCEEDINGS, TO FIND IF THERE IS AN ESCAPEMENT OF INCOME. IT WAS HELD THAT THE SCOPE OF SECTION 147 CANNOT ENCOMPASS SUCH AN ACTION UNDER WHICH CERTAIN EXAMINATION IS T O BE CONDUCTED FOR FORMING A REASON TO BELIEVE AS TO THE ESCAPEMENT OF INCOME. I F THE FACTS OF THE PRESENT CASE INCLUDING ESPECIALLY THE REASONS RECORDED BY THE AS SESSING OFFICER FOR REOPENING THE ASSESSMENT A RECONSIDERED IN THE LIGHT OF THE DECIS ION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF DEPUTY DIRECTOR OF INCOME T AX (INTERNATIONAL TAXATION)-21, MUMBAI - VS.- SOCIETE INTERNATIONAL DE TELECOMMUNIC ATION (SUPRA), I AM OF THE VIEW THAT THE INITIATION OF REASSESSMENT PROCEEDING ITSE LF WAS BAD IN LAW AND THE ASSESSMENT COMPLETED BY THE ASSESSING OFFICER UNDER SECTION 14 3(3) READ WITH SECTION 147 IN PURSUANCE OF SUCH INVALID INITIATION IS LIABLE TO B E CANCELLED. I ORDER ACCORDINGLY. 16. IN THE PRESENT CASE ALSO THE RE-ASSESSMENT PRO CEEDINGS HAVE BEEN INITIATED ONLY FOR THE PURPOSE OF VERIFICATION AND EXAMINATION WHICH IS NO T THE SCOPE OF REASSESSMENT PROCEEDINGS. IT WOULD BE THE CASE OF RATHER REASONS TO SUSPECT RATH ER THAN REASONS TO BELIEF THAT THERE WAS ESCAPEMENT OF INCOME. IT IS A CASE OF THE AO SEEKIN G TO MAKE FISHING AND ROVING INQUIRY WITHOUT ANY BASIS. WE HAVE NO HESITATION IN CONCLUD ING THAT INITIATION OF REASSESSMENT PROCEEDINGS IN THE PRESENT CASE WAS NOT VALID AS TH E MANDATORY REQUIREMENT OF SUCH 147 HAS NOT BEEN SATISFIED. WE THEREFORE HOLD THAT REASSESS MENTS ORDERS FOR A.Y.2007-08 AND 2008-09 DATED 30.12.2011 WERE INVALID. CONSEQUENTLY ORDER P ASSED U/S 263 OF THE ACT DATED 21.03.2014 FOR A.Y.2007- 08 AND 2008-09 ARE ALSO HE LD TO BE INVALID AND QUASHED. THUS THE APPEALS BEING ITA NO.765 AND 766/KOL/2014 ARE ALLOW ED. 10. THE HONBLE DELHI HIGH COURT IN THE CASE OF COM MISSIONER OF INCOME-TAX, IV V. INSECTICIDES (INDIA) LTD[2013] 357 ITR 330 (DELHI) UPHELD THE ORDER OF THE ITAT DELHI BENCH IN ITA NOS. 2332-2333/DEL/2010, HOLDING AS FO LLOWS:- 7. WE MAY POINT OUT AT THIS JUNCTURE ITSELF THAT T HE TRIBUNAL DID NOT GO INTO THE QUESTION OF MERITS. IT ONLY EXAMINED THE QUESTION OF THE VALIDITY OF THE PROCEE DINGS UNDER SECTION 147 OF THE SAID ACT. THE TRIBUN AL, IN ESSENCE, HELD THAT THE PURPORTED REASONS FOR REOPEN ING THE ASSESSMENTS WERE ENTIRELY VAGUE AND DEVOID OF ANY MATERIAL. AS SUCH, ON THE AVAILABLE MATERIAL, N O REASONABLE PERSON COULD HAVE ANY REASON TO BELIEV E THAT INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, T HE TRIBUNAL HELD THAT THE PROCEEDINGS UNDER SECTION 147 OF THE SAID ACT WERE INVALID. 16 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 8. THE TRIBUNAL GAVE DETAILED REASONS FOR CONCLUDING T HAT THE PROCEEDINGS UNDER SECTION 147 WERE INVALID. INSTEAD OF ADDING ANYTHING TO THE SAI D REASONS, WE THINK IT WOULD BE APPROPRIATE IF THE SAME ARE REPRODUCED: 'IN THE CASE AT HAND, AS IS SEEN FROM THE REASONS R ECORDED BY THE AO, WE FIND THAT THE AO HAS MERELY S TATED THAT IT HAS BEEN INFORMED BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETTER DATED 16.06.2006 THAT THE A BOVE NAMED COMPANY WAS INVOLVED IN GIVING AND TAKING BOGUS ENT RIES/TRANSACTIONS DURING THE RELEVANT YEAR, WHICH I S ACTUALLY UNEXPLAINED INCOME OF THE ASSESSEE COMPANY. THE AO HAS FURTHER STATED THAT THE ASSESSEE COMPANY HAS FA ILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND SOU RCE OF THESE FUNDS ROUTED THROUGH BANK ACCOUNT OF T HE ASSESSEE COMPANY. IN THE REASONS RECORDED, IT IS NOWHERE MEN TIONED AS TO WHO HAD GIVEN BOGUS ENTRIES/TRANSACTIONS TO THE ASSESSEE OR TO WHOM THE ASSESSEE HAD GIVEN BOGUS ENT RIES OR TRANSACTIONS. IT IS ALSO NOWHERE MENTIONED AS TO ON WHICH DATES AND THROUGH WHICH MODE THE BOGUS ENTRIES AND TRANSACTIONS WERE MADE BY THE ASSESSEE. WHAT W AS THE INFORMATION GIVEN BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETTER DATED 16.06.2006 HA S ALSO NOT BEEN MENTIONED. IN OTHER WORDS, THE CONTENTS OF THE LETTER DATED 16.06.2006 OF THE DIRECTOR OF INCOME-TAX (INV.), NE W DELHI HAVE NOT BEEN GIVEN. THE AO HAS VAGUELY REF ERRED TO CERTAIN COMMUNICATIONS THAT HE HAD RECEIVED FROM THE DIT(IN V.), NEW DELHI; THE AO DID NOT MENTION THE FACTS ME NTIONED IN THE SAID COMMUNICATION EXCEPT THAT FROM THE INFORMATION S GATHERED BY THE DIT (INV.), NEW DELHI THAT THE AS SESSEE WAS INVOLVED IN GIVING AND TAKING ACCOMMODATION ENTRIES ONLY AND REPRESENTED UNSECURED MONEY OF THE ASSESS EE COMPANY IS ACTUALLY UNEXPLAINED INCOME OF THE ASSESSEE COMP ANY OR THAT IT HAS BEEN INFORMED BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI VIDE LETTER DATED 16.06.2006 THAT THE ASSESSEE COMPANY WAS INVOLVED IN GIVING AND TA KING BOGUS ENTRIES/TRANSACTIONS DURING THE RELEVANT FINANCIAL YEAR. THE AO DID NOT MENTION THE DETAILS OF TRANSAC TIONS THAT REPRESENTED UNEXPLAINED INCOME OF THE ASSESSEE COMP ANY. THE INFORMATION ON THE BASIS OF WHICH THE AO H AS INITIATED PROCEEDINGS U/S 147 OF THE ACT ARE UNDOUBTEDLY VAGU E AND UNCERTAIN AND CANNOT BE CONSTRUED TO BE SUFFI CIENT AND RELEVANT MATERIAL ON THE BASIS OF WHICH A REASONABL E PERSON COULD HAVE FORMED A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN OTHER WORDS, THE REASONS RECORDED BY THE AO ARE TOTALLY VAGUE, SCANTY AND AMBIGUOUS. TH EY ARE NOT CLEAR AND UNAMBIGUOUS BUT SUFFER FROM VAGUENESS. TH E REASONS RECORDED BY THE AO DO NOT DISCLOSE THE AO 'S MIND AS TO WHAT WAS THE NATURE AND AMOUNT OF TRANSACTION OR EN TRIES, WHICH HAD BEEN GIVEN OR TAKEN BY THE ASSESSE E IN THE RELEVANT YEAR. THE REASONS RECORDED BY THE AO ALSO DO NOT DISCLOSE HIS MIND AS TO WHEN AND IN WHAT MOD E OR WAY THE BOGUS ENTRIES OR TRANSACTIONS WERE GIVEN OR TAKEN B Y THE ASSESSEE. FROM THE REASONS RECORDED, NOBODY C AN KNOW WHAT WAS THE AMOUNT AND NATURE OF BOGUS ENTRIES OR TRANS ACTIONS GIVEN AND TAKEN BY THE ASSESSEE IN THE RELE VANT YEAR AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. AS ALREA DY NOTED ABOVE, IT IS WELL SETTLED THAT ONLY THE RE ASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS U/S 147 OF THE AC T ARE TO BE LOOKED AT OR EXAMINED FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED U/S 148 OF THE ACT. THE REASONS ARE R EQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITION CAN BE MADE TO THOSE REASONS. THEREFORE, THE DETAILS OF ENTRIE S OR AMOUNT MENTIONED IN THE ASSESSMENT ORDER AND IN RESPECT OF WHICH ULTIMATE ADDITION HAS BEEN MADE BY THE AO, C ANNOT BE MADE A BASIS TO SAY THAT THE REASONS RECORDED BY THE AO WERE WITH REFERENCE TO THOSE AMOUNTS MENTIONED IN T HE ASSESSMENT ORDER. THE REASONS RECORDED BY THE AO ARE TOTALLY S ILENT WITH REGARD TO THE AMOUNT AND NATURE OF BOGUS ENTRIES AND TRANSACTIONS AND THE PERSONS WITH WHOM THE TRANSACT IONS HAD TAKEN PLACE. IN THIS RESPECT, WE MAY RELY UPON THE DECISION OF HON'BLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT V. ATUL JAIN [2000] 299 ITR 383 , IN WHICH CASE THE INFORMATION RELIED UPON BY THE AO FOR INITIATING PR OCEEDINGS U/S 147 OF THE ACT DID INDICATE THE SOURC E OF THE CAPITAL GAIN AND NOBODY KNEW WHICH SHARES WERE TRANSACTED A ND WITH WHOM THE TRANSACTION HAS TAKEN PLACE AND IN THAT CASE THERE WERE ABSOLUTELY NO DETAILS AVAILABLE AND THE INFORMATION SUPPLIED WAS EXTREMELY SCANTY AND VAGUE AND IN THAT LIGHT OF THOSE FACTS, THE HON'BLE JURISDICTIONAL DE LHI HIGH COURT HELD THAT INITIATION OF PROCEEDINGS U/S 147 OF THE ACT BY THE AO WAS NOT VALID AND JUSTIFIED IN THE EYES OF L AW. THE RECENT DECISION OF HON'BLE JURISDICTIONAL H IGH COURT OF DELHI IN THE CASE OF SIGNATURE HOTELS (P.) LTD. (SUPRA) ALSO SUPPORTS THE VIEW WE HAVE TAKEN ABOVE.' 9. WE DO NOT SEE ANY REASON TO DIFFER WITH THE VIEW EX PRESSED BY THE TRIBUNAL. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. THE APPEALS AR E DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS . 11. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRI NCIPAL CIT VS G&G PHARMA INDIA LTD. IN ITA 545/2015 VIDE ORDER DT. 08.10.2015 AT P ARAS 12 AND 13 WAS HELD AS FOLLOWS: 17 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 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 FEB. 2003, FROM FOUR ENTRIES WHICH WERE RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 TH FEB. 2003, FROM FOUR ENTRIES WHICH WERE TERMED AS ACCOMMODATIO N ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY TH E DIRECTOR INVESTIGATION, THE A.O. STATED: I HAVE AL SO PERUSED VARIOUS MATERIALS AND REPORT FROM INVEST IGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS, INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHE THER THE A.O. APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABO UT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOS E MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE B EEN DIFFICULT FOR THE A.O., IF HE HAD IN FACT UNDERTAKEN THE EXER CISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH TH OSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHIC H MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WH ICH WAS FILED ON 14 TH NOVEMBER, 2004 AND WAS PROCESSED U/S 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE A.O. TO HAVE SIMPLY CONCLUDED: IT IS EVIDENT THAT THE ASSE SSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES. IN THE CONSIDERED V IEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIEN T CLARITY BY THE SUPREME COURT IN THE DECISION DISC USSED, THE BASIC REQUIREMENT THAT THE A.O. MUST APPLY HIS MIND TO TH E MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THA T THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE P RESENT CASE. 13. A PERUSAL OF THE REASONS RECORDED DEMONSTRATE TOTAL NON APPLICATION OF MIND BY THE A.O. THUS APPLYING THE PROPOSITION LAID DOWN BY THE JURISDICTIONAL HIG H COURT IN G&G PHARMA INDIA (SUPRA) WE HOLD THAT TH E REOPENING OF ASSESSMENT IS BAD IN LAW 12. PER CONTRA, THE LD. DR SUPPORTING THE ORDER OF THE AUTHORITIES BELOW SUBMITTED THAT THE ADIT, (INV.), THANE HAS CONDUCTED DETAILED INVE STIGATION INTO THE ACTIVITIES OF SHRIVIKAS JAIN AND FAMILY, WHO WERE ENGAGED IN FLOATING PAPER COMPANIES AND BRINGING IN FUNDS FROM KOLKATA COMPANIES AND THEREAFTER SYSTEMATICALLY LAU NDERING THE UNACCOUNTED MONEY OF PERSONS LIKE ASSESSEE. ACCORDING TO THE LD. DR, WH EN THE AO WAS IN RECEIPT OF THE INFORMATION FROM THE ADIT, THANE, HE NOTED THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRY IN THE FORM OF SHARE CAPITAL FROM THE COMPANI ES NAMED IN THE REPORT WHICH WAS NOTHING BUT THE INFUSION OF THE UNACCOUNTED MONEY O F THE ASSESSEE. SO, WHEN HE UNDERSTOOD THAT ASSESSEE HAD INDULGED IN OBTAINING ACCOMMODATI ON ENTRY FROM PAPER COMPANIES FLOATED BY SHRI VIKAS JAIN WHO HAD ADMITTED ALSO IN SEC. 13 1 STATEMENT THESE FACTS, THE AO BELIEVED THAT THERE WAS ESCAPEMENT OF INCOME. THEREFORE, HE RIGHTLY REOPENED THE ASSESSMENT THAT TOO WHICH WAS NOT ORIGINALLY DONE UNDER SCRUTINY. THEREFORE, ACCORDING TO THE LD. DR, WE SHOULD NOT INTERFERE IN THE IMPUGNED ORDER OF THE L D. CIT(A) AND ALSO RELIED UPON THE FOLLOWING DECISIONS : 13. PCIT VS. NRA IRON & STEEL (P.) LTD. [103 TAXMANN.CO M 48 (SC)] ISSUE OF CASH CREDIT (SHARE APPLICATION MONEY) WAS RAISED AS TO WHETHER ASSESSEE IS UNDER A LEGAL OBLIGATION TO PROVE RECEI PT OF SHARE CAPITAL/PREMIUM TO SATISFACTION OF ASSESSING OFFICE R, FAILURE OF WHICH, WOULD JUSTIFY ADDITION OF SAID AMOUNT TO INCOME OF ASSESSEE. HON'BLE 18 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 APEX COURT HELD THE ANSWER IN AFFIRMATIVE AS YES. A NOTHER ISSUE WAS THAT THE ASSESSEE COMPANY, IN ITS RETURN OF INCOME FOR RELEVANT YEAR SHOWED THAT MONEY AGGREGATING TO RS. 17.60 CRORES H AD BEEN RECEIVED THROUGH SHARE CAPITAL PREMIUM. ASSESSING OFFICER AD DED BACK RS. 17.60 CRORES TO TOTAL INCOME OF ASSESSEE ON GROUND THAT A SSESSEE HAD FAILED TO DISCHARGE ONUS BY COGENT EVIDENCE EITHER OF CREDITW ORTHINESS OF SO- CALLED INVESTOR-COMPANIES, OR GENUINENESS OF TRANSA CTION. ON APPEAL, COMMISSIONER (APPEALS), DELETED THE ADDITION ON GRO UND THAT ASSESSEE HAVING FILED CONFIRMATIONS FROM INVESTOR COMPANIES TO SHOW THAT ENTIRE AMOUNT HAD BEEN PAID THROUGH NORMAL BANKING CHANNEL S, AND HENCE DISCHARGED INITIAL ONUS UNDER SECTION 68 FOR ESTABL ISHING CREDIBILITY AND IDENTITY OF SHAREHOLDERS. TRIBUNAL AS WELL AS HIGH COURT CONFIRMED ORDER PASSED BY COMMISSIONER (APPEALS). HOWEVER, IT WAS FOUND THAT AUTHORITIES BELOW DID NOT EVEN ADVERT TO FIELD ENQU IRY CONDUCTED BY ASSESSING OFFICER WHICH REVEALED THAT IN SEVERAL CA SES INVESTOR COMPANIES WERE FOUND TO BE NON-EXISTENT, AND ONUS T O ESTABLISH IDENTITY OF INVESTOR COMPANIES, WAS NOT DISCHARGED BY ASSESS EE. THUS, ENTIRE TRANSACTION SEEMED BOGUS' AND LACKED CREDIBILITY. M ERELY BECAUSE ASSESSEE COMPANY HAD FILED ALL PRIMARY EVIDENCE, IT COULD NOT BE SAID THAT ONUS ON ASSESSEE TO ESTABLISH CREDITWORTHINESS OF INVESTOR COMPANIES STOOD DISCHARGED. ACCORDINGLY, QUESTION A ROSE AS TO WHETHER, ASSESSING OFFICER WAS JUSTIFIED IN PASSING ASSESSME NT ORDER MAKING ADDITIONS UNDER SECTION 68 FOR SHARE CAPITAL/PREMIU M RECEIVED BY ASSESSEE COMPANY. HONBLE SUPREME COURT HELD THE AC TION OF THE AO VALID AND THE QUESTION WAS ANSWERED IN AFFIRMATIVE AS YES. 14. PURVIBEN SNEHALBHAI PANCHHIGAR VS. ACIT [101 TAXMA NN.COM 393 (GUJARAT) ASSESSEE FILED HIS RETURN CLAIMING CAPITAL GAIN ARI SING FROM SALE OF SHARES OF COMPANY T AS EXEMPT UNDER SECTION 10(38 ), IN VIEW OF FACT THAT SAID RETURN WAS ACCEPTED UNDER SECTION 143(1) WITHOUT SCRUTINY, AO WAS JUSTIFIED IN INITIATING REASSESSMENT PROCEEDING S ON BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING THAT C OMPANY 'T' WAS A SHELL COMPANY AND SHARES OF THE SAID COMPANY WERE B ASICALLY USED FOR PROVIDING BOGUS CLAIM OF LONG-TERM OR SHORT-TERM CA PITAL GAIN. ASSESSING OFFICER THUS TAKING A VIEW THAT ASSESSEE HAD RAISED A FALSE CLAIM FOR EXEMPTION OF CAPITAL GAIN, INITIATED REAS SESSMENT PROCEEDINGS. QUESTION WAS, WHETHER SINCE THERE WAS NO SCRUTINY A SSESSMENT, ASSESSING OFFICER HAD NO OCCASION TO FORM ANY OPINI ON ON ANY OF ISSUE ARISING OUT OF RETURN FILED BY ASSESSEE HELD, YES . ANOTHER ISSUE WAS WHETHER, THEREFORE, CONCEPT OF CHANGE OF OPINION WO ULD HAVE NO APPLICATION AND, AS A CONSEQUENCE, VALIDITY OF IMPU GNED REASSESSMENT PROCEEDINGS WAS TO BE UPHELD - HELD, YES. 19 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 15. IN THE CASE OF ANIP RASTOGI VS. ITO, IN ITA NO. 380 9/DEL/2018 DT.8.1.2019 TS-5007- ITAT-2019 (DELHI)-O) HONBLE ITAT, DELHI HAS UPHELD ADDITION U/S 68 ON A CCOUNT OF CREDITS ARISING ON SALE OF PENNY STOCK ON THE GROUND THAT A SSESSEE HAD GENERATED BOGUS ENTRIES OF LONG TERM CAPITAL GAINS ON SALE OF PENNY STOCKS (COPY OF ORDER ATTACHED). 16. M/S. PANKAJ AGARWAL & SONS (HUF); I.T.A.NO.1413/CHN Y/2018 DT.6.12.201 8 (AND OTHERS). IN THIS CASE AO TREATED SALE AND PURCHASE OF SHARES AS SHAM TRANSACTION DENYING THE CLAIM U/S.10(38) AND TREATING THE SAME U/S. 68. FINDINGS OF THE SEBI WERE CORROBORATED BY THE INVESTIGATION WIN G OF THE DEPARTMENT VIZ. EQUITY SHARES WITH NO CREDIBILITY W ERE PURCHASED. TRADING PARTICIPANTS WERE PART OF SYNDICATED BROKER S INDULGING IN PRICE RIGGING. FOR FACILITATING SUCH BOGUS ENTRIES, TRADE RS WERE PAID COMMISSION. MOTIVE OF PRICE RIGGING WAS TO CONVERT BLACK MONEY AS LEGITIMATELY EARNED LONG TERM CAPITAL GAIN U/S. 10( 38). BEFORE THE HON'BLE ITAT PLEA WAS TAKEN BY THE ASSESSEE FOR THE FIRST TIME THAT OPPORTUNITY FOR CROSS-EXAMINATION WAS NOT PROVIDED. HON'BLE ITAT DENIED THE STAND TAKEN BY THE ASSESSEE AND CONFIRME D THE ADDITION (COPY OF ORDER ATTACHED). 17. VIDYA REDDY VS. ITO ITA NO. 20L6/CHNY/2017 DT.15.5. 2018 IN THIS CASE ASSESSEE HAD MADE CLAIM OF LONG TERM C APITAL GAIN U/S 10(38) WHEREAS, INVESTIGATION WING OF THE DEPARTMEN T REVEALED THAT SUCH RIGGED CLAIMS WERE BEING FILED BY THE ASSESSEE S AND THE CASE OF THE ASSESSEE WAS ONE OF SUCH CASES. IT WAS NOTED THAT A SSESSEE HAD MANIPULATED SALES WITHIN SHORT SPAN OF TIME WITH CO LLUSION OF BROKERS TO CLAIM LTCG U/S10(38). THUS, THE SAME WAS ADDED U/S 68. HON'BLE ITAT OBSERVED THAT THE ASSESSEE FAILED TO PRODUCE ANY CO NVINCING EVIDENCE THUS APPEAL OF THE APPELLANT WAS DISMISSED (COPY OF ORDER ATTACHED). 18. CHANDAN GUPTA VS CIT P&H HIGH COURT 2015 [2015] 54 TAXMANN.COM 10 (PUNJAB & HARYANA)/[2015] 229 TAXMAN 173 ISSUE WAS WHETHER, ONCE TRANSACTION OF PURCHASE AND SALE OF SHARES WAS FOUND TO BE BOGUS THEN SALE PROCEEDS HAD TO BE ADDE D AS INCOME OF ASSESSEE UNDER SECTION 68 AS MONEY RECEIVED ON BASI S OF BOGUS TRANSACTION HAD BEEN CREDITED BY ASSESSEE IN HIS BO OKS OF ACCOUNT WHICH REMAINED UNEXPLAINED. HELD, YES. 20 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 19. BALBIR CHAND MAINI VS CIT P&H HIGH COURT 2011] 12 T AXMANN. COM 276 (PUNJAB & HARYANA)/[2011] 201 TAXMAN 94 (PUNJAB & HARYANA (MAG.)/2012] 340 ITR 161 (PUNJAB & HARYANA)/ [2012] 247 CTR 468 (PUNJAB & HARYANA) ASSESSEE HAD PURCHASED CERTAIN SHARES OF A COMPANY AT RATE BETWEEN RS.2.50 AND RS. 3.40 PER SHARE IN MONTH OF APRIL, 1 997 AND PART OF THOSE SHARES WERE SOLD THROUGH A BROKER AT RS. 55 P ER SHARE. AO RECORDED STATEMENT OF BROKER WHO ADMITTED TO HAVE P URCHASED SHARES IN QUESTION BUT FAILED TO PRODUCE BOOKS OF ACCOUNT AND OTHER RELEVANT DOCUMENTS. THE ALLEGED SALE OF SHARES HAD NOT TAKEN PLACE THROUGH ANY STOCK EXCHANGE. BROKER COULD NOT GIVE DETAILS OF PU RCHASER OF SHARES. ADDITION HELD TO BE JUSTIFIED. 20. ABHIMANYU SOIN VS ACIT ITAT CHANDIGARH 2018 2018 TI OL-733- ITAT-CHD UNNATURAL LTCG @ 3072% OVER A PERIOD OF 1.5 YEARS F ROM SCRIP OF THE UNLISTED COMPANY WHOSE EVEN NET WORTH WAS NOT KNOWN TO THE ASSESSEE, WITHOUT EXPERT ADVICE WAS BEYOND THE BUSINESS LOGIC S AND WAS VALID REASON TO MAKE ADDITION FOR UNDISCLOSED INCOME. WHE N ASSESSEE FAILS TO PROVE THROUGH EVIDENCES THAT PURCHASE AND SALE TRAN SACTIONS OF SHARES ARE GENUINE, CLAIM OF EXEMPTED LTCG CAN BE DISALLOW ED AND ADDITION FOR UNDISCLOSED INCOME CAN BE MADE. WHEN FACTS INDI CATES THAT WHOLE PROCESS OF TRADING IN SHARES IS DEPICTED JUST TO AV OID TAX LIABILITY, THE ADDITION FOR UNDISCLOSED INCOME SHOULD BE UPHELD. 21. SMT. M. K. RAJESHWARI VS ITO ITAT BANGALORE 2018 [2 018] 99 TAXMANN.COM 339 (BANGALORE - TRIB.) WHERE ASSESSEE CLAIMED EXEMPTION UNDER SECTION 10(3 8) IN RESPECT OF CAPITAL GAIN ARISING FROM SALE OF SHARES, IN VIEW O F FACT THAT FINANCIAL WORTH OF SAID COMPANY WAS MEAGRE AND, MOREOVER, THE RE WAS ABNORMAL RISE IN PRICE OF SHARES, IT COULD BE CONCLUDED THAT ASSESSEE INTRODUCED HER OWN UNACCOUNTED MONEY IN GARB OF LONG TERM CAPI TAL GAIN AND, THUS, CLAIM RAISED BY HER WAS TO BE REJECTED. 22. SANJAY BIMALCHAND JAIN L/J SHANTIDEVI BIMALCHAND JA IN VS PCIT BOMBAY HIGH COURT (NAGPUR BENCH) 2017 ITA NO. 18/20 L7L: THE ASSESSEE HAD PURCHASED SHARES OF TWO PENNY STOC KS OF KOLKATA BASED COMPANIES I.E., 8000 SHARES AT THE RATE OF RS .5.50 PER SHARE ON 08.08.2003 AND 4000 SHARES AT THE RATE OF RS.4LPER SHARE ON 05.08.2003. 21 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 THE ASSESSEE SOLD 2200 SHARES AT AN EXORBITANT RATE OF RS.486.55 PER SHARE ON 07.06.2005 AND 800 SHARES ON 20.06.2005 AT THE RATE OF IS.A85.65. THE AUTHORITIES HELD THAT THE ASSESSEE H AD NOT TENDERED COGENT EVIDENCE TO EXPLAIN AS TO HOW THE SHARES IN AN UNKN OWN WORTH RS.5/HAD JUMPED TO RS.485/ IN NO TIME. ADDITION CONFIRMED. 23. USHA CHANDRESH SHAH VS ITO ITAT MUMBAI 2014 2014 T IOL-1459- ITAT-MUM. IN THIS CASE THE ASSESSEE COULD NOT PRODUCE THE COP IES OF SHARE CERTIFICATES AND COPIES OF SHARE TRANSFER FORMS. TH E TRANSACTION OF PURCHASE OF SHARES COULD NOT BE CROSS VERIFIED. THE SHARES OF THE COMPANY WERE DECLARED AS PENNY STOCK BY SEBI AND THE BROKER SANJU KABRA THROUGH WHOM THE SHARES WERE SOLD BY THE ASSE SSEE WAS INDICTED FOR MANIPULATING THE PRICES OF PENNY STOCK SHARES. THE TAX AUTHORITIES HAVE RIGHTLY APPLIED THE TEST OF HUMAN PROBABILITIE S TO EXAMINE THE CLAIM OF PURCHASE AND SALE OF SHARES MADE BY THE AS SESSEE. THE CIT(A) WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE AO BY APPLYING THE TEST OF HUMAN PROBABILITIES. AND THEREFORE LD DR DOES NOT WANT US TO INTERFERE W ITH THE ORDER OF LD. CIT(A). 24. HAVING TAKEN INTO CONSIDERATION THE AFORESAID JUDIC IAL PRECEDENTS AND OTHER CASE LAWS CITED BEFORE US BY BOTH THE PARTIES, IN ORDER TO AP PRECIATE THE LEGAL GROUND RAISED BEFORE US, WE NEED TO LOOK INTO THE REASONS RECORDED BY THE AO BEFORE PROPOSING TO REOPEN THE ASSESSMENT WHICH WE FIND PLACED AT PAGE 1194 - 1195 OF THE PAPER BOOK NO. 3, WHICH IS REPRODUCED AS UNDER: 25. THE LEGAL ISSUE THAT HAS BEEN RAISED BY THE ASSESS EE IN THIS APPEAL IS AGAINST THE JURISDICTION TO REOPEN THE ASSESSMENT BY THE AO U/S . 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). IN ORDER TO ADJUDICATE THE SAME, WE NEED TO LOOK INTO THE REASONS RECORDED BY THE AO WHICH IS SEEN AT PAG ES 1194 AND 1195 OF THE ASSESSEES PAPER BOOK WHICH IS REPRODUCED AS UNDER: 22 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 26. 23 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 27. 24 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 15. HAVING PERUSED THE REASONS RECORDED BY THE AO BEFORE REOPENING AND WHEN THE VALIDITY OF THE ORDER U/S. 147 OF THE ACT DEPENDS U PON THE AO RIGHTLY ASSUMING JURISDICTION AS CONTEMPLATED BY LAW TO MAKE AN ORDER OF ASSESSME NT U/S. 147 OF THE ACT, LET US UNDERSTAND THE SETTLED POSITION OF LAW ON THE LEGAL ISSUE AT HAND. WE NOTE THAT BEFORE THE AO ASSUMES JURISDICTION TO RE-OPEN IT IS NECESSARY TH AT THE CONDITIONS LAID DOWN IN THE SAID SECTION 147 HAS TO BE SATISFIED VIZ., AO SHOULD REC ORD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX FOR THAT ASSESSMENT YEAR HAS ESCA PED ASSESSMENT . IF THIS CONDITION IS NOT SATISFIED AT THE FIRST PLACE, THEN IT CANNOT BE SAI D THE AO HAS VALIDLY ASSUMED JURISDICTION U/S. 147 OF THE ACT. THEREFORE, THE QUESTION FOR CONSID ERATION IS WHETHER ON THE BASIS OF THE REASONS RECORDED BY THE AO, HE COULD HAVE VALIDLY R EOPENED THE ASSESSMENT. FOR THAT IT HAS TO BE SEEN AS TO WHETHER THE AO ON THE BASIS OF WHA TEVER MATERIAL BEFORE HIM, [WHICH HE HAD INDICATED IN HIS REASONS RECORDED] HAD REASONS WA RRANT HOLDING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS IM PORTANT TO REMEMBER THAT THE REASONS RECORDED BY AO TO REOPEN HAS TO BE EVALUATED ON A STAND-ALONE BASIS AND NO ADDITION/EXTRAPOLATION CAN BE MADE OR ASSUMED, WHIL E ADJUDICATING THE LEGAL ISSUE OF AOS USURPATION OF JURISDICTION U/S. 147 OF THE ACT. MO REOVER, THE PARLIAMENT HAS GIVEN POWER TO AO TO REOPEN THE ASSESSMENT, IF THE CONDITION PRECE DENT AS DISCUSSED ABOVE ARE SATISFIED, AND NOT OTHERWISE. IT SHOULD BE KEPT IN MIND THAT T HE CONCEPT OF ASSESSMENT IS GOVERNED BY THE TIME-BARRING RULE AND THE ASSESSEE ACQUIRES A R IGHT AS TO THE FINALITY OF PROCEEDINGS. QUEITUS OF THE COMPLETED ASSESSMENT IS THE FUNDAMEN TAL RULE AND EXCEPTION TO THIS RULE IS RE-OPENING OF ASSESSMENT BY AO UNDER SECTION 147 OR EXERCISE OF REVISIONAL JURISDICTION BY CIT UNDER SECTION 263 OF THE ACT. THEREFORE, THE P ARLIAMENT IN ITS WISDOM HAS PROVIDED SAFEGUARDS FOR EXERCISE OF THE REOPENING OF ASSESSM ENT JURISDICTION TO AO; AND REVISIONAL JURISDICTION OF CIT BY PROVIDING CONDITION PRECEDEN T WHICH IS SINE QUA NON FOR ASSUMPTION/USURPATION OF JURISDICTION. IN THE CASE OF REOPENING OF ASSESSMENT, THE REASON TO BELIEVE ESCAPEMENT OF INCOME IS THE JURISDICTIONAL FACT AND LAW (MIXED QUESTION OF FACT AND LAW) AND FOR REVISIONAL JURISDICTION THE ORDER OF T HE AO SHOULD BE ERRONEOUS AS WELL AS PREJUDICIAL TO THE REVENUE. UNLESS THE CONDITION P RECEDENT IS NOT SATISFIED, THE AO OR THE CIT CAN EXERCISE THEIR REOPENING JURISDICTION OR RE VISIONAL JURISDICTION RESPECTIVELY. THE LEGISLATIVE HISTORY IS THAT IN RESPECT TO THE REOPE NING U/S. 147 OF THE ACT, THE PARLIAMENT BY 25 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 DIRECT TAX LAWS (AMENDMENT) ACT 1987 W.E.F. 01.04.1 989 HAD SUBSTITUTED FOR REASON TO BELIEVE ESCAPEMENT OF INCOME TO FOR REASONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION WHICH GAVE UNBRIDLED SUBJECTIVE SATISFACTION TO TH E AO WAS LATER SUBSTITUTED BACK TO REASON TO BELIEVE ESCAPEMENT OF INCOME , BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1989. THE HONBLE APEX COURT AS WELL AS THE HONBLE HIGH COURTS HAVE ALREADY HELD IN PLETHORA OF CASES THE TEST OF A PRUDENT PERSON INS TRUCTED IN LAW IN UNDERSTANDING JURISDICTIONAL FACT AND LAW (MIXED QUESTION OF FACT AND LAW) THE REASON TO BELIEVE ESCAPEMENT OF INCOME (SUPRA). 16. THE AO, WHO IS A QUASI JUDICIAL AUTHORITY IS EMPOWE RED TO REOPEN THE COMPLETED ASSESSMENT ONLY IN A GIVEN CASE WHEREIN THERE IS RE ASON TO BELIEVE ESCAPEMENT OF CHARGEABLE INCOME TO TAX WHICH IS THE JURISDICTIONAL FACT & LA W AND SINE QUA NON TO ASSUME JURISDICTION TO REOPEN A COMPLETED ASSESSMENT U/S. 143(3) OR 143 (1) OF THE ACT. WHY WE SAID EVEN ASSESSMENTS WHEREIN INTIMATION U/S.143(1) OF THE AC T HAS BEEN DONE, REQUIRES THE SATISFACTION OF THE CONDITION PRECEDENT BECAUSE THE ASSESSEE HAS NO CONTROL OVER THE DEPARTMENT IN RESPECT OF ASSESSMENT TO BE COMPLETED BY SCRUTINY U/S. 143(3) OR 143(1) OF THE ACT AND, THEREFORE, IF THE RETURN OF INCOME OF AN A SSESSEE IS PROCESSED U/S. 143(1) AND INTIMATION HE RECEIVES THEREAFTER FROM THE DEPARTME NT, HE CANNOT BE KEPT IN A DISADVANTAGEOUS POSITION VIS--VIS A CASE WHEREIN T HE RETURN OF INCOME OF AN ASSESSEE HAS BEEN PICKED UP FOR SCRUTINY U/S. 143(3) OF THE ACT. IN ANY CASE, FOR REOPENING THE ASSESSMENT BY THE AO THE CONDITION PRECEDENT OF REASON TO BELI EVE ESCAPEMENT OF INCOME IS SINE QUA NON IN BOTH THE CASES WHEREIN ASSESSMENT IS DONE UN DER 143(1) OR 143(3) OF THE ACT. THUS, IT MUST BE KEPT IN MIND THAT REASONS TO BELIEVE POS TULATES FOUNDATION BASED ON INFORMATION AND BELIEF BASED ON REASON. EVEN IF THERE IS FOUND ATION BASED ON INFORMATION THERE MUST BE SOME REASON WARRANT HOLDING THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT HAS TO BE KEPT IN MIND THAT THE HON BLE SUPREME COURT IN GANGA SARAN & SONS P. LTD. VS. ITO (1981) 130 ITR 1 (SC) HELD THA T THE EXPRESSION REASON TO BELIEVE OCCURRING IN SEC. 147 IS STRONGER THAN THE EXPRES SION IF SATISFIED AND SUCH REQUIREMENT HAS TO BE MET BY THE AO IN THE REASONS RECORDED BEF ORE USURPING THE JURISDICTION U/S. 147 OF THE ACT. IT MUST BE KEPT IN MIND THAT INFORMATION ADVERSE AGAINST THE ASSESSEE MAY TRIGGER 26 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 REASON TO SUSPECT THEN THE AO IS DUTY BOUND TO MAKE REASONABLE ENQUI RY TO COLLECT MATERIAL WHICH WOULD MAKE HIM BELIEF THAT THERE IS IN FACT AN ESCAPEMENT OF INCOME. 28. SO THE CONDITION PRECEDENT AS DISCUSSED ABOVE IS TH E JURISDICTIONAL FACT & LAW, WHICH IS SINE QUA NON FOR THE AO TO SUCCESSFULLY USURP THE JURISDICTION U/S. 147 OF THE ACT AND IT HAS TO BE ALSO KEPT IN MIND THAT THE JURISDICTIONA L FACT (MIXED QUESTION OF FACT AND LAW) REFERRED TO IN SECTION 147 OF THE ACT I.E REASON TO BELIEVE ESCAPEMENT OF INCOME SHOULD BE THAT OF AO AND NOT THAT OF ANY OTHER AUTHORITY, BEC AUSE THEN IT WILL BE AGAINST ONE OF THE BASIC FEATURE OF THE CONSTITUTION OF INDIA I.E, THE RULE OF LAW, WHEREIN THE PARLIAMENT HAS EMPOWERED THIS REOPENING JURISDICTION ONLY TO THAT OF ASSESSING OFFICER AND THAT IS WHY IF THE REASON TO BELIEVE ESCAPEMENT OF INCOME IS NOT THAT OF AO, THE ASSUMPTION OF JURISDICTION TO RE-OPEN, HAS BEEN HELD TO BE VITIATED AND RESUL TANTLY BAD IN LAW, SINCE IT WILL BE ON THE BASIS OF BORROWED SATISFACTION. THE HONBLE SUPREM E COURT HAS HELD IN ANIRUDDHA SINGHAJI KARANSINGHJI JADEJA & ANR. VS.STATE OF GUJARAT (199 5) 5 SCC 302 THAT IF A STATUTORY AUTHORITY HAS BEEN VESTED WITH JURISDICTION, HE HAS TO EXERCISE IT ACCORDING TO ITS OWN DISCRETION. IF DISCRETION IS EXERCISED UNDER THE D IRECTION OR IN COMPLIANCE WITH SOME HIGHER AUTHORITIES, INSTRUCTIONS ETC. THEN IT WILL BE A CA SE OF FAILURE TO EXERCISE DISCRETION ALTOGETHER. THE HONBLE SUPREME COURT AT PARA 13 HAS TAKEN NOTE OF WADE & FORSYTH IN ADMINISTRATIVE LAW, 7 TH EDITION AT PAGES 358 AND 359 UNDER THE HEADING SU RRENDER, ABDICATION, DICTATION AND SUB-HEADING POWER IN THE WRONG HAND S AS BELOW: CLOSELY AKIN TO DELEGATION, AND SCARCELY DISTINGUI SHABLE FROM IT IN SOME CASES, IS ANY ARRANGEMENT BY WHICH A POWER CONFERRED UPON ONE AUT HORITY IS IN SUBSTANCE EXERCISED BY ANOTHER. THE PROPER AUTHORITY MAY SHA RE ITS POWER WITH SOMEONE ELSE, OR MAY ALLOW SOMEONE ELSE TO DICTATE TO IT BY DECLI NING TO ACT WITHOUT THEIR CONSENT OR BY SUBMITTING TO THEIR WISHES OR INSTRUCTIONS. THE EFFECT THEN IS THAT THE DISCRETION CONFERRED BY PARLIAMENT IS EXERCISED, AT LEAST INPA RT, BY THE WRONG AUTHORITY, AND THE RESULTING DECISION IS ULTRA VIRES AND VOID. SO STR ICT ARE THE COURTS IN APPLYING THIS PRINCIPLE THAT THEY CONDEMN SOME ADMINISTRATIVE ARR ANGEMENTS WHICH MUST SEEM QUITE NATURAL AND PROPER TO THOSE WHO MAKE THEM. . MINISTERS AND THE DEPARTMENTS HAD SEVERAL TIME FALLEN FOUL OF THE SAM E RULE, NO DOUBT EQUALLY TO THEIR 27 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 SURPRISE.. THE HONBLE SUPREME COURT THEREAFTER IN PARA 14 IN THAT CASE HELD THE PRESENT WAS THUS A CLEAR CASE OF EXERCISE OF P OWER ON THE BASIS OF EXTERNAL DICTATION. THAT THE DICTATION CAME ON THE PRAYER O F DSP WILL NOT MAKE ANY DIFFERENCE TO THE PRINCIPLE. THE DSP DID NOT EXERCISE THE JUR ISDICTION VESTED IN HIM BY THE STATUTE AND DID NOT GRANT APPROVAL TO THE RECORDING OF INFORMATION UNDER TADA IN EXERCISE OF HIS DISCRETION. AND THEREAFTER THE HON BLE SUPREME COURT WAS PLEASED TO HOLD THAT SINCE THE DSP DID NOT EXERCISE HIS DISCRE TION INDEPENDENTLY BUT REFERRED THE MATTER TO THE ADDITIONAL SECRETARY, HOME DEPARTMENT REQUESTING PERMISSION TO INVOKE THE PROVISIONS OF TADA WAS HELD TO BE AN EXE RCISE OF POWER ON THE BASIS OF EXTERNAL DICTATION AND THE REGISTRATION OF CASE UND ER TADA WAS HELD TO BE VITIATED AND WAS, THEREFORE, QUASHED 29. FROM THE AFORESAID UNDERSTANDING OF LAW GOVERNING T HE ISSUE AT HAND, WE HAVE TO EXAMINE THE REASONS RECORDED BY AO FOR SUCCESSFULLY ASSUME JURISDICTION TO RE-OPEN U/S 147 OF THE ACT, WHICH IS ALREADY SET OUT ABOVE AND TEST WHETHER THE CONDITION PRECEDENT NECESSARY TO USURP THE RE-OPENING JURISDICTION CAN BE DISCERNED FROM PERUSAL OF THE REASONS RECORDED BY THE AO IN THE INSTANT CASE (SUPRA). FRO M THE GIST OF THE REASONS RECORDED BY THE AO, WE UNDERSTAND THAT THE AO RECEIVED INFORMATION FROM ADIT, THANE CONDUCTED SOME INVESTIGATIONS IN THE CASE OF ONE MR. VIKAS KUSHALC HAND SANKLECHA (JAIN) ALONG WITH HIS FATHER/BROTHER AND FOUND THAT THE COMPANIES LISTED FROM 1 TO 23 IN THE REASONS RECORDED HAVE BEEN FLOATED WITH HIS FAMILY MEMBERS/LOYAL EMPLOYEE S AS DIRECTORS. ACCORDING TO INFORMATION FROM THANE ADIT (INV.), THE AO NOTICED THAT SHRI VIKAS KUSHALCHAND SANKLECHA IN THE STATEMENT U/S. 131 OF THE ACT IT H AS BEEN RECORDED BY THE THANE, ADIT (INV.) WING STATED THAT HIS COMPANIES M/S. GANDHAR GAUTAM FABTEX PVT. LTD., M/S. SAGARTEX CREATION PVT. LTD. AND M/S. SAHANI INFRA DEVELOPMEN TS PVT. LTD. WERE IN NEED OF FUNDS AND THE FUNDS WERE NOT COMING FROM THE BANKS, SO HE FLO ATED THESE COMPANIES FOR GENERATING FUNDS AND FOR BACKWARD INTEGRATION. ACCORDINGLY, S HRI VIKAS KUSHALCHAND SANKLECHA JAIN BROUGHT A TOTAL FUND OF RS.14.50 CR. IN THESE COMPA NIES FROM KOLKATA BASED COMPANIES. THEREAFTER, THE AO RECORDS THAT THE ASSESSEE M/S. S . D. FINSTOCKS PVT. LTD. (NOW KNOWN AS 28 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 M/S. VINOD COMMODITIES LTD.) HAD RECEIVED FUNDS TO THE TUNE OF RS.1.22 CR. FROM M/S. DHANVARSHA FABRICATION PVT. LTD. AND M/S. PROG DYE CHEM PVT. LTD. WHICH IS A VIKAS JAINS COMPANY, WHICH FORMS PART OF THE FUNDS SHOWN TO HAV E BEEN RECEIVED BY THE ASSESSEE. THEREAFTER, THE AO CONCLUDES AS MENTIONED BY ADIT (INV.), THANE INVESTIGATION PR OVED THAT THE COMPANIES WERE CREATED BY MR. VIKAS JAIN A ND HIS ASSOCIATES JUST TO GIVE ACCOMMODATION ENTRIES AND THE INVESTMENT OF FUNDS A RE NOT GENUINE INVESTMENT. THESE COMPANIES WERE NOT HAVING ANY PROPER FUNDS OF THEIR OWN BUT RECEIVED FUNDS FROM KOLKATA BASED AND APPARENTLY OPERATORS RUN COMPANIES. THUS, ACCORDING TO AO, THE COMPANIES OF SHRI VIKAS JAIN ARE MERE LAYERS IN THE CHAIN TO LAU NDER UNACCOUNTED FUNDS FOR THE BENEFICIARIES. THEREAFTER, THE AO STATES THAT SINC E THE ASSESSEE HAS SHOWN INVESTMENTS FROM THE COMPANIES MENTIONED IN THE LIST (1 TO 23) GIVEN IN THE FIRST PAGE, IT IS QUITE CLEAR THAT THE ASSESSEE HAS TAKEN ABOVE BENEFIT OF ACCOMMODATION E NTRIES FROM COMPANIES FOUND TO BE OF NO WORTH. THEREAFTER, THE AO SAYS THAT SOURCE OF F UNDS ARE NOT GENUINE AND THE INFUSION OF FUNDS THROUGH SHARE CAPITAL IS JUST A FAADE TO REG ULARIZE UNACCOUNTED MONEY. THEN THE AO CONCLUDES THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM COMPANIES OPERATED BY SHRI VIKAS JAIN TO THE TUNE OF RS.1.22 CR. AND THEN THE AO AGAIN CONCLUDES THAT BUT TOTAL SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE DU RING THE AY 2009-10 IS RS. 11,50,00,000/-. THEREFORE, HE HAS REASONS TO BEL IEVE THAT INCOME OF RS.11,50,00,000/- OR MORE HAS ESCAPED ASSESSMENT. ACCORDINGLY, HE HAS I SSUED NOTICE U/S. 148 OF THE ACT. 30. AN ANALYSIS OF THE REASONS RECORDED BY THE AO TO BE LIEVE ESCAPEMENT OF INCOME, WE NOTE THAT HE RECEIVED AN INFORMATION FROM ADIT (INV .), THANE THAT THE INVESTIGATION CARRIED OUT REVEALED THAT ONE SHRI VIKAS JAIN ALONGWITH HIS FAMILY MEMBERS AND TRUSTED EMPLOYEES HAVE FLOATED 23 COMPANIES FOR THE PURPOSE OF FUNDIN G HIS THREE COMPANIES NAMELY, M/S. GANDHAR GAUTAM FABTEX LTD., M/S. SAGARTEX CREATION LTD. & M/S. SAHANI INFRA DEVELOPMENT PVT. LTD. AS PER SHRI VIASH JAIN (U/S. 131 OF THE /ACT) SINCE FUNDS WERE NOT AVAILABLE FROM BANKS, HE FLOATED THE 23 COMPANIES A ND INFUSED FUNDS OF RS. 14.50 CR. FROM KOLKATA BASED COMPANIES FOR BACKWARD INTEGRATION. THEREAFTER, THE AO NOTES THAT THE ASSESSEE COMPANY RECEIVED RS. 1.22 CR. FROM TWO (2) COMPANIES OF THE SHRI VIKAS JAIN. THEREAFTER, THE AO COMES TO A CONCLUSION IN HIS OWN WORDS AS MENTIONED BY ADIT (INV.), 29 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 THANE INVESTIGATION PROVED THAT THE COMPANIES WERE CREATED BY MR. VIKAS JAIN AND HIS ASSOCIATES JUST TO GIVE ACCOMMODATION ENTRIES AND T HE INVESTMENT OF FUNDS ARE NOT GENUINE INVESTMENT. THESE COMPANIES WERE NOT HAVING ANY PR OPER FUNDS OF THEIR OWN BUT RECEIVED FUNDS FROM KOLKATA BASED AND APPARENTLY OPERATORS R UN COMPANIES. (SO AOS CONCLUSION THAT THE COMPANIES FLOATED BY SHRI VIKAS JAIN AND H IS ASSOCIATES ARE TO GIVE ACCOMMODATION ENTRIES AND THOSE COMPANIES DID NOT HAVE PROPER FUN DS FOR DOING GENUINE INVESTMENT AND ARE FROM OPERATORS RUN COMPANIES STANDS PROVED IS BASED ON THE AFORE MENTIONED INFORMATION GIVEN BY ADIT (INV.), THANE AND NOT BASED ON HIS PR ELIMINARY ENQUIRY). SINCE THE AO HAS TAKEN THE INFORMATION GIVEN BY THE ADIT (INV.), TH ANE AS GOSPEL OF TRUTH AND ACCORDING TO HIM THIS INFORMATION PROVES THAT FUNDS INFUSED BY T HE COMPANIES OF SHRI VIKAS JAIN FROM KOLKATA BASED COMPANIES ARE TAINTED, THE AO OPINES THAT COMPANIES OF SHRI VIKAS JAIN ARE MERE LAYER IN THE CHAIN TO LAUNDER UNACCOUNTED FUND S FOR THE BENEFICIARIES. (THIS THE AO DRAWS NOT BASED ON ANY PRELIMINARY ENQUIRES MADE BY HIM, BUT WHICH IS A FALL OUT OF THE INFORMATION GIVEN BY ADIT (INV.), THANE WHICH ACCOR DING TO AO, PROVES THAT COMPANIES OF SHRI VIKAS JAIN ARE ACCOMMODATION ENTRY PROVIDER AN D NOT GENUINE). THEN THE AO TAKING NOTE THAT ASSESSEE HAD RECEIVED RS.1.22 CR. FROM TW O OF THE SHRI VIKAS JAINS COMPANIES, THE SAID SUM IS ACCOMMODATION ENTRY. (THIS CONCLUSION GOES ON TO SHOW THAT AO HAD MADE THIS FINDING BASED ON THE INFORMATION WHICH ACCORDING T O HIS OWN WORDS (SUPRA) HAS PROVED THAT SHRI VIKAS JAINS COMPANIES ARE ACCOMMODATION ENTRY PROVIDERS AND NO PRELIMINARY ENQUIRY WAS CONDUCTED BY THE AO TO EVEN CALL FOR THE SEC. 1 31 STATEMENT OF SHRI VIKAS JAIN STATEMENT WHICH WOULD SHOW THAT SHRI VIKAS JAIN WAS APPROACHED BY THE ASSESSEE OR NOT, ETC). THEREAFTER THE AO SAYS THAT SINCE RS. 1.22 C R. HAS BEEN GIVEN BY SHRI VIKAS JAIN COMPANIES TO ASSESSEE IT IS ACCOMMODATION ENTRY AND THEREAFTER THE FINAL CONCLUSION IN HIS OWN WORDS BUT TOTAL SHARE APPLICATION MONEY RECEIVED BY THE A SSESSEE DURING THE AY 2009- 10 IS RS.11,50,00,000/-. THEREFORE, THE AO STATES THAT HE HAS REASONS TO BEL IEVE THAT INCOME OF RS.11,50,00,000/- OR MORE HAS ESCAPED ASS ESSMENT. THIS FINAL CONCLUSION OF RS. 11.50 CR. ESCAPING ASSESSMENT AND RS. 1.22 CR. DISC USSED TILL THE FINAL CONCLUSION ABOVE GOES ON TO SHOW THAT AO INFLUENCED BY THE INFORMATION GI VEN BY ADIT (INV.) THANE BY MERE SUSPICION, IN ORDER TO UNDERTAKE A ROVING ENQUIRY, WITHOUT APPLICATION OF MIND HAS FINALLY JUMPED TO THE CONCLUSION OF RS. 11.50 CR. ESCAPING INCOME, WITHOUT MAKING ANY PRELIMINARY 30 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 ENQUIRY AT ALL. THUS, FROM A READING OF THE REASONS RECORDED BY AO TO JUSTIFY RE-OPENING OF ASSESSMENT, CLEARLY SHOW THAT THE AO HAS TAKEN NOT E OF THE INFORMATION FROM THE ADIT(INV.) AND TAKEN THE CONTENTS OF THE INFORMATIO N GIVEN BY ADIT (INV) AS GOSPEL OF TRUTH AGAINST THE ASSESSEE [WITHOUT ANY VERIFICATION OR E NQUIRY] TO FORM A CONCLUSION ABOUT ESCAPEMENT OF INCOME WITHOUT INDEPENDENT APPLICATI ON OF MIND BY HIMSELF IS NOTHING BUT AN ACTION TAKEN BY AO BASED ON THE STRENGTH OF BOR ROWED BELIEF OF ADIT (INV) AND NOT THAT OF AO, WHICH VITIATES THE VERY ASSUMPTION OF JURISD ICTION BY AO TO RE-OPEN THE ASSESSMENT, WHICH FINDING OF US WILL BE CLEAR WHEN WE ANALYZE T HE REASONS RECORDED IN DETAIL INFRA. 31. FROM THE AFORESAID REASONS RECORDED BY AO IT IS EVI DENT THAT OTHER THAN THE INFORMATION GIVEN BY ADIT (INV) THERE IS NO OTHER M ATERIAL THE AO COLLECTED HIMSELF AFTER UNDERTAKING AT LEAST A PRELIMINARY ENQUIRY WHICH CO ULD HAVE ENABLED HIM AT THE TIME OF RECORDING REASONS TO COME TO A CONSCIOUS INDEPENDEN T CONCLUSION THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT . ACCORDING TO US, THE INFORMATION GIVEN BY ADIT( INV) CAN ONLY BE A BASIS TO IGNITE/TRIGGER AND BE THE ST ARTING POINT TO ENQUIRE; AND AT THAT STAGE THE INFORMATION OF ADIT (INV.) CAN BE TERMED AS A FOUND ATION ONLY TO FORM REASON TO SUSPECT AND NOT REASON TO BELIEVE ESCAPEMENT OF INCOME WHIC H IS THE JURISDICTIONAL FACT & LAW REQUIRED TO ENABLE THE AO TO SUCCESSFULLY ASSUME JU RISDICTION TO REOPEN AS ENVISAGED U/S. 147 OF THE ACT. AND THE REASON TO SUSPECT CANNOT B E THE BASIS FOR USURPING JURISDICTION TO REOPEN U/S. 147 OF THE ACT, FOR CONDUCTING ROVING/F URTHER EXAMINATION TO BE RESORTED BY HIM IN ORDER TO STRENGTHEN THE SUSPICION TO AN EXTENT W HICH CAN LATER TRANSFORM THE SUSPICION TO CREATE THE BELIEF IN HIS MIND THAT INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT. MERELY ON AN ALLEGATIONS LEVELED BY ADIT (INV.), AS IN THI S CASE EXPLAINING THE MODUS OPERANDI CARRIED OUT BY SHRI VIKAS JAIN WHO SAID ABOUT INFUS ING FUNDS TO HIS THREE COMPANIES NAMELY M/S GANDHAR GAUTAM FABTEX LTD., M/S. SAGARTEX CREA TION LTD. & M/S. SAHANI INFRA DEVELOPMENT PVT. LTD HAS TAKEN FUNDS TO THE TUNE OF RS 14.50 CR FROM KOLKATA BASED COMPANES SINCE BANKS DID NOT FUND HIM, THE AO TAKIN G NOTE THAT ASSESSEE RECEIVED RS 1.22 CR FROM SHRI VIKAS JAIN COMPANIES CONCLUDED THAT A SSESSEE HAS TAKEN ACCOMMODATION ENTRY (THAT TOO WITHOUT ANY INCRIMINATING STATEMENT BY S HRI VIKAS JAIN AGAINST ASSESSEE OR ANY STATEMENT IS REFERRED TO AGAINST THE ASSESSEE OR AO HAS TAKEN THE DEPOSITION OF SHRI VIKAS 31 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 JAIN). THE INFORMATION PROVIDED BY ADIT THANE AT BE ST CAN ONLY RAISE SUSPICION IN THE MIND OF THE AO (WHICH FACT WE HAVE POINTED OUT EARLIER) WHICH IS NOT SUFFICIENT/REQUIREMENT OF LAW FOR REOPENING OF ASSESSMENT. IT HAS TO BE KEPT IN MIND THAT THE REASONS TO BELIEVE IS NOT SYNONYMOUS TO REASON TO SUSPECT . REASON TO SUSPECT BASED ON AN INFORMATION CAN TRIGGER AN ENQUIRY SO THAT IT CAN BE FOUND OUT WHET HER THERE IS ANY SUBSTANCE OR MATERIAL TO SUBSTANTIATE THAT THERE IS MERIT IN THE INFORMATION ADDUCED BY THE ADIT(INV.) AND AFTER POST ENQUIRY THE AO HAS TO TAKE AN INDEPENDENT DECISION WHETHER TO RE-OPEN THE ASSESSMENT OR NOT. AND AT THE COST OF REPETITION WE SAY THAT THE AO SHOULD NOT ACT ON DICTATE OF ANY OTHER AUTHORITY LIKE IN THIS CASE FROM ADIT (INV.) BECAUS E THEN IT WOULD BE BORROWED SATISFACTION OF THE JURISDICTIONAL FACT & LAW WHICH IS NOT PERMI TTED BY LAW AND CONSEQUENTLY VITIATE THE ASSUMPTION OF JURISDICTION BY AO TO REOPEN U/S. 147 OF THE ACT. IN THIS CASE, AS DISCUSSED ABOVE, WE NOTE THAT THE AO AFTER REFERRING TO THE I NVESTIGATION REPORT CONCLUDES THAT THE INFORMATION GIVEN BY THE ADIT (INV.) PROVES THAT CO MPANIES CREATED BY SHRI VIKAS JAIN ARE FOR PROVIDING ACCOMMODATION ENTRIES. THEREAFTER, TH E AO SAYS THAT HE HAS REASON TO BELIEVE ESCAPEMENT OF INCOME OF RS. 11.50 CR, THOUGH AO ADM ITS THAT ASSESSEE HAS RECEIVED ONLY RS. 1.22 CR. FROM COMPANIES RUN BY SHRI VIKAS JAIN. SO IT IS CLEAR FROM THE AFORESAID AVERMENTS THAT AO BASED ON ADIT INVESTIGATIONS REP ORT HAS TAKEN A VIEW THAT SHARE CAPITAL OF RS.11.50 CR. HAVE ESCAPED ASSESSMENT, AND NOT A S PER HIS INDEPENDENT VIEW AFTER A PRELIMINARY ENQUIRY. BECAUSE THE AO HIMSELF RECOR DS IN THE REASONS TO RE-OPEN THAT AS MENTIONED BY ADIT (INV.), THANE INVESTIGATION PROVE D THAT THE COMPANIES WERE CREATED BY MR. VIKAS JAIN AND HIS ASSOCIATES JUST TO GIVE ACCO MMODATION ENTRIES AND THE INVESTMENT OF FUNDS ARE NOT GENUINE INVESTMENT. THESE COMPANIES WERE NOT HAVING ANY PROPER FUNDS OF THEIR OWN BUT RECEIVED FUNDS FROM KOLKATA BASED AND APPARENTLY OPERATORS RUN COMPANIES , WHICH ADMISSION OF AO GOES ON TO SHOW THAT AOS MA KES UP HIS MIND AGAINST THE ASSESSEE BASED ON THE BORROWED SATISFACTION OF ADIT TANE ONLY AND NOT REASON TO BELIEVE INDEPENDENTLY.. SO THE AO ADMITS THAT THE INFORMAT ION GIVEN BY ADIT(INV.) HAS PROVED THAT COMPANIES OF SHRI VIKAS ARE INDULGING IN ACCOMMODAT ION ENTRY, WHICH RENDERED HIM TO MAKE UP HIS MIND TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AT THE COST OF REPETITION WE SAY THAT AN ADVERSE INFORMATI ON AGAINST AN ASSESSEE MAY TRIGGER REASON TO SUSPECT, AS IN THIS CASE WAS, AND IT WAS INCUMB ENT ON HIS PART PURSUANT TO THE 32 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 INFORMATION REACHING HIS HAND (AO), TO MAKE REASONA BLE ENQUIRY AND COLLECT MATERIAL WHICH COULD MAKE HIM BELIEVE, THAT THERE IS IN FACT AN ES CAPEMENT OF INCOME, WHICH EXERCISE AO ADMITTEDLY DID NOT DO AND HAS BLINDLY COPIED THE CO NTENTS OF THE ADIT(INV) REPORT AND PROCEEDED TO REOPEN THE ASSESSMENT/ INTIMATION PASS ED U/S. 143(1) WHICH ACTION OF AO CANNOT BE COUNTENANCED. IN OTHER WORDS, WHEN THE A O WAS IN RECEIPT OF THE INFORMATION FROM THE ADIT(INV.) HE OUGHT TO HAVE MADE REASONABL E ENQUIRY AND COLLECT MATERIALS WHICH WOULD MAKE HIM BELIEVE, THAT THERE IS ESCAPEMENT OF INCOME. AS STATED EARLIER, IT HAS TO BE REMEMBERED THAT INFORMATION IS NOT SYNONYMOUS TO TRUTH . AT THE COST OF REPETITIONS, WE NOTE THAT AO SIMPLY ON THE BASIS OF THE INVESTIGATION RE PORT OF ADIT (INV.) HAS JUMPED INTO CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME WH ICH IS ERRONEOUS SINCE IT DOES NOT SATISFY THE JURISDICTIONAL FACT AND LAW FOR REOPENING AS EN VISAGED U/S. 147 OF THE ACT. THE AO SIMPLY TAKING NOTE OF THE ADIT(INV.) LETTER HAS BO RROWED THE SATISFACTION WITHOUT INDEPENDENT APPLICATION OF MIND TO FORM REASON WARR ANT HOLDING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. JUST BEC AUSE A LETTER HAS BEEN RECEIVED FROM THE ADIT(INV.) THE AO CANNOT REOPEN THE ASSESSMENT EVEN IF ORIGINAL ASSESSMENT WAS U/S. 143(1) OF THE ACT. IN THE LIGHT OF THE ABOVE, THE AO BASED ON THE REASONS RECORDED AS SET OUT ABOVE COULD NOT HAVE INITIATED A FISHING ENQUIRY TO FIND OUT THE VERACITY OF THE INFORMATION GIVEN BY THE ADIT(INV.). THE REASONS RECORDED BY A O DOES NOT STAND THE TEST AS LAID BY PLETHORA OF JUDICIAL PRECEDENCE AS DISCUSSED ABOVE WHICH IS SINE QUA NON TO ASSUME JURISDICTION U/S 147 OF THE ACT, THEREFORE, IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED, WE FIND THA T THE REASONS RECORDED BY THE AO TO JUSTIFY REOPENING THE ASSESSMENT U/S. 147 FAILS AND , THEREFORE, THE VERY ASSUMPTION OF JURISDICTION TO REASSESS THE ASSESSEE FALLS. SINCE THE AO FAILED TO VALIDLY ASSUME JURISDICTION U/S. 147 OF THE ACT, THE ASSUMPTION OF JURISDICTION BY HIM TO RE-OPEN THE ASSESSMENT ITSELF IS QORUM NON JUDICE AND, THEREFORE, ALL SUBSEQUENT ACT ION IS NULL IN THE EYES OF LAW AND THEREFORE, WE QUASH THE REOPENING AND CONSEQUENT RE ASSESSMENT ORDER FRAMED BY HIM. 32. FURTHER, WHILE CHALLENGING THE LEGALITY OF ASSUMPTI ON OF JURISDICTION BY THE AO FOR REOPENING THE ASSESSMENT U/S. 147 OF THE ACT, THE A SSESSEE HAS ALSO CHALLENGED THE LEGALITY/VALIDITY OF THE APPROVAL GRANTED BY THE LD , COMMISSIONER BY ONLY WRITING I AM 33 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 SATISFIED, WHICH ACCORDING TO THE LD. AR, DOES NOT SATISFY THE REQUIREMENT OF LAW AS LAID IN PLETHORA OF DECISIONS, AND, THEREFORE, THE APPROVAL OF COMMISSIONER SINCE VITIATED, THE AO COULD NOT LEGALLY USURP THE JURISDICTION TO REOPEN THE ASSESSMENT. WE FIND THAT ON THE FORMAT WHICH HAS BEEN REPRODUCED, THE COMMISSIONER HAS SIM PLY WRITTEN YES I AM SATISFIED [ PB PAGE 1224-1226] ON THE DAY, I.E. 29.03.2016 ON WHIC H DAY ITSELF THE AO HAD ISSUED THE REASON RECORDED WHICH IS SEEN PLACED AT PAGE 1195 ( SUPRA) WHICH DOES NOT IN ANY MANNER SHED ANY LIGHT AS TO WHETHER THERE WAS ANY APPLICAT ION OF MIND AT ALL BY THE AFORESAID SENIOR OFFICER, WHO WAS DUTY BOUND TO HAVE LOOKED IN TO CA REFULLY THE REASONS RECORDED BY THE AO TO ASSUME JURISDICTION TO REOPEN. WHEN A SUPERIOR A UTHORITY IS GIVEN POWER BY THE PARLIAMENT, TO GRANT SANCTION TO DO AN ACT BY AN AU THORITY BELOW HIM, THEN THAT POWER NEEDS TO BE EXERCISED WITH DUE CARE AND CIRCUMSPECTION AN D AFTER DUE APPLICATION OF MIND. MECHANICAL MANNER OF GIVING SANCTION LIKE IN THIS C ASE HAVE NOT BEEN APPROVED BY THE HONBLE SUPREME COURT IN A SIMILAR CASE IN CHHUGAMA L RAJPAL VS. S.P. CHALIHA & ORS. 79 ITR 603 (SC) AND HONBLE HIGH COURT OF MADHYA PRADE SH IN ARJUN SINGH VS ASSTT. DIRECTOR OF INCOME TAX (M.P.) REPORTED IN (2000) 246 ITR 363 (MP). SINCE WE ARE NOT SATISFIED WITH THE REASONS RECORDED BY THE AO TO REOPEN BECAUSE IT DOES NOT SATISFY THE CONDITION PRECEDENT REQUIRED TO USURP JURISDICTION UNDER SECT ION 147, THE APPROVAL COULD NOT HAVE BEEN GIVEN BY COMMISSIONER. WE ARE OF THE OPINION THAT THE COMMISSIONER HAS MECHANICALLY ACCORDED PERMISSION WHICH DOES NOT SATISFY DUE CAR E AND CIRCUMSPECTION AND APPLICATION OF MIND SUPPOSED TO BE EXERCISED BY A SUPERIOR AUTHORI TY BEFORE ACCORDING APPROVAL TO AO. IF ONLY HE HAD READ THE REPORT AND APPLIED THE MIND ON THE REASONS RECORDED BY THE AO JUSTIFYING REOPENING, HE WOULD NOT HAVE GRANTED THE PERMISSION. THE SAFEGUARD AGAINST REOPENING U/S 151 OF THE ACT HAS BEEN DONE BY THE S UPERIOR AUTHORITY VERY LIGHTLY AND AS HELD BY THE HONBLE SUPREME COURT IN CHUGAMAL RAJPA L (SUPRA), THE AUTHORITY SUBSTITUTED FORM OVER SUBSTANCE. THUS, WE HOLD THAT THE SANCTI ON GRANTED BY THE COMMISSIONER U/S 151 IS INVALID AND SO, THE NOTICE OF THE AO FOR REOPENI NG U/S. 148 IS BAD IN LAW AND HAS TO BE NECESSARILY STRUCK DOWN. SINCE THE ASSESSEE SUCCEED S ON THE LEGAL ISSUES RAISED BY IT BEFORE US, THEREFORE, THE MERITS OF THE CASE IS NOT BEING LOOKED INTO/ADJUDICATED BECAUSE IT HAS BECOME ACADEMIC IN NATURE. 34 SA 7/JODH/2019 & ITA NO.135/JODH/2019 VINOD COMMODITIESLTD., AY 2009-10 33. THEREFORE, RESPECTFULLY APPLYING THE PROPOSITIONS O F LAW LAID DOWN IN THE JUDGMENTS CITED ABOVE TO THE FACTS OF THE CASE, WE HAVE NO OT HER ALTERNATIVE BUT TO HOLD THAT THE REOPENING OF THE ASSESSMENTS IS BAD IN LAW AND WE Q UASH THE IMPUGNED REOPENING PROCEEDINGS AND CONSEQUENTIAL REASSESSMENT. 33. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D AND THE STAY APPLICATION OF ASSESSEE IS INFRUCTUOUS, SO DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 09/05/201 9 SD/- SD/- (N. K. SAINI) (A. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED: 9TH MAY, 2019 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 4 5 CIT(A)-2, JODHPUR. CIT , JODHPUR DR, ITAT, JODHPUR BENCH / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR