Sh. Mahesh Chand Jain, Agra V. I.T.O., Ward-4(2), Agra

ITA 154/AGR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89196 (ITAT-AGRA)
• Duration Of Justice: 1 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 23-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT SHUK LA
• Assessee Lawyers: ANURAG SINHA
• Keywords: Reopening of assessment; Gift; Principle of natural justice; Wrong claim; Difference of opinion; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 148; 143(3)

Judgement Text

I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH, AGRA [CORAM:PRAMOD KUMAR AM ] I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR: 2002-03 MAHESH CHAND JAIN, ..APPELLANT 6/92, KACHORA BAZAR,BELANGANJ, AGRA. [PAN:ACXPJ 0483 H ] VS. INCOME-TAX OFFICER, .RESPONDENT WARD 4(2), AGRA APPEARANCES BY: ANURAG SINHA FOR THE APPELLANT AMIT SHUKLA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 16 , 2015 DATE OF PRONOUNCING THE ORDER : JUNE 24 , 2015 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE HAS CHALLENG ED THE CORRECTNESS OF ORDER DATED 10 TH FEBRUARY, 2014 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE INCOME-TAX ACT FOR TH E ASSESSMENT YEAR 2002-03. THE GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOW : 1. BECAUSE OF THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE AUTHORITIES BELOW WERE HIGHLY UNJUSTIFIED IN MAKING THE ADDITION AND THEREBY CONFIRMING THE ADDITION MADE BY THE AO AND BECAUSE THE ASSESSEE IS BAD IN LAW AS THE LEANED A.O. HAS MADE IT FLAGRANTLY VIOLATING THE PR INCIPLES OF NATURAL JUSTICE. THE REASONS RECORDED FOR TAKING ACTION U/S 148 IS N OT VALID AND CORRECT. 2. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION OF RS.5,01,500/- ALLEGEDLY AS I NCOME FROM UNDISCLOSED I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 2 OF 11 SOURCES IGNORING THE MATERIAL ON RECORD AND WITHOUT JUDICIOUSLY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. 3. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING THE GIFT AS THE ASSESSEE HAS ESTABLISHED THE IDENTITY, CREDITWORTHI NESS AND GENUINENESS OF THE TRANSACTION AND HE HAS NOT PROPERLY AND LEGALLY APPRECIATED THE EVIDENCES ON RECORD IN SUPPORT OF THE GIFT. 4. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN NOT TAKING INTO CONSIDERATION THE EARLIER ORDER OF THE HONBLE INCOME TAX APPELLA TE TRIBUNAL, AGRA BENCH, AGRA WHICH WERE FILED DURING THE COURSE OF PROCEEDI NGS. 5. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION ALLEGEDLY AS INCOME FROM UNDISC LOSED SOURCES IGNORING THE MATERIAL ON RECORD AND WITHOUT JUDICIOUSLY CONS IDERING THE OBJECTION IN RECORDING THE REASONS AND THE EXPLANATION MADE. THE ENTRIES IN SEIZED RECORDS ITSELF VERIFY THE TRANSACTION. 6. BECAUSE THE ASSESSMENT IS BAD IN LAW AS THE LEAR NED AO HAS MADE IT FLAGRANTLY VIOLATING THE PRINCIPLES OF NATURAL JUST ICE. THE REASONS RECORDED FOR TAKING ACTION U/S. 148 IS NOT VALID AND CORRECT. 2. TO ADJUDICATE ON THIS APPEAL, CERTAIN MATERIAL F ACTS NEED TO BE TAKEN NOTE OF. IN THIS CASE ASSESSMENT PROCEEDINGS WERE REOPENED O N THE BASIS OF INFORMATION RECEIVED FROM ADDL. DIT(INV.), DELHI THAT ONE SHRI SATISH CHAND JAIN IS INDULGED IN PROVIDING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES WITHOUT ANY ACTUAL TRANSACTIONS OF SHARES HAVING BEEN MADE. THE ASSESSEES NAME WAS AL SO LISTED AMONGST THE BENEFICIARIES SHOWING THAT HE RECEIVED AN AMOUNT OF RS.5,01,500/- ON 15.01.2002 THROUGH INSTRUMENT NO. 504574 ISSUED BY SHRI SATISH CHAND JAIN. IT WAS IN THIS BACKDROP, THE ASSESSING OFFICER INITIATED REASSESSM ENT PROCEEDINGS U/S. 147 AND AFTER CONSIDERING THE EXPLANATIONS OF ASSESSEE UNSA TISFACTORY, MADE ADDITION OF RS.5,01,500 AS AN INCOME WHICH ESCAPED ASSESSMENT. THE AO RECORDED THE REASONS AS FOLLOWS : I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 3 OF 11 INFORMATION HAS BEEN RECEIVED FROM THE ADDL. DIT(IN V.), DELHI THAT ONE SHRI SATISH CHAND JAIN HAS PROVIDED BOGUS ENTRIES OF SAL E PROCEEDS OF SHARES TO THE ASSESSEE. ENQUIRIES HAVE BEEN CONDUCTED BY THE ADDL . DIT (INV.), DELHI AND IT HAS BEEN FOUND THAT NO GENUINE TRANSACTION IN SALE/PURC HASE OF SHARES HAS TAKEN PLACE THROUGH THIS BANK ACCOUNT. THE BENEFICIARIES HAVE T AKEN ENTRIES BY PAYING IN CSH AN AMOUNT EQUIVALENT TO THE DRAFT/CHEQUE AMOUNT AND CE RTAIN PREMIUM ON THAT. THE BROKER ON RECEIPT OF CASH FROM THE BENEFICIARIES DE POSITED THE SAME IN THE BANK ACCOUNT AND THEN ISSUED DRAFT/CHEQUE TO THE BENEFIC IARIES. ADDL. DIT(INV.), DELHI HAS PROVIDED A LIST OF SUCH BENEFICIARIES. IN THE SAME LIST, NAME OF THE ASSESSEE SHRI MAHESH CHAND JAIN WHO FALLS UNDER THE JURISDICTION OF THE UNDERSIGNED . THE ASSESSEE HAS TAKEN BOGUS ENTRY IN F.Y. 2003-04 AND RECEIVED AN AMOUNT OF RS.5,01,500/- ON 15.01.2002 THROUGH INSTRUMENT NO.504574 ISSUED BY SHRI SATISH CHAND JAIN. SIMILAR CASES OF BOGUS CLAIM OF CAPITAL GAIN ARRAN GED THROUGH VARIOUS BROKERS HAVE ALREADY BEEN ASSESSED U/S. 148/143(3) IN RANGE -4/AGRA CHARGE. THE CIT(APPEALS)-II, AGRAS ORDER IN THE CASE OF SHRI A SHOK KUMAR LAVANIA, A.Y. 2001- 02, M/S. BAIJ NATH AGRAWAL, A.Y. 2001-02 AND BRIJ M OHAN AGRAWAL, A.Y. 2001-02, TO NAME A FEW, DISCUSSES THE MODUS OPERANDI OF SUCH TR ANSACTIONS WHEREIN WITH THE CONNIVANCE OF SHARE BROKERS ASSESSEES UNACCOUNTED MONEY IS ROUTED AS SALE PROCEEDS OF SHARES. IN VIEW OF THE INFORMATION RECEIVED FROM THE INVES TIGATION WING AND THE ADVERSE MATERIAL IN POSSESSION OF THE DEPARTMENT AS MENTIONED ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.5, 01,500/- SHOWN AS BOGUS SALE PROCEEDS OF SHARES HAS ESCAPED ASSESSMENT IN THE CA SE OF SHRI MAHESH CHAND JAIN, R/O-6/92, KACHORA BAZAR, BELANGANJ, AGRA FOR THE ASSESSMENT YEAR 2002-03. 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A), WHERE HE ASSAILED THE VALIDITY OF REASSESSMENT ORDE R AS WELL AS THE ADDITIONS SO MADE, ON MERITS, BUT WITHOUT ANY SUCCESS. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 4 OF 11 5. DURING THE COURSE OF HEARING, THE LEARNED AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY CONTENDED THAT THE ISSUE WITH R ESPECT TO VALIDITY OF REASSESSMENT PROCEEDINGS IN THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY A DECISION OF CO-ORDINATE BENCH OF ITAT, AGRA (SMC) I N ITA NO. 428/AGR/2011 (A.Y. 2003-04)- SHRI NITIN GOYAL VS. ITO WITH ITA NO. 433 /AGR/2011(A.Y. 2002-03)- SMT. SONIYA AGARWAL VS. ITO, WHEREIN THE REASONS RECORDE D ARE VERBATIM TO THE REASONS RECORDED IN THE INSTANT CASE. IN THAT CASE, THE TRI BUNAL, INTER ALIA, OBSERVED AS FOLLOWS: 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L ON RECORD. THE AO RECORDED FOLLOWING REASONS FOR REOPENING OF ASSESSM ENT (PB-14) : 'INFORMATION HAS BEEN RECEIVED FROM THE ADDL. DIT(I NV), AGRA THAT ONE M/S. SARASWATI DEVI GOYAL, NEW DELHI (A/C. NO.16051) HAS PROVIDED BOGUS ENTRIES OF SALE PROCEED OF SHARES TO THE ASSESSEE THROUGH JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI. ENQUIRIES HAVE BEEN CONDUCTED BY THE ADDL. DIT(INV. ), AGRA AND IT HAS BEEN FOUND THAT NO GENUINE TRANSACTION IN SALE/ PURCHASE OF SHARES HAS TAKEN PLACE THROUGH THIS BANK ACCOUNT. THE BENE FICIARIES HAVE BEEN TAKEN ENTRIES BY PAYING IN CASH AN AMOUNT EQUI VALENT TO THE DRAFT/CHEQUE AMOUNT AND CERTAIN PREMIUM ON THAT. TH E BROKER ON RECEIPT OF CASH FROM THE BENEFICIARIES DEPOSITED TH E SAME IN THE BANK ACCOUNT AND THEN ISSUED DRAFT/CHEQUUE TO THE BENEFI CIARIES. THE ADDL. DIT(INV.), AGRA HAS PROVIDED A LIST OF SUCH BENEFIC IARIES. IN THE SAME LIST, NAME OF THE ASSESSEE SH. NITIN GOYAL, G-679, KAMLA NAGAR, AGRA WHO FALLS UNDER THE JURISDICTION OF THE UNDERSIGNED APPEARS AT SL. NO. 61. THE ASSESSEE HAS TAKEN BOGUS ENTRY ON 14.10.200 2 AND RECEIVED AMOUNT OF RS.50,125/- THROUGH INSTRUMENT/DD NO.1498 14 OF JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI ISSUED BY M/S. SARASWATI DEVI GOYAL, NEW DELHI AND DEPOSITED THE S AME TO THE ACCOUNT NO.837, ALLAHABAD BANK, NEW AGRA. SIMILAR SUCH CASES OF BOGUS CLAIM OF CAPITAL GAIN A RRANGED THROUGH VARIOUS BROKERS HAVE ALREADY BEEN ASSESSED UNDER SECTION 148/143(3) IN RANGE-4, AGRA CHARGE. THE CIT(A)-II, AGRA'S ORDER IN THE CASE OF SH. ASHOK KUMAR LAWANIA, AY 2001-2002, M/S. BAIJNATH AGARWAL, AY 2001-02 AND BRIJ MOHAN AGARWAL, AY 2001 -02 TO NAME A I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 5 OF 11 FEW ASSESSEES, THE MODUS OPERANDI OF SUCH TRANSACTI ONS WHEREIN WITH THE CONVENIENCE OF SHARE BROKERS ASSESSEE'S UN ACCOUNTED MONEY IS ROUTED AS SALE PROCEEDS OF SHARE. IN VIEW OF THE INFORMATION RECEIVED FROM THE INVEST IGATION WING, AGRA AND THE ADVERSE MATERIAL IN POSSESSION O F THE DEPARTMENT AS MENTIONED ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.50,125/- SHOWN AS BOGUS SALE PROCEEDS OF SHAR ES HAS ESCAPED ASSESSMENT IN THE CASE OF SH. NITIN GOYAL, G-679, K AMLA NAGAR, AGRA FOR THE AY 2003-04.' 8. THE ASSESSEE RAISED OBJECTIONS BEFORE THE ASSESS ING OFFICER FOR REOPENING OF THE ASSESSMENT. REPLY OF ASSESSEE IS F ILED AT PAGE 16 OF THE PAPER BOOK, IN WHICH THE ASSESSEE MORE OR LESS RAIS ED THE SAME OBJECTION, AS HAS BEEN ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE . THE ASSESSEE EXPLAINED IN THE REPLY BEFORE THE ASSESSING OFFICER THAT THER E WAS NO MATERIAL TO FORM THE BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THAT THE INITIATION OF THE PROCEEDINGS U/S. 147 IS NOT B ASED ON AN INDEPENDENT APPLICATION OF MIND, BUT BY MECHANICALLY FOLLOWING THE INFORMATION RECEIVED FROM ADDL. DIT(INV.), AGRA. THE ASSESSEE ALSO EXPLA INED THAT THERE WAS NO INFORMATION WITH THE ASSESSING OFFICER THAT THE GIF T RECEIVED BY THE ASSESSEE WAS BOGUS. RATHER, THE ASSESSING OFFICER R ECORDED THE REASONS FOR REOPENING OF ASSESSMENT ON ACCOUNT OF T AKING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. THE REASONS REPRODUCED ABOVE CLEARLY SUPPORT THE CASE OF THE ASSESSEE TO PROVE THAT THE ASSESSING OFFICER WAS HAVING NO REASON TO BELIEF THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER FOLLOWED THE REPORT OF ADDL. DIT(INV.), AGRA FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT, IN WHICH IT WAS PROVIDED THAT THE ASSESSEE IS ONE OF THE BENEFI CIARIES WHO RECEIVED BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. NOTHING I S MENTIONED IF THE ASSESSEE RECEIVED ANY BOGUS GIFT FROM SMT. SARASWAT I DEVI, FOR WHICH THE ASSESSING OFFICER ULTIMATELY MADE ADDITION IN THE A SSESSMENT ORDER. THUS, THE REASONS ON WHICH THE NOTICE FOR RE-ASSESSMENT W AS ISSUED, WERE NOT EXISTING. THE ASSESSING OFFICER RELIED ON THE INFOR MATION WHICH WAS NON- EXISTING. IT IS, THEREFORE, CLEAR THAT THE REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSME NT, WHICH NEVER EXISTED. THE ASSESSING OFFICER HAS NOT VERIFIED THE INFORMATION BEFORE RECORDING REASONS FOR RE-ASSESSMENT IN THE MATTER. SINCE NOTHING WAS FOUND AGAINST THE ASSESSEE ON ACCOUNT OF TAKING BOGUS ENT RIES OF SALE PROCEEDS OF SHARES, THEREFORE, REASONS RECORDED QUA ASSESSEE, W ERE INCORRECT REASONS HAVING NO NEXUS WITH THE CASE OF THE ASSESSEE. THUS , NO SUCH INCOME HAS ESCAPED ASSESSMENT AS MENTIONED IN THE I NFORMATION AND REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. T HE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSME NT WERE MERE PRETENCE, AN EXCUSE TO ENQUIRE INTO TAKING OF BOGUS ENTRY OF SALE PROCEEDS OF SHARES I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 6 OF 11 WITHOUT ANY MATERIAL OR EVIDENCE IN POSSESSION OF T HE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE , DID NOT HAVE REA SONS TO BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNES S OF THE INFORMATION RECEIVED BY HIM, BUT MERELY ACCEPTED THE TRUTH OF V AGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING OFFICER HAS NOT EV EN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING NOTICE U/S. 148 OF THE INCOME-TAX ACT. I AM FORTIFI ED IN MY VIEW BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ATUL JAIN, 299 ITR 383(DELHI), IN WHICH IT WAS HELD AS UNDER : 'THERE MUST BE 'REASON TO BELIEVE' WARRANTING THE I SSUANCE OF A NOTICE OF REASSESSMENT BY THE ASSESSING OFFICER. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING THE PROCEEDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE Q UASHED. MERE SATISFACTION OF THE ASSESSING OFFICER FOR THE ISSUA NCE OF A NOTICE NOT ENOUGH, THERE MUST BE REASONS ON RECORD WHICH LED H IM TO BELIEVE THAT A NOTICE SHOULD BE ISSUED. AFTER A FOUNDATION BASED ON INFORMATION IS SET UP, THERE MUST STILL BE SOME REASONS WHICH WARR ANT THE HOLDING OF A BELIEF SO AS TO NECESSITATE THE ISSUANCE OF A NOT ICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961. THE ASSESSEES PURCHASED SHARES AND SUBSEQUENTLY SOL D THESE SHARES AT A MUCH HIGHER VALUE. FOR THE ASSESSMENT Y EAR 1997-98, THE ASSESSEE'S DISCLOSED LONG-TERM CAPITAL GAINS ARISIN G FROM THE TRANSACTION. ON THE BASIS OF THE INFORMATION RECEIV ED BY THE DEPUTY DIRECTOR (INVESTIGATION), THE ASSESSING OFFICER ISS UED NOTICE UNDER SECTION 148. THE FILES WERE THEN PUT UP BEFORE THE COMMISSIONER AND IN RESPONSE TO THE QUESTION WHETHER THE COMMISSIONE R WAS SATISFIED THAT INCOME HAD ESCAPED ASSESSMENT, HE WROTE 'YES'. THEREAFTER, THE ASSESSING OFFICER RE-ASSESSED THE INCOME AND CHARGE D INTEREST AND LEVIED PENALTY. THE COMMISSIONER (APPEALS) ALLOWED RELIEF PARTLY BUT THE TRIBUNAL CONCLUDED THE ISSUE IN FAVOUR OF THE A SSESSES. ON APPEAL HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMA TION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAI NS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THA T AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPI TAL GAINS WHICH IN THIS CASE WERE SHARES. THEE WAS NO INFORMATION WHIC H SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF TH E VAGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING O FFICER HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNES S OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE UNDER SECTION 148. WHAT HAD BEEN RECORDED BY THE ASSESSING OFFICER AS HIS 'REASONS T O BELIEVE' WAS I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 7 OF 11 NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMM ISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORD ING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE ASSESSING OFFICER HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE. 9. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ATLAS CYCLE INDUSTRIES, 180 ITR 319 (P&H) HAS HELD AS UND ER : HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELING THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASS ESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND, THEREFORE, THE INCOME-TAX OFFICER DID NOT GET JURISDICTION TO MAKE A REASSESS MENT.' 10. IN THE CASE OF ACIT VS. O.P. CHAWLA, 306 ITR (A T) 328, THE THIRD MEMBER, ITAT DELHI BENCH, ON DIFFERENCE OF OPINION, HELD 'THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT WERE A MERE PRETENCE, AN E XCUSE TO ENQUIRE INTO THE GIFTS RECEIVED BY THE ASSESSEE WITHOUT ANY MATERIAL OR EVIDENCE COMING INTO HIS POSSESSION AFTER HE PROCES SED THE RETURN UNDER SECTION 143(1)(A). THE ASSESSING OFFICER DID NOT HAVE 'REASON TO BELIEVE' THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE COMMISSIONER (APPEALS) WAS JUSTIFIE D IN HOLDING THAT THE REOPENING OF THE ASSESSMENT WAS NOT VALID AND T HEREFORE, THE REASSESSMENT MADE WAS VOID AB INITIO.' 11. THE DIVISION BENCH OF ITAT, AGRA BENCH IN THE C ASE OF KISHAN CHAND VS. ITO (SUPRA) IN PARA 15 TO 17, HELD AS UNDER : '15. WE HAVE CAREFULLY EXAMINED THE RECORDS, INCLUD ING THE 'REASONS RECORDED' FOR TAKING ACTION UNDER SECTION 148 OF THE ACT. WE HAVE FOUND THAT APART FROM RELYING ON THE REPORT OF ADIT, THE LD 'AO' HAS DONE NO OTHER EXERCISE TO VERIFY THE FACTUAL FA CTS OF THIS CASE BY WAY OF COLLECTING SUBJECTIVE MATERIALS ON THE BASIS OF WHICH HE COULD FROM HIS OPINION. ANY INVESTIGATION DONE OR EVIDENC ES COLLECTED AFTER THE ISSUANCE OF NOTICE UNDER SECTION 148 ARE NOT RE LEVANT FOR FORMING OF HIS OPINION, FOR WRITING HIS REASONS OR FOR RE-O PENING OF ASSESSMENT ORDER. THE OBSERVATION MADE BY LD CIT(A) THAT THE L D. AO CAN ACT ON THE INFORMATION OF ADIT, FOR WHICH HE HAS REFERRED TO CERTAIN DECISION ALSO IS NOT AT ALL CORRECT. NO COURT OF LAW HAS TAK EN SUCH A LEGAL VIEW. WE ARE AWARE THAT THE AO IS NOT REQUIRED TO PROVE T HE ALLEGATION OF ESCAPEMENT OF INCOME AT THAT STAGE IT IS ENOUGH IF HE FORMS HIS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT EVEN ON HIS SUBJ ECTIVE SATISFACTION BUT SUCH A BELIEF HAS TO BE FORMED ON THE BASIS OF OBJECTIVE MATERIALS. THE INFORMATION OF ADIT IS NOT THAT OBJECTIVE MATERIAL'. THEREFORE, WE ARE NOT IN AGREEMENT WITH LD. CIT(A) IN THAT REGARD. THE REASONS FOR OUR ABOVE CONCLUSION ARE BE ING NARRATED IN THE FOLLOWING PARAGRAPHS. I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 8 OF 11 16. THE ASSESSEE ORIGINALLY FILED HIS RETURN OF INC OME ON 23.07.2001 DECLARING TOTAL INCOME OF RS. 1,10,840/- AS HAS BEE N DISCUSSED ABOVE. SUBSEQUENTLY ON THE INFORMATION RECEIVED FORM ADI ( INV.), DELHI, THAT THIS ASSESSEE HAS RECEIVED D.D. NO. 268194 FOR RS. 2,50,000/- ON 08.02.2001 MADE FROM VIJAYA BANK, BHAKAJI KAMA PALA CE, NEW DELHI, BY WAY OF LONG TERM CAPITAL GAIN/PROFIT IN S HARE DEALING/GIFTS/CONTRIBUTION TO SHARE CAPITAL FROM M/ S YADAV & CO./ RAAKESH NAGAR & CO./ SHRI S.S. MEHTA, NEW DELHI AND ON INVESTIGATION DONE BY THE INVESTIGATION WING IT WAS NOTICED THAT THIS WAS A PLOY TO GIVE AND TAKE ACCOMMODATION ENTRIES T O BENEFICIARIES WHO HAD THEMSELVES PAID CASH AMOUNT ALONGWITH SETTL ED AMOUNT OF COMMISSION, FOR GETTING D.. OF THE AMOUNT. ON THE B ASIS OF THE ABOVE REASONS THE ASSESSMENT IN QUESTION WAS REOPENED. IT IS A AN UNDENIABLE FACT THAT THE LEARNED AO HAS FRAMED HIS OPINION FOR TAKING ACTION UNDER SECTION 148 OF THE ACT, ON THE BASIS O F INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DDIT, DELHI . THE ASSESSEE HAS ENCLOSED CAPITAL ACCOUNT WITH ORIGINAL RETURN F ILED BY HIM. EXCEPT FOR THE AMOUNT OF D.D. AND BANK ALL THE FACTS MENTI ONED IN THE REASONS ARE FOUND TO BE NOT CORRECT. THIS FACT IS ALSO EVID ENT FROM THE FIRST PAGE OF ASSESSMENT ORDER ITSELF IT IS OBVIOUS THAT THE LEARNED AO HAS ACTED IN A MECHANICAL MANNER AND HAS NOT APPLIED HI S MIND AT ALL TO THE INFORMATION RECEIVED FROM THE DDIT, INVESTIGATI ON WING. THE ASSESSEE HAS DECLARED RECEIPT OF TWO GIFTS, TOTALIN G TO RS. 4,50,000/- IN HIS CAPITAL ACCOUNT AND THE LEARNED AO HAS ALSO MAD E ADDITION OF THE SAME AMOUNT, BUT IN REASONS, HE HAS MENTIONED ONLY THE ESCAPEMENT OF RS. 2,50,000/- ON ACCOUNT OF CAPITAL GAIN. HE HAS STATED THAT THE ASSESSEE HAS TAKEN BOGUS ENTRIES RE SULTING INTO CAPITAL GAIN, FROM STOCK BROKER YADAV & CO. RAKESH NAGAR & CO. AND SHRI S.S. MEHTA OF NEW DELHI. BUT IT WAS FOUND THAT THE ASSESSEE HAD NO CONCERN WITH THE ABOVE PERSONS/ENTITIES AND THAT HE NEITHER PURCHASED NOR SOLD ANY SHARE OF THESE COMPANIES DUR ING THE YEAR. ONLY BECAUSE THE NUMBER OF D.D. AND THE NAME OF THE BANK TALLIED, CANNOT RESULT INTO BELIEF BUT ONLY TO SUSPICION DDI T' REPORT MAY BE USED AS A BASIS FOR MAKING THE PRELIMINARY ENQUIRIES. TH E LD AO HAS TO APPLY HIS OWN MIND FOR FORMING THE BELIEF OF ESCAPE MENT OF INCOME, WITHOUT WHICH THE LD. AO CANNOT ACQUIRE A VALID JUR ISDICTION. THE FACTS OF THE GIVEN CASE CLEARLY ESTABLISH THE AO HAS NOT AT ALL APPLIED HIS MIND AND HAS ONLY BASED HIS OPINION ON THE BORROWED INFO RMATION. THERE IS NO DOUBT THAT A BORROWED INFORMATION CAN BE UTILISE D AS A BASIS FOR REOPENING BUT THAT TOO ONLY WHEN THE FACTS MENTIONE D THEREIN ARE SPECIFIC AND RELEVANT. IN THIS CASE NEITHER THE INF ORMATION IS SPECIFIC NOR RELEVANT TO THE FACTS OF ASSESSEE'S CASE. THE ASSES SEE NEVER DEALT IN SHARES AND HAD ONLY RECEIVED TOW GIFTS WHICH WERE D ULY DISCLOSED IN THE RETURN OF INCOME FILED WITHIN DUE TIME. THE ASS ESSEE HAS NEVER DEALT IN SHARES AS HAS BEEN MENTIONED IN THE REASON S OR FOR THAT MATTER IN THE INFORMATION OF DDIT, DELHI, THIS CLEARLY EST ABLISHED THE NON- APPLICATION MIND BY THE LEARNED AO HAD HE APPLIED H IS MIND HE WOULD HAVE VERIFIED THE DOCUMENT ATTACHED WITH THE RETURN OF INCOME AND COULD EASILY COME TO THE CORRECT REASONING IF H E WANTED TO. THEREFORE, ANY ASSUMPTION OF JURISDICTION ON THE BA SIS OF INVALID I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 9 OF 11 REASON RENDERS THE ENTIRE PROCEEDINGS UNDERTAKEN TH EREAFTER AS INVALID AND VITIATE THE ENTIRE PROCESS OF REASSESSM ENT. THE OBJECTION S RAISED BY THE ASSESSEE ABOUT REOPENING OF THE ASSES SMENT WERE NOT DISPOSED OF PRIOR TO TAKING RECOURSE TO REASSESSMEN T. THE AO IS REQUIRED TO DISPOSE OF SUCH OBJECTION BEFORE PROCEE DINGS FURTHER. THE LEGISLATORS IN THEIR WISDOM HAVE ENACTED THE PROVIS ION IN THE REGARD SO THAT IF IS FOUND IN THE VERY BEGINNING THAT THE REA SONS ARE NOT CORRECT, TIME AND MONEY OF THE PARTIES MAY NOT BE WASTED IN SUBSEQUENT FUTILE EXERCISE WHEN AT THE END THE SAME CONCLUSION WAS TO BE REACHED. 17. WHILE DECIDING THE CASE OF DASS FRIENDS BUILDER S PVT. LIMITED REPORTED IN (2006) 280 ITR 77 (ALL) AHS CATEGORICAL LY HELD THAT UNDER SECTION 147 OF THE ACT, THE WORDS ARE HAS REASONS T O BELIEVE' AND NOT 'REASONS TO SUSPECT'. THE BELIEF ENTERTAINED BY THE AO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE AND BASED ON REASONS WHICH ARE RELEVANT. IT MUST BE IN GOOD FAITH AND NO T A MERE PRETENCE, SHOULD HAVE A RATIONAL CONNECTION AND RELEVANT BEAR ING ON THE FORMATION OF THE BELIEF AND SHOULD NOT BE EXTRANEOU S OR IRRELEVANT. THE MATERIAL SHOULD BE RELATION TO THE PARTICULAR Y EAR FOR WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED. IT IS NOT ANY AND EVERY MATERIAL, HOWEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FOR-FETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF REL ATING TO ESCAPEMENT OF INCOME. IN THIS CASE EXACTLY SAME SIT UATION HAS HAPPENED. THE REASONS RECORDED BY THE A.O. ARE SIMP LY REPRODUCTION OF THE REPORT RECEIVED BY HIM FROM DDIT, DELHI. THE REFORE HE HAS NOT APPLIED HIS MIND TO THE FACTS AND THE AVERMENT CONT AINED IN THAT REPORT. FOR FORMING HIS BELIEF THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT HE IS BOUND TO APPLY HIS MIND AN D HAS TO REDUCE HIS THIS BELIEF IN WRITING ALONGWITH THE REA SONS FOR DOING SO. WE DO NOT DISPUTE THAT AN INFORMATION OF THE DDIT CAN BE USED FOR MAKING REASSESSMENT ONLY WHEN THE REPORT IS COMPLETE. SPEC IFIC AND RELEVANT TO THE CASE OF THE ASSESSEE TO THAT PARTICULAR A.Y. AND THE BASE READING OF WHICH, TO THE NORMAL PRUDENT MIND, GIVES AN INFE RENCE OF THE FACT THAT INCOME HAS ESCAPED ASSESSMENT. IN THAT CASE TH AT REPORT ITSELF CAN BE USED FOR FORMING HIS OPINION AS IS REQUIRED UNDE R SECTION 147 READ WITH SECTION 148 OF THE ACT. BUT WHEN THE INFORMATI ON IS NOT SPECIFIC, CONCRETE AND RELEVANT AND IS ONLY VAGUE AND REMOTE THAT CANNOT BE, PER SE, MADE A BASIS FOR FORMING HIS OPINION BY LEA RNED A.O. IN SUCH CASES HE HAS TO FURTHER EXAMINE THE FACTS AND FIGUR ES SO FOUND RECORDED IN SUCH REPORT OF DDIT AND ONLY THEREAFTER , BY APPLYING HIS MIND, HE HAS TO MAKE OUT HIS OPINION WHICH HAS TO B E TRANSLATED INTO THE REASONS IN WRITING. IN THIS CASE EXCEPT A SUM S AY RS. 2.5 LAKHS STATED TO BE AS CAPITAL GAINS RECEIVED THROUGH A PA RTICULAR NUMBER OF D.D. DRAWN ON A PARTICULAR BANK IS FOUND TO BE CORR ECT BUT THE ENTIRE OTHER INFORMATIONS ARE FOUND TO BE INCORRECT. THE A SSESSEE HAS NOT AT ALL DEALT WITH PERSONS NAMED IN THAT REPORT. THE AS SESSEE HAS NOT RECEIVED ANY CAPITAL GAIN ON THE TRANSACTIONS OF SH ARES DURING THE RELEVANT YEAR. THE ASSESSEE HAD ALREADY DISCLOSED T WO GIFTS OF RS. 2.50 LAKHS AND RS. 2.00 LAKHS IN HIS ORIGINAL RETURN AND HAS SUBMITTED THE I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 10 OF 11 ENTIRE REQUISITE INFORMATIONS REGARDING THE GIFTS. THERE ARE PLETHORA OF DECISIONS IN THIS DIRECTION WHICH CLEARLY EXHORT TH AT ONLY ON BASIS OF VAGUE INFORMATION OF THE DEPARTMENT WHICH IS NOT SP ECIFIC AND RELEVANT, ACTION UNDER SECTION 147 READ WITH SECTIO N 148 CANNOT BE TAKEN. THE EXISTENCE OF ESCAPED ASSESSMENT WITH REG ARD TO A PARTICULAR INCOME IS A PRECONDITION FOR TAKING SUCH AN ACTION. IF THE REASONS ARE NOT FOUND TO BE CORRECT, IT HAS TO BE P RESUMED THAT THE VERY REASON RECORDED BY THE LEARNED A.O. FOR MAKING REASSESSMENT WAS NON-EXISTENT AND THUS IT WAS INVALID. THERE IS A SUBTLE AND TENUOUS DIFFERENCE BETWEEN THE VALIDITY AND INVALIDITY OF R EASONS IN A GIVEN SET OF FACTS. IF A REASONS IS FOUND TO BE CORRECT AND V ALID ANT TO EXIST ON THE DATE OF RECORDING OF REASONS ON THE BASIS OF IN COMPLETE OR INCORRECT FACTS AND SUBSEQUENTLY AFTER EXAMINING TH E ENTIRE RECORDS IT IS FOUND THAT THE FACTS CONCEIVED BY THE LEARNED A. 0 AT THAT TIME WERE NOT CORRECT, IN THAT EVENTUALITY, THE REASONS RECOR DED BECOME RETROSPECTIVELY INVALID. MEANING THEREBY SUBSEQUENT FINDING OF FACT STILL INVALIDATE VALID REASONS WHICH WERE SUPPORTED TO BE SO AT THE TIME OF RECORDING OF REASONS. MANY A TIMES THIS LEGAL PO SITION IS CONFUSED WITH THE CASES WHERE THE REASONS ARE VALID AS PER T HE RECORDS BUT DURING RE-ASSESSMENT PROCEEDINGS THE ASSESSEE SUCCE EDS IN EXPLAINING AND THAT IS WHY ADDITION QUA THAT GROUND IN REASONS IS NOT MADE, STILL THE 'AO CANNOT BE SAID TO HAVE NOT VALID REASONS. T HE EXISTENCE OF FACTS HELPS THE AO TO FORM HIS SUBSTANTIVE SATISFAC TION BASED ON MATERIAL FACTS AVAILABLE BEFORE HIM AS EXPLAINED BU T THOSE FACTS ARE NEVER FOUND TO BE NON-EXISTENT. NATURALLY IN THAT S ITUATION IT CANNOT BE SAID THAT THE REASONS WAS NOT VALID AND MOREOVER SU BSEQUENT EXPLAINED POSITION OF THOSE FACTS WOULD NOT RENDER THE REASON AS INVALID. THEREFORE, IN EACH AND EVERY CASE A FINE D ISTINCTION HAS TO BE DRAWN BETWEEN THESE TWO SETS OF SATISFACTION. IN TH E GIVEN CASE THE LEARNED AO HAS NO VALID REASONS FOR RESORTING TO SE CTION 147/148 OF THE ACT AND THEREFORE, IT CAN BE SAFELY SAID THAT H E HAD ONLY VAGUE AND IRRELEVANT REASONS FOR MAKING ROVING AND FISHING EN QUIRIES IN ORDER O FIND CERTAIN FACTS BASED AS A SEQUEL OF PUBLICITY G IVEN IN PRINT AND ELECTRONIC MEDIA REGARDING A SCAM OF GIVING ACCOMMO DATION ENTRIES. HENCE A VAGUE INFORMATION RECEIVE BY THE O EVEN FRO M THE INVESTIGATION WING OF THE DEPARTMENT COULD NOT JUST IFY THE REASONS. IN THE RESULT WE HOLD THAT THE ASSUMPTION OF JURISDICT ION FOR RE- ASSESSMENT ON THE BASIS OF VAGUE AND INVALID REASON S HAS TO BE QUASHED BEING NULL AND VOID. THE NOTICE UNDER SECTI ON 148 IS THEREFORE, QUASHED AND AS A RESULT THE CONSEQUENTIA L RE-ASSESSMENT ORDER IS ALSO QUASHED.' 12. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REOPENING OF THE ASSESSMENT IN THE MATTER. I, THEREFORE, HOLD THAT A SSUMPTION OF JURISDICTION FOR RE-ASSESSMENT ON THE BASIS OF VAGUE, INCORRECT AND NON-EXISTING REASONS QUA THE ASSESSEE, HAVE TO BE QUASHED. IN VIEW OF THE PE CULIAR FACTS OF THE CASE, THE ORDER IN THE CASE OF SMT. KAMALJEET KALRA (SUPR A) OF ITAT (SMC) BENCH, AGRA CANNOT BE GIVEN PREFERENCE IN THE MATTER. I, A CCORDINGLY, QUASH THE I.T.A. NO. 154/AGR/2014 ASSESSMENT YEAR 2002-03 PAGE 11 OF 11 INITIATION AND RESULTANT PROCEEDINGS U/S. 148 OF TH E INCOME-TAX ACT IN THE MATTER AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE F INDING, THERE IS NO NEED TO DECIDE THE ISSUE OF GENUINENESS OF GIFT, AS THE SAM E HAS BECOME ACADEMIC IN NATURE. RESULTANTLY, ALL ADDITIONS MADE IN THE RE-A SSESSMENT PROCEEDINGS WOULD STAND DELETED. AS A RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. I SEE NO REASON TO TAKE A VIEW DIFFERENT FROM T HAT TAKEN BY CO-ORDINATE BENCH IN THE ABOVE ORDER UNDER IDENTICAL FACTS AND CIRCUM STANCES. I, THEREFORE, FOLLOWING THE ABOVE DECISION, UPHOLD THE GRIEVANCE OF ASSESSEE ON VALIDITY OF REASSESSMENT PROCEEDINGS, REVERSE THE IMPUGNED ORDER AND QUASH T HE RE-ASSESSMENT ORDER. 7. IN VIEW OF THE FACT THAT ONCE THE REASSESSMENT O RDER ITSELF STANDS QUASHED, I SEE NO NEED TO DEAL WITH OTHER ARGUMENTS SO STRENUO USLY ADVANCED BY THE LEARNED COUNSEL ON MERITS OF THE CASE. THE SAME IS RENDERED WHOLLY ACADEMIC. 8. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THIS 24 TH DAY OF JUNE, 2015. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 24 TH DAY OF JUNE 2015 *AKS/- COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA