DCIT, Central Circle - 2(1), Kolkata , Kolkata V. M/s. Yaduka Financial Services Ltd., , Kolkata

ITA 1646/KOL/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8165 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 14-07-2017
• Court: TRIBUNAL

Judgement Text

1 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOLKATA ( ) . . , . [ , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, AM] I.T.A. NO. 1646/KOL/2017 ASSESSMENT YEAR: 2009-10 DCIT, CC 2(1), KOLKATA VS. M/S. YADUKA FINANCIAL SERVICES LTD. [PAN: AAECP 3304 K] APPELLANT RESPONDENT DATE OF HEARING 20.06.2019 DATE OF PRONOUNCEMENT 19.07.2019 FOR THE APPELLANT SHRI RADHEY SHYAM, CIT, DR FOR THE RESPONDENT SHRI SUNIL SURANA, FCA ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) 20, KOLKATA DATED 16.01.2017 FOR ASSESSMENT YEAR 2009-10. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT FOR AY 2009-10, THE ASSESSEE HAD FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 2,80,100/-. DURING THE RELEVANT FINANCIAL YEAR 2008-09, THE ASSESSEE RECEIVED SHARE SUBSCRIPTION MONEY AGGREGATING TO RS. 86.27 CRORES. THE RETURN OF INCOME WAS ORIGINALLY PROCESSED THROUGH AST U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) ON 16.08.2010 AT THE SAME RETURNED INCOME. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS. IN RESPONSE TO NOTICES U/S 143(2) & 142(1), THE ASSESSEE FURNISHED THE BOOKS OF ACCOUNTS, BANK STATEMENTS AND OTHER DETAILS AS REQUISITIONED. FROM THE MATERIAL PLACED IN THE PAPER BOOK, IT IS NOTED THAT BEFORE PASSING OF THE ORDER U/S 143(3) ON 19.12.2011, THE AO MADE INDEPENDENT ENQUIRIES U/S 133(6) FROM THE SHARE SUBSCRIBERS IN CONNECTION WITH THE SHARE CAPITAL OF RS. 86.27 CRORES SUBSCRIBED BY THEM. UPON VERIFICATION OF THE MATERIAL COLLECTED 2 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 BY HIM, THE AO IN HIS ORIGINAL SCRUTINY ORDER PASSED U/S 143(3) ON 19.12.2011, OBSERVED THAT DURING THE YEAR THE ASSESSEE COMPANY HAD RAISED PAID UP SHARE CAPITAL OF RS. 86.27 CRORES INCLUDING PREMIUM AND IT HAS BEEN DULY VERIFIED ON TEST CHECK BASIS . THEREAFTER, THE CASE OF THE ASSESSEE WAS REOPENED AFTER THE EXPIRY OF FOUR YEARS VIDE NOTICE U/S 148 DATED 22.03.2016. IN RESPONSE, THE ASSESSEE FILED RETURN OF INCOME ON 18.05.2016 AND REQUESTED THE AO TO SUPPLY THE REASONS RECORDED PRIOR TO REOPENING OF THE ASSESSMENT. VIDE LETTER DATED 14.06.2016 THE AO SUPPLIED THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WHICH READ AS FOLLOWS: A SURVEY OPERATION U/S 133A WAS CONCLUDED IN THE CASE OF M/S. ASHIKA GROUP. IT IS FOUND FROM THE EVIDENCE THAT M/S. YADUKA FINANCIAL SERVICES LTD. (FORMERLY KNOWN AS M/S. PR VANIJYA PVT. LTD.) RAISED SHARE CAPITAL OF RS. 86,30,000/- DURING THE FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10. ON PERUSAL OF THE LETTER NUMBER DDIT (INV.)/U-2(2)/2015-15/KOL/3628 DATED 23.02.2016. IT IS FOUND THAT M/S. YADUKA FINANCIAL SERVICES LTD. HAS ALLOTTED SHARES TO DIFFERENT COMPANIES ARE PAPER/BOGUS/SHELL COMPANIES. SHARES HAVE BEEN ALLOTTED ON 31.03.2009 TO ALL THE ALLOTTEE COMPANIES AT HIGH PREMIUM @ RS. 190 PER SHARE. HENCE, IT IS OBSERVED THAT IT WAS NOTHING BUT ACCOMMODATION ENTRY IN THE FORM OF BOGUS SHARE CAPITAL ROUTED THROUGH THE PAPER/BOGUS SHELL COMPANIES. THUS IT IS DETECTED THAT M/S. YADUKA FINANCIAL SERVICES LTD. HAS ROUTED THEIR UNACCOUNTED INCOME THROUGH THE PAPER/BOGUS/SHELL COMPANIES. HENCE, IT IS REASON TO BELIEVE THAT THE AMOUNT OF RS. 86,24,30,000/- HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10 WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT. 3. THE OBJECTIONS RAISED BY THE ASSESSEE WERE DISPOSED OF BY ORDER DATED 05.07.2016. THEREAFTER IN THE SECOND ROUND WHICH IS ASSAILED BEFORE US, THE AO ISSUED REQUISITIONS U/S 143(2) & 142(1) OF THE ACT INTER ALIA CALLING FOR DETAILS IN CONNECTION WITH SHARE SUBSCRIPTION MONIES RECEIVED DURING THE YEAR. FROM THE DETAILS SUBMITTED IT WAS NOTED THAT THE ASSESSEE HAD RECEIVED SUBSCRIPTION MONIES FROM 95 SHARE APPLICANTS. THE AO AGAIN MADE ENQUIRIES U/S 133(6) FROM ALL THE SHAREHOLDERS. OUT OF NOTICES SENT TO 95 SHAREHOLDERS, IT WAS NOTED BY THE AO THAT 13 NOTICES RETURNED UNSERVED AND IN 15 CASES THE NOTICES WERE SERVED BUT NO REPLIES WERE RECEIVED. 70 SHARE SUBSCRIBERS COMPLIED WITH THE AOS 3 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 REQUISITION U/S 133(6) OF THE ACT, WHICH COMPRISED OF FOUR PARTIES WHOSE NOTICES WERE RETURNED UNSERVED BUT REPLIES WERE RECEIVED IN THE OFFICE OF THE AO. UPON EXAMINATION OF THE REPLIES, THE AO NOTED THAT MOST OF THE COMPANIES HAD MEAGER INCOME AND THE SOURCE OF INVESTMENT WAS PRIMARILY PROCEEDS RECEIVED ON SALE OF SHARES OR APPLICATION MONEY RECEIVED BY THEM. THE AO FURTHER NOTED THAT MOST OF THE COMPANIES DID NOT FURNISH THEIR BOARD RESOLUTION AUTHORIZING THE INVESTMENT IN THE ASSESSEE-COMPANY. THE AO THEREAFTER DEPUTED HIS INSPECTOR TO CONDUCT SPOT VERIFICATION AND PERSONALLY SERVE SUMMONS ON ALL THE SHARE SUBSCRIBERS. THE AO NOTED THAT OUT OF THE 95 SHARE SUBSCRIBERS 30 WERE NOT FOUND BY THE INSPECTOR AT THE GIVEN ADDRESS. ACCORDING TO THE AO NONE OF THE SHARE SUBSCRIBERS ATTENDED THE SUMMONS. THE AO THEREAFTER TABULATED THE DETAILS OF 34 SHARE SUBSCRIBING COMPANIES WHICH ACCORDING TO HIM WERE CONTROLLED BY SOME ENTRY OPERATORS. BASED ON THE AFORESAID ENQUIRIES AND FINDINGS, THE AO CONCLUDED THAT THE ASSESSEE WAS UNABLE TO SATISFACTORILY SUBSTANTIATE THE IDENTITY & CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTIONS. THE AO ACCORDINGLY FRAMED THE ASSESSMENT U/S 147/143(3) ON 26.12.2016 ADDING SUM OF RS. 86,24,30,000/- BY WAY OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT IN THE HANDS OF THE ASSESSEE. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). ON APPEAL, THE LD. CIT(A) OBSERVED THAT CONDITION PRECEDENT FOR REOPENING OF THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS WAS THAT THE AO WAS REQUIRED TO POINT OUT THE SPECIFIC FAILURE ON THE ASSESSEES PART TO DISCLOSE TRUE AND CORRECT PARTICULARS IN THE COURSE OF ORIGINAL ASSESSMENT. THE LD. CIT(A) OBSERVED THAT THE AO HAD FAILED TO SET OUT THE OMISSION OR FAILURE ON THE ASSESSEES PART TO DISCLOSE TRUE AND CORRECT PARTICULARS IN HIS RECORDED REASONS AND FOR THAT REASON HE HELD THAT THE REOPENING OF ASSESSMENT WAS INVALID AND STOOD VITIATED IN LAW. THE LD. CIT(A) ACCORDINGLY CANCELLED THE ASSESSMENT FRAMED BY THE AO U/S 147/143(3) DATED 26.12.2016. BEING AGGRIEVED, THE REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I) THAT THE LD. CIT(A) ERRED IN FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF RS.86,24,30,000/- ON ACCOUNT OF SHARE APPLICATION MONEY RECEIVED ON THE GROUND THAT THE PROCEEDINGS INITIATED U/S T47 AFTER 4 YEARS FROM THE END OF THE ASSESSMENT IS BAD IN LAW SINCE THERE WAS NO REASONABLE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT BECAUSE OF' FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIALS FACTS NECESSARY FOR ASSESSMENT. 4 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 II) WHETHER THEREFORE WHERE AFTER SCRUTINY ASSESSMENT, ASSESSING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WING THAT WELL KNOWN ENTRY OPERATORS OF KOLKATA PROVIDED BOGUS ENTRIES TO VARIOUS BENEFICIARIES, AND ASSESSEE WAS ONE OF SUCH BENEFICIARIES. ASSESSING OFFICER WAS JUSTIFIED IN REOPENING ASSESSMENT. III) WHETHER THE INFORMATION RECEIVED BY THE ASSESSING OFFICER FROM THE INVESTIGATION WING REGARDING THE ACCOMMODATION ENTRY TAKEN THE ASSESSEE AND REOPENING ON THE BASIS OF SUCH INFORMATION AFTER 4 YEARS IS NOT A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH PARTIES. ASSAILING THE ORDER OF THE LD. CIT(A) THE LD. CIT, DR SUBMITTED THAT THERE INDEED WAS FAILURE ON THE PART OF THE ASSESSEE TO SUBMIT FULL AND TRUE INFORMATION AT THE TIME OF ORIGINAL ASSESSMENT AND HENCE THE LD. CIT(A) HAD ERRED IN HOLDING THAT THE INITIATION OF REASSESSMENT BY THE AO WAS BAD IN LAW. THE LD. CIT, DR SUBMITTED THAT IN THE COURSE OF SURVEY CARRIED OUT AGAINST ASHIKA GROUP, INFORMATION WAS GATHERED THAT THE ASSESSEE WAS BENEFICIARY OF ACCOMMODATION ENTRIES RECEIVED IN THE FORM OF SUBSCRIPTION TO ITS SHARE CAPITAL. THIS MATERIAL INFORMATION INDICATED THAT THE ASSESSEE DID NOT MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS UNDER SECTION 143(3). THE LD. DR FILED THE WRITTEN SYNOPSIS OF HIS ARGUMENTS WHICH ARE EXTRACTED BELOW FOR THE SAKE BREVITY :- IN THIS INSTANT CASE, THE LD. CIT(A) DELETED THE ADDITION OF RS.86,24,30,000/- MADE BY AO U/S 68 MERELY ON THE GROUND THAT THERE WAS NO FAILURE ON THE PART OF ASSESSEE AND PROCEEDING INITIATED AFTER FOUR YEARS ARE BAD IN LAW. THE CIT(A) OBSERVED THAT NAME OF THE SHARE APPLICANT AND AMOUNT ALONG WITH CHEQUE DETAIL WAS SUBMITTED BY THE ASSESSEE IN THE ORIGINAL ASSESSMENT ORDER. WHEREAS, AS PER THE DATA/INFORMATION GATHERED AFTER A SURVEY U/S 133A WHICH WAS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT IN THE ASHIKA GROUP OF CASES AT THE OFFICE PREMISES AT TRINITY, 7 TH FLOOR, 226/1, AJC BOSE ROAD, KOLKATA- 700020 ANDON THE BASIS OF INFORMATION AVAILABLE ON RECORD IT IS FOUND BY THE AO THAT THE ASSESSEE COMPANY RAISED SHARE CAPITAL OF RS.86,24,30,000/- BY ISSUING SHARES TO DIFFERENT COMPANIES WHICH ARE PAPER/BOGUS/SHELL COMPANIES. THUS IT WAS CLEARLY HELD THAT THE SAID AMOUT RS.86,24,30,000/- WAS NOTHING BUT ACCOMMODATION ENTRY IN THE FORM OF BOGUS SHARE CAPITAL/ENTRY PROVIDER ROUTED THROUGH THE JAMAKHARCHI/SHELL/PAPER COMPANIES. THUS IT IS CRYSTAL CLEAR THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE COMPANY TO SUBMIT THE FULL AND TRUE INFORMATION, THE ASSESSEE COMPANY GAVE MISREPRESENTATION ABOUT THE FACTS BEFORE THE AO. THUS THE AO CLEARLY HAD THE SUBSTANTIAL NEW MATERIAL IN FORM OF INFORMATION ON THE BASIS 5 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 OF WHICH ASSESSING OFFICER FORMED A BELIEF/REASON THAT INCOME OF ASSESSEE HAS ESCAPED ASSESSMENT. FOLLOWING ARE THE CASE LAWS WHICH CLEARLY SUPPORT THE ACTION OF AO. 1. THE ORDER OF THE HIGH COURT OF GUJRAT IN THE CASE OF PEASS INDUSTRIAL ENGINEERS(P) LTD. V.S DCIT. SCA NO.3250 OF 2016 SECTION 68 , READ WITH SECTION 147 , OF THE INCOME-TAX ACT, 1961 - CASH CREDIT (BOGUS ENTRIES) - ASSESSMENT YEAR 2011-12 - WHETHER WHAT IS REQUIRED AT STAGE OF ISSUING NOTICE UNDER SECTION 148 IS A REASON TO BELIEVE AND NOT ESTABLISH FACT OF ESCAPEMENT OF INCOME AND, THEREFORE, LOOKING TO THE SCOPE OF SECTION 147 AS ALSO SECTIONS 148 TO 152 EVEN IF SCRUTINY ASSESSMENT HAS BEEN UNDERTAKEN, IF SUBSTANTIAL NEW MATERIAL IS FOUND IN FORM OF INFORMATION ON BASIS OF WHICH ASSESSING AUTHORITY CAN FORM A BELIEF THAT INCOME OF PETITIONER HAS ESCAPED ASSESSMENT, IT IS ALWAYS OPEN FOR ASSESSING AUTHORITY TO REOPEN ASSESSMENT - HELD, YES - WHETHER THEREFORE WHERE AFTER SCRUTINY ASSESSMENT ASSESSING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WING THAT TWO WELL-KNOWN ENTRY OPERATORS OF COUNTRY PROVIDED BOGUS ENTRIES TO VARIOUS BENEFICIARIES, AND ASSESSEE WAS ONE OF SUCH BENEFICIARY, ASSESSING OFFICER WAS JUSTIFIED IN REOPENING ASSESSMENT HELD, YES 2. IN THE ORDER OF THE HIGH COURT OF GUJRAT IN CASE OF ARADHNA ESTATE (P) LTD. V.S DCIT ,CIR(1). SCA NO. 21999 OF 2017, FEBRUARY 2018 SECTION 68 , READ WITH SECTION 148 , OF THE INCOME-TAX ACT, 1961 - CASH CREDITS (SHARE CAPITAL MONEY) - ASSESSMENT YEAR 2004-05 - ASSESSEE FILED ITS RETURN OF INCOME WHICH WAS PROCESSED UNDER SECTION 143(1) - SUBSEQUENTLY, ASSESSING OFFICER ISSUED A NOTICE UNDER SECTION 148 SEEKING TO REOPEN ASSESSMENT - IN REASONS RECORDED, ASSESSING OFFICER MENTIONED THAT HE HAD RECEIVED INFORMATION FROM INVESTIGATION WING OF DEPARTMENT THAT ASSESSEE HAD RECEIVED CERTAIN AMOUNT BY WAY OF SHARE CAPITAL AND SHARE PREMIUM FROM SEVERAL SHELL COMPANIES WHICH WERE WORKING AS AN ACCOMMODATION ENTRY PROVIDERS - IT WAS NOTED THAT THERE WAS MATERIAL ON RECORD SUGGESTING THAT ASSESSING OFFICER HAD RECEIVED ENTIRELY NEW SET OF DOCUMENTS AND MATERIALS FOR HIS CONSIDERATION IN FORM OF REPORT RECEIVED FROM INVESTIGATION WING AND SUCH MATERIALS DID NOT FORM PART OF ORIGINAL ASSESSMENT PROCEEDINGS - WHETHER SINCE ASSESSING OFFICER HAD SUFFICIENT MATERIAL AT HIS COMMAND TO FORM A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, MERELY BECAUSE THESE TRANSACTIONS WERE SCRUTINISED BY ASSESSING OFFICER DURING ORIGINAL ASSESSMENT WOULD NOT PRECLUDE HIM FROM REOPENING ASSESSMENT; THUS, IMPUGNED REASSESSMENT NOTICE WAS JUSTIFIED - HELD, YES [PARA 8] [IN FAVOUR OF REVENUE] 3. THE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF BALLARPUR PAPER AND STRAW BOARD MILLS LTD. V.- CIT (1975) 101 ITR 55 (CAL) HAS HELD THAT IT IS NECESSARY THAT FOR REOPENING AN ASSESSMENT, THERE MUST BE NEW INFORMATION BEFORE THE REOPENING IS MADE. IF IT IS A NEW LOOK AT THE OLD FACTS, UNPROVOKED BY ANY KNOWLEDGE OF ANY FACT OR LAW COMING TO THE POSSESSION OF THE 6 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 DEPARTMENT SUBSEQUENT TO THE ORIGINAL ASSESSMENT EITHER FROM RECORDS OR FROM ANY DIRECTION OR DECISION, IT WOULD BE NOTHING BUT MERE CHANGE OF OPINION AND SUCH A CHANGE OF OPINION WOULD NOT BE JUSTIFIED. 4. IN CIT-KOL-II V EUREKA STOCK AND SHARE STOCK & SHARE BROKING SERVICES LTD.(2017) 291CTR313 (CAL), ALTHOUGH THE RELEVANT ISSUE HAD BEEN EXAMINED BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT THERE WAS NO CHANGE OF OPINION WITH THE FOLLOWING OBSERVATIONS : THE ASSESSEE, BY ITS LETTER DATED FEBRUARY 8, 2003, MISREPRESENTED THE FACTS. HE ALSO ACTIVELY MISLED THE ASSESSING OFFICER INTO BELIEVING THAT 'IN ORDER TO EARN BROKERAGE INCOME, THE SHARE BROKER HAS TO PURCHASE OR SALE VARIOUS SHARES .. ON THEIR OWN ACCOUNT ALSO. THIS DOES NOT MEAN THAT THIS IS A LOSS TO THE ASSESSEE. ..' THE SUGGESTION MADE BY THE ASSESSEE, IT WAS NOT DISPUTED BY MR. KHAITAN, WAS FACTUALLY INCORRECT. THE ASSESSING OFFICER, WHO SUCCEEDED, REALISED THAT THE ASSESSEE HAD MISREPRESENTED THE FACTS TO THE EARLIER ASSESSING OFFICER. HE IN THE CIRCUMSTANCES ISSUED THE NOTICE UNDER SECTION 148 AND ALSO RECORDED THE REASONS. IT IS NOT THEREFORE A CASE OF CHANGE OF OPINION. THE FACTS HAVE TO BE CORRECTLY UNDERSTOOD BY THE CONCERNED OFFICER. WHEN THE CONCERNED OFFICER WAS UNDER A MISAPPREHENSION AS REGARDS THE FACTS BASED ON MISREPRESENTATION MADE BY THE ASSESSEE IT CANNOT, IN THAT CASE, BE SAID THAT HE SUBSEQUENTLY CHANGED HIS OPINION WHEN HE ISSUED NOTICE SEEKING TO DISALLOW THE LOSS EARLIER ALLOWED EXPRESSLY OR IMPLIEDLY TO BE SET OFF AGAINST THE INCOME ARISING OUT OF THE BROKERAGE OF SHARES. 5. IN THE CASE OF GIRILAL & CO. V INCOMETAX OFFICER, MUMBAI (2016) 243TAAXMAN233(SC)/ (2016)387ITR122(SC) IN RELATION TO DEDUCTION CLAIMED U/S 80IB OF THE ACT, DURING THE ASSESSMENT PROCEEDINGS A QUESTION WAS RAISED ONLY ABOUT THE VALUE OF LAND. IN REPLY, THE VALUE OF LAND WAS STATED AND, IN SUPPORT OF THE STATEMENT, A CERTIFICATE FROM REGISTERED ARCHITECT AND ENGINEER WAS FILLED. NOTICE WAS ISSUED FOR REASSESSMENT ON THE GROUND THAT THE ASSESSEE HAD NOT CORRECTLY DISCLOSED ACTUAL ASSETS/SIZE OF PLOT AND, HENCE, IT WAS ENTITLED FOR DEDUCTION UNDER SECTION 80-IB. THE HONBLE SUPREME COURT HELD THAT EVEN IF IN SAID ATTACHED VALUATION REPORT, SIZE OF LAND WAS MENTIONED, IT WOULD NOT BE PROPER DISCLOSURE OF INFORMATION ABOUT SIZE OF PLOT ON WHICH HOUSING PROJECT WAS CONSTRUCTED SINCE IN RETURN ITSELF, SIZE OF LAND WAS NOT DISCLOSED AND THE ASSESSING OFFICER WAS JUSTIFIED IN REOPENING ASSESSMENT TO DENY DEDUCTION ALLOWED UNDER SECTION 80-IB. IT WAS ARGUED ON BEHALF OF THE ASSESSEE THAT IT WAS MERELY A CASE OF CHANGE OF OPINION WHICH IS NOT VALID GROUND FOR REOPENING OF THE ASSESSMENT AS THERE WAS A MENTION ABOUT THE LAND IN QUESTION IN A COMMUNICATION MADE BY THE ASSESSEE. THE COURT REJECTED THE AFORESAID SUBMISSION OF THE APPELLANT OBSERVING THAT ONLY THE VALUE OF THE LAND WAS STATED AND IN SUPPORT, A CERTIFICATE FROM THE REGISTERED ARCHITECT & ENGINEER WAS FILED. IT WAS HELD AS UNDER: .. 7 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF YOGENDRAKUMAR GUPTA V. ITO (2014) 366ITR186 (GUJ) HELD THAT THE LAW REQUIRES ONLY FORMATION OF BELIEF OF THE ASSESSING OFFICER ON THE BASIS OF INFORMATION IN HIS POSSESSION THAT INCOME HAD ESCAPED ASSESSMENT WITHOUT THE NECESSITY TO SUPPLY AND SPECIFIC DOCUMENTS TO THE ASSESSEE DISCUSSING THE FACTS AS UNDER: '20. THIS COURT HAS EXAMINED THE BELIEF OF THE ASSESSING OFFICER TO A LIMITED EXTENT TO INQUIRY AS TO WHETHER THERE WAS SUFFICIENT MATERIAL AVAILABLE ON RECORD FOR THE ASSESSING OFFICER TO FORM A REQUISITE BELIEF WHETHER THERE WAS A LIVE LINK EXISTING OF THE MATERIAL AND THE INCOME CHARGEABLE TO TAX THAT ESCAPED ASSESSMENT. THIS DOES NOT APPEAR TO BE THE CASE WHERE THE ASSESSING OFFICER ON VAGUE OR UNSPECIFIC INFORMATION INITIATED THE PROCEEDINGS OF REASSESSMENT, WITHOUT BOTHERING TO FORM HIS OWN BELIEF IN RESPECT OF SUCH MATERIAL. WE NEED TO NOTICE THAT THE JOINT DIRECTOR, CBI, MUMBAI, INTIMATED TO THE DIT (INVESTIGATION), MUMBAI. A CASE IS REGISTERED AGAINST MR. ARUN DALMIA, HARSH DALMIA AND DURING THE SEARCH AT THEIR RESIDENCE AND OFFICE PREMISES, THE SUBSTANTIAL MATERIAL INDICATED THAT 20 DUMMY COMPANIES OF MR. ARUN DALMIA WERE ENGAGED IN MONEY LAUNDERING AND THE INCOME-TAX EVASION. THE SAID ENTITIES INCLUDED BASANT MARKETING PVT. LTD. ALSO. FROM THE ANALYSIS OF DETAILS FURNISHED AND THE BENEFICIARIES REFLECTED, WHICH ARE SPREAD ACROSS THE COUNTRY, THE CIT, KOKLATA, SUSPECTED THE ACCOMMODATION ENTRY RELATED TO THE ASSESSMENT YEAR 2006-07 AS WELL, THIS INFORMATION HAS BEEN PROVIDED TO DIRECTOR GENERAL OF INCOME-TAX, KOLKATA, WHO IN TURN, COMMUNICATED TO THE CHIEF COMMISSIONER OF INCOME-TAX, AHMEDABAD. FURTHER REVELATION OF INVESTIGATION AS COULD BE NOTICED FROM THE RECORD EXAMINED (FILE) DESERVES NO REFLECTION IN THIS PETITION. INSISTENCE ON THE PART OF THE PETITIONER TO PROVIDE ANY FURTHER MATERIAL FORMING THE PART OF INVESTIGATION CARRIED OUT AGAINST DALMIAS ALSO NEEDS TO MEET WITH NEGATION, AS THE LAW REQUIRES SUPPLY OF INFORMATION ON WHICH ASSESSING OFFICER RECORDED HER SATISFACTION, WITHOUT NECESSITATING SUPPLY OF ANY SPECIFIC DOCUMENTS. THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT WOULD NOT BE RENDERED VOID ON NON-SUPPLY OF SUCH DOCUMENT FOR WHICH CONFIDENTIALITY IS CLAIMED AT THIS STAGE, FOLLOWING THE DECISION OF THE DELHI HIGH COURT IN CASE OF ACORUS UNITECH WIRELESS (P.) LTD. (SUPRA). ASSUMPTION OF JURISDICTION ON THE PART OF THE ASSESSING OFFICER IS SINCE BASED ON FRESH INFORMATION, SPECIFIC AND RELIABLE AND OTHERWISE SUSTAINABLE UNDER THE LAW, CHALLENGE TO REASSESSMENT PROCEEDINGS WARRANT NO INTERFERENCE.' 6. IN THE CASE OF ANKIT FINANCIAL SERVICES LTD. V DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1(1)(2) (GUJ) (2017) 78 TAXMANN. COM 58 (GUJARAT), THE REASSESSMENT PROCEEDINGS HAD BEEN INITIATED BY THE ASSESSING OFFICER ON THE BASIS OF MATERIAL PROVIDED B THE INVESTIGATION WING SHOWING THAT THE ASSESSEE WAS THE BENEFICIARY OF TRANSACTIONS OF SHARE APPLICATIONS BY BOGUS CONCERNS. THE HONBLE REFERRED TO THE JUDGEMENTS IN THE CASES OF ASSTT. CIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD. [2007] 291 ITR 500 (SC ) AND YOGENDRAKUMAR GUPTA V. ITO (2014) 366ITR186(GUJ) AND HELD THAT IT COULD NOT BE SAID THAT THERE WAS NO MATERIAL BEFORE THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT, AS UNDER : IN THE PRESENT CASE ALSO, IN THE WAKE OF INFORMATION RECEIVED BY THE ASSESSING OFFICER, WHEN ASSESSING OFFICER FORMED A BELIEF THAT THE INVESTMENT MADE FROM THE FUNDING OF SUCH 8 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 COMPANIES WHICH ARE BOGUS, THE ASSESSING OFFICER HAS RIGHTLY ASSUMED THE JURISDICTION OF INITIATING THE REASSESSMENT PROCEEDINGS. ASSESSING OFFICER, ON THE BASIS OF INFORMATION SUBSEQUENTLY HAVING COME TO HIS KNOWLEDGE, RECOGNIZED UNTRUTHFULNESS OF THE FACTS FURNISHED EARLIER. IN THE PRESENT CASE, SINCE BOTH THE NECESSARY CONDITIONS TO REOPEN THE ASSESSMENT HAVE BEEN DULY FULFILLED, SUFFICIENCY OF THE REASONS IS NOT TO BE GONE INTO BY THIS COURT. INFORMATION FURNISHED AT THE TIME OF ORIGINAL ASSESSMENT, WHEN BY SUBSEQUENT INFORMATION RECEIVED FROM THE PRINCIPAL DIRECTOR OF INCOME TAX (INVESTIGATION), AHMEDABAD, ITSELF FOUND TO BE CONTROVERTED, THE OBJECTION TO THE NOTICE OF REASSESSMENT UNDER SECTION 147 OF THE ACT MUST FAIL. THUS IT CAN BE ARGUED THAT THE REOPENING WAS JUSTIFIED WHERE SUBSEQUENT INFORMATION PROVED THAT INFORMATION FURNISHED AT THE STAGE OF ORIGINAL ASSESSMENT WAS NOT CORRECT. 7. IN THE CASE OF DCIT CENTRAL CIRCLE 1, JODHPUR V SAMBHAV ENERGY LTD.(2017) 80 TAXMANN. COM389 (RAJ), THE ORIGINAL ASSESSMENT WAS FINALIZED U/S 153A READ WITH SECTION 143(3) OF THE ACT. THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT WERE BASED ON SEIZED DOCUMENTS WHICH WERE NOT TAKEN INTO CONSIDERATION EARLIER. IT WAS HELD THAT THE REASONS WERE NOT BASED ON MERE SUSPICION BUT ON GOOD FAITH. ALTHOUGH THERE WAS NO FRESH MATERIAL FOR THE FORMATION OF THE REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT, THE ASSESSING OFFICER NOTICED WITH GOOD FAITH THAT CERTAIN DOCUMENTS ESCAPED CONSIDERATION AND RESULTED IN ESCAPEMENT OF INCOME. HENCE, IT WAS HELD THAT THERE WERE ADEQUATE REASONS TO BELIEVE TO ISSUE NOTICE U/S 148 OF THE ACT KEEPING IN VIEW OF ABOVE IT IS REQUESTED THAT THE ACTION OF THE REOPENING MAY BE SUSTAINED. 5. PER CONTRA THE LD. AR SUPPORTED THE ORDER OF THE LD. CIT(A) CLAIMING THAT HE HAD FULLY APPRECIATED THE CONTENTIONS RAISED OBJECTING TO REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. HE SUBMITTED THAT IN THE PRESENT CASE THE ORIGINAL ASSESSMENT WAS PASSED U/S 143(3) AND THE PROCEEDINGS U/S 147 WERE INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE LD. AR THEREFORE ARGUED THAT FOR VALID INITIATION OF PROCEEDINGS U/S 147 IT WAS NECESSARY FOR THE AO TO SHOW THAT WHILE RECORDING THE REASONS U/S 148 HE WAS PRIMA FACIE SATISFIED THAT THE ESCAPEMENT OF THE INCOME CHARGEABLE TO TAX FOR THE RELEVANT ASSESSMENT YEAR WAS AS A RESULT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. HE SUBMITTED THAT FROM THE RECORDED REASONS ITSELF SUCH SATISFACTION SHOULD HAVE BEEN DISCERNIBLE. DRAWING ATTENTION TO THE REASONS RECORDED, THE LD. AR SUBMITTED THAT NOWHERE IT WAS EVEN PRIMA FACIE APPARENT THAT IN AOS OPINION ESCAPEMENT OF INCOME HAD RESULTED BECAUSE OF ASSESSEES FAILURE TO DISCLOSE TRULY & FULLY ALL MATERIAL FACTS FOR ITS ASSESSMENT. 9 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 THE LD. AR THEREFORE SUBMITTED THAT THE TWIN CONDITIONS EMBEDDED IN PROVISO TO SECTION 147 WERE NOT FULFILLED. THE LD. AR SUBMITTED THAT INITIATION OF REASSESSMENT WOULD HAVE BEEN PERMISSIBLE ONLY IF THE AO WAS HAVING IN HIS POSSESSION FRESH AND TANGIBLE MATERIAL AND WHICH CAME IN HIS POSSESSION SUBSEQUENT TO PASSING OF THE ORDER U/S 143(3) AND ITS RELATION WITH FORMATION OF BELIEF SHOULD HAVE BEEN SPELT OUT IN THE REASONS RECORDED TO JUSTIFY REOPENING. ACCORDING TO LD. AR THE AO HAD MISERABLY FAILED TO DEMONSTRATE THE FOREGOING IN THE RECORDED REASONS WHICH VITIATED THE USURPATION OF JURISDICTION BY THE AO. THE LD. AR FURTHER SUBMITTED THAT IN THE COURSE OF PROCEEDINGS U/S 143(3) THE ASSESSEE WAS DIRECTED TO FURNISH THE PARTICULARS OF MONIES RECEIVED DURING THE RELEVANT YEAR BY WAY OF SHARE SUBSCRIPTION AMOUNTS. IN COMPLIANCE THE PARTICULARS AS REQUISITIONED WERE FURNISHED WHICH THEREAFTER WERE EXAMINED BY THE AO NOT ONLY WITH REFERENCE TO THE ASSESSEES BOOKS OF ACCOUNT BUT ALSO BY MAKING INDEPENDENT ENQUIRIES U/S 133(6) AS NOTED FROM THE ORDER U/S 143(3). THE LD. AR THEREFORE SUBMITTED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRUE AND FULL MATERIAL FACTS PRIOR TO COMPLETION OF ORDER U/S 143(3). IN THE CIRCUMSTANCES THEREFORE THE REOPENING OF ASSESSMENT AFTER FOUR YEARS WAS CLAIMED TO BE IMPERMISSIBLE. THE LD. AR DREW OUR ATTENTION TO THE CORRESPONDENCE BETWEEN THE ACIT- CC2(1) AND THE DDIT(INV) UNIT 2(2), KOLKATA TO SHOW THAT NO TANGIBLE MATERIAL WAS GATHERED BY THE INVESTIGATION WING WHICH IN ANY MANNER COULD LEAD ONE TO BELIEVE THAT INCOME OF THE ASSESSEE FOR THE AY 2009-10 TO THE EXTENT OF RS. 86,27 CRS HAD ESCAPED ASSESSMENT. IN THE LETTER DATED 23.02.2016 THERE WAS ONLY A MENTION OF THE FACT THAT THE RECEIPT OF SHARE CAPITAL MAY BE BOGUS AND THEREFORE THE DDIT(INV) HAD RECOMMENDED THAT THOROUGH ENQUIRIES SHOULD BE MADE BY THE AO DURING THE COURSE OF ASSESSMENT TO TAKE SUITABLE ACTION AS PER LAW. IN THE SAME REPORT THE DDIT(INV) HAD HIMSELF OPINED THAT THE FOCUS OF HIS SURVEY REPORT WAS BOGUS LTCG FOR WHICH DETAILED ENQUIRIES WERE CONDUCTED BUT DUE TO PAUCITY OF TIME CASH/MONEY TRAIL COULD NOT BE MADE IN THE CASE OF SHARE CAPITAL. THE LD. AR THEREFORE SUBMITTED THAT EVEN THE LETTER OF DDIT(INV) UNIT 2(2), KOLKATA WHICH FORMED THE FOUNDATION FOR THE AO TO INITIATE PROCEEDINGS U/S 147 ITSELF SHOWED THAT THE SAID DDIT(INV) UNIT 2(2), KOLKATA HIMSELF HAD NEVER CARRIED OUT DETAILED ENQUIRY BUT HAD MERELY INFORMED HIS SUSPICION THAT THE SHARE CAPITAL RECEIVED BY THE ASSESSEE MAY BE BOGUS AND RECOMMENDED THOROUGH ENQUIRY. THE LD. AR THEREFORE SUBMITTED THAT EXCEPT FOR 10 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 UNSUBSTANTIATED ALLEGATION CONTAINED IN THE DDIT(INV)S LETTER DATED 23.02.2016, THE AO DID NOT HAVE IN HIS POSSESSION ANY TANGIBLE MATERIAL ON THE BASIS OF WHICH HE COULD FORM REASON TO BELIEVE THAT THE INCOME OF ASSESSEE HAD ESCAPED ASSESSMENT. THE LD. AR THEREFORE SUBMITTED THAT ACTING ON THE DICTATE OF THE INVESTIGATION WING OF THE DEPARTMENT ONLY, THE AO PROCEEDED TO ISSUE NOTICE U/S 148 IN THE MOST MECHANICAL MANNER WITHOUT HIMSELF BEING SATISFIED ABOUT THE CORRECTNESS OF SUCH INFORMATION. THE LD. AR SUBMITTED THAT AFTER RECEIVING THE INFORMATION IN THE FORM OF DDIT(INV)S LETTER DATED 23.02.2016 THE AO HIMSELF DID NOT CONDUCT ANY WORTHWHILE ENQUIRY OF HIS OWN TO VERIFY THE CORRECTNESS OF THE INFORMATION AND IN THE MOST MECHANICAL MANNER HE PROCEEDED TO RECORD HIS SATISFACTION. THE LD. AR THEREFORE SUBMITTED THAT BESIDES THERE BEING NO TANGIBLE MATERIAL AVAILABLE WITH THE AO, THE REOPENING OF ASSESSMENT WAS BASED ONLY ON BORROWED SATISFACTION AND THEREFORE PROCEEDINGS U/S 147 SUFFERED FROM INCURABLE INFIRMITY. 6. DRAWING ATTENTION TO THE RECORDED REASONS THE LD. AR SUBMITTED THAT THE RECORDED REASONS PROCEEDED ON THE BASIS OF INFORMATION THAT A SURVEY U/S 133A WAS CONDUCTED IN THE CASE OF ASHIKA GROUP DURING WHICH IT WAS FOUND THAT THE ASSESSEE HAD RAISED SHARE CAPITAL OF RS.86.24 CRORES DURING THE FY 2008-09 RELATING TO AY 2009-10. IN THE LETTER DATED 23.02.2016 IT WAS REVEALED THAT THE ASSESSEE HAD ALLOTTED SHARES TO DIFFERENT COMPANIES WHICH WERE PAPER / BOGUS / SHELL COMPANIES. SHARES WERE ALLOTTED ON 31.03.2009 AT A PREMIUM OF RS.190/ SHARE. CONSIDERING THE REPORT OF THE DDIT, IT WAS OBSERVED THAT IT WAS NOTHING BUT UNACCOUNTED INCOME ENTERED IN THE BOOKS OF ASSESSEE BY WAY OF ACCOMMODATION ENTRY IN THE FORM OF BOGUS SHARE CAPITAL ROUTED THROUGH PAPER/ BOGUS / SHELL COMPANIES. THE LD. AR SUBMITTED THAT THE DDITS LETTER DATED 23.02.2016 WAS ADDRESSED TO THE ACIT, CC- 2(1), KOLKATA WHO IN TURN FORWARDED THE SAME TO THE DCIT, CIRCLE 6(2), KOLKATA ON 28.02.2016 AND WITHIN 8 DAYS OF THE SAID LETTER, THE DCIT, CIRCLE 6(2), KOLKATA RECORDED HIS SATISFACTION AND SOUGHT SANCTION FROM THE PR.CIT-2, KOLKATA. THE LD. AR THEREFORE SUBMITTED THAT THE FACTS ON RECORD DEMONSTRATED THAT WITHOUT OBJECTIVELY EXAMINING THE INFORMATION RECEIVED AND WITHOUT CONDUCTING ANY WORTHWHILE ENQUIRY OF HIS OWN THE AO PROCEEDED TO INITIATE REASSESSMENT PROCEEDINGS. THE LD. AR FURTHER SUBMITTED THAT THE FACT THAT THE ASSESSEE HAD ISSUED FRESH CAPITAL AND THEREBY RAISED RS.86.27 CRORES DURING FY 2008-09 WAS 11 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 KNOWN TO THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS U/S 143(3) WHICH WERE COMPLETED IN 2011. AS SUCH NO NEW MATERIAL OR INFORMATION CAME IN AOS POSSESSION THROUGH DDITS LETTER. THE ONLY ALLEGATION WHICH PROMPTED THE AO TO PROCEED WITH REASSESSMENT PROCEEDINGS WAS THE INFORMATION TO THE EFFECT THAT THE ALLOTTEES OF THE SHARES WERE ALLEGEDLY PAPER / SHELL COMPANIES. HOWEVER IN SUPPORT OF THIS ALLEGATION THE AO DID NOT HAVE IN HIS POSSESSION ANY TANGIBLE MATERIAL EXCEPT FOR UNVERIFIED INFORMATION RECEIVED FROM DDIT(INV) WHO HIMSELF HAD DESIRED DETAILED ENQUIRY BY THE AO. THE LD. AR POINTED OUT THAT SINCE IN THE REGULAR ASSESSMENT THESE VERY ENTITIES WERE FOUND TO BE GENUINE, BEFORE RECORDING HIS SATISFACTION THE AO SHOULD HAVE MADE SOME ENQUIRIES OF HIS OWN. THE LD. AR THEREFORE SUBMITTED THAT SIMPLY BASED ON THE UNVERIFIED INFORMATION RECEIVED FROM THE OFFICE OF THE DDIT(INV), AND UPON CHANGE OF OPINION IN RESPECT OF FACTS AND MATERIAL AVAILABLE ON RECORD THE AO PROCEEDED TO ISSUE OF NOTICE U/S 148. THE LD. AR THEREAFTER DREW OUR ATTENTION TO THE SANCTION GRANTED BY COMMISSIONER UNDER SECTION 151 OF THE ACT. EXCEPT WRITING YES. I AGREE, THE PR.CIT-2, KOLKATA DID NOT IN ANY MANNER INDICATE AS TO HOW HE HAD REACHED HIS SATISFACTION ON THE REASONS RECORDED BY THE AO. THE LD. AR THEREFORE ARGUED THAT THE SANCTION ACCORDED BY THE LD. PR.CIT WAS MECHANICAL AND WITHOUT DUE APPLICATION OF MIND AS REQUIRED BY LAW, AND RESULTANTLY THEREFORE NOTICE U/S 148 ITSELF IS VITIATED. IN THE LIGHT OF THE AFORESAID SUBMISSIONS, THE LD. AR SUBMITTED THAT THE REOPENING OF THE ASSESSMENT WAS LEGALLY IMPERMISSIBLE AND, THEREFORE HE URGED FOR UPHOLDING THE ORDER OF THE LD. CIT(A) WHO HAS CANCELLED THE ORDER U/S 147/143(3). 7. BEFORE WE ADVERT TO THE FACTS IN THIS CASE, LET US LOOK INTO THE WELL SETTLED PRINCIPLES REGARDING REOPENING OF ASSESSMENTS COMPLETED U/S 143 (3) OF THE ACT. 8. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECORDED FOR REOPENING THE ASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASONS RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REASONS RECORDED. THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR [(2004) 268 ITR 332], HAS, INTER ALIA, OBSERVED THAT '.IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN 12 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE.' . THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY AS THEY WERE RECORDED BY THE COMPETENT OFFICER BEFORE THE ISSUE OF THE NOTICE. 9. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT. THE REASONS SHOULD NOT MERELY DISCLOSE NEED FOR AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE SOMETHING TANGIBLE WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE DETAILED INVESTIGATION WAS NOT CARRIED OUT AND IF SO, COULD HAVE LED TO DETECTION OF INCOME ESCAPING ASSESSMENT, CANNOT BE THE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEEN FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMENT. THE LATTER CATEGORY CONSISTS OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS TO BE SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECORDED AND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF ITO VS LAKHMANI 13 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 MEWAL DAS [(1976) 103 ITR 437] THAT, THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. 10. IN CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 256 ITR 1, THE FULL BENCH OF HONBLE DELHI HIGH COURT HELD AS UNDER :- IT IS A WELL SETTLED PRINCIPLE OF INTERPRETATION OF STATUTE THAT THE ENTIRE STATUTE SHOULD BE READ AS A WHOLE AND THE SAME HAS TO BE CONSIDERED THEREAFTER CHAPTER BY CHAPTER AND THEN SECTION BY SECTION AND ULTIMATELY WORD BY WORD. IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER DOES NOT HAVE ANY JURISDICTION TO REVIEW HIS OWN ORDER. HIS JURISDICTION IS CONFINED ONLY TO RECTIFICATION OF MISTAKES AS CONTAINED IN SECTION 154 OF THE ACT. THE POWER OF RECTIFICATION OF MISTAKE CONFERRED UPON THE INCOME-TAX OFFICER IS CIRCUMSCRIBED BY THE PROVISIONS OF SECTION 154 OF THE ACT. THE SAID POWER CAN BE EXERCISED WHEN THE MISTAKE IS APPARENT. EVEN A MISTAKE CANNOT BE RECTIFIED WHERE IT MAY BE A MERE POSSIBLE VIEW OR WHERE THE ISSUES ARE DEBATABLE. EVEN THE INCOME-TAX APPELLATE TRIBUNAL HAS LIMITED JURISDICTION UNDER SECTION 254(2) OF THE ACT. THUS WHEN THE ASSESSING OFFICER OR TRIBUNAL HAS CONSIDERED THE MATTER IN DETAIL AND THE VIEW TAKEN IS A POSSIBLE VIEW THE ORDER CANNOT BE CHANGED BY WAY OF EXERCISING THE JURISDICTION OF RECTIFICATION OF MISTAKE. IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHAT CANNOT BE DONE DIRECTLY CANNOT BE DONE INDIRECTLY. IF THE INCOME-TAX OFFICER DOES NOT POSSESS THE POWER OF REVIEW, HE CANNOT BE PERMITTED TO ACHIEVE THE SAID OBJECT BY TAKING RECOURSE TO INITIATING A PROCEEDING OF REASSESSMENT OR BY WAY OF RECTIFICATION OF MISTAKE. IN A CASE OF THIS NATURE THE REVENUE IS NOT WITHOUT REMEDY. SECTION 263 OF THE ACT EMPOWERS THE COMMISSIONER TO REVIEW AN ORDER WHICH IS PREJUDICIAL TO THE REVENUE. 14 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 IN BAWA ABHAI SINGH'S CASE [2002] 253 ITR 83 (DELHI), A DIVISION BENCH OF THIS COURT OF WHICH ONE OF US (D. K. JAIN J.) IS A MEMBER, CLEARLY HELD (PAGE 88) : 'THE CRUCIAL EXPRESSION IS 'REASON TO BELIEVE'. THE EXPRESSION PREDICATES THAT THE ASSESSING OFFICER MUST HOLD A BELIEF . . . BY THE EXISTENCE OF REASONS FOR HOLDING SUCH A BELIEF. IN OTHER WORDS, IT CONTEMPLATES EXISTENCE OF REASONS ON WHICH THE BELIEF IS FOUNDED AND NOT MERELY A BELIEF IN THE EXISTENCE OF REASONS INDUCING THE BELIEF. SUCH A BELIEF MAY NOT BE BASED MERELY ON REASONS BUT IT MUST BE FOUNDED ON INFORMATION. AS WAS OBSERVED IN GANGA SARAN AND SONS P. LTD. V. ITO [1981] 130 ITR 1 (SC), THE EXPRESSION 'REASON TO BELIEVE' IS STRONGER THAN THE EXPRESSION 'IS SATISFIED'. THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER SHOULD NOT BE IRRATIONAL AND ARBITRARY. TO PUT IT DIFFERENTLY, IT MUST BE REASONABLE AND MUST BE BASED ON REASONS WHICH ARE MATERIAL. IN S.NARAYANAPPA V. CIT [1967] 63 ITR 219, IT WAS NOTED BY THE APEX COURT THAT THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147 DOES NOT MEAN PURELY A SUBJECTIVE SATISFACTION ON THE PART OF THE ASSESSING OFFICER, THE BELIEF MUST BE HELD IN GOOD FAITH ; IT CANNOT BE MERELY A PRETENCE. IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASONS FOR THE BELIEF HAVE A RATIONAL NEXUS OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SECTION. TO THAT LIMITED EXTENT, THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS UNDER SECTION 147 CAN BE CHALLENGED IN A COURT OF LAW.' IT WAS FURTHER HELD THAT, WE ARE THEREFORE OF THE OPINION THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO INITIATE REASSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPINION. IT WAS FURTHER OBSERVED AS UNDER :- WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RECORDED AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDING UNDER SECTION 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB-SECTION (1) OF SECTION 143 OR SUB-SECTION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB-SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 15 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 11. IT IS NECESSARY TO EXAMINE WHETHER THERE WAS ANY REASON TO BELIEVE TO HAVE HAD SUCH AN EXERCISE. THE TERM REASON TO BELIEVE CANNOT BE CONSIDERED OR EVALUATED IN A WATER TIGHT COMPARTMENT AND SCOPE AND APPLICABILITY MAY VARY FROM CASE TO CASE, DEPENDING UPON THE FACTS AND CIRCUMSTANCES. THE POWER UNDER SECTIONS 147 / 148 COMES INTO EXISTENCE IF HE HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FORMATION OF REASON TO BELIEVE THAT INCOME ESCAPED ASSESSMENT HAS TO BE THAT OF A PRUDENT PERSON. THE REASONS FOR SUCH BELIEF HAVE TO BE RECORDED IN WRITING ON THE BASIS OF MATERIAL IN THE POSSESSION OF AO. WHILE THE WORDS REASON TO BELIEVE ARE WIDE IN THEIR IMPORT, IT CANNOT INCLUDE A MERE SUSPICION OR IPSE DIXIT OF THE AO. THE BELIEF OF THE AO SHOULD LEAD HIM TO FORM AN HONEST AND REASONABLE OPINION BASED ON REASONABLE GROUNDS. THIS PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE SUPREME COURT IN THE JUDGMENTS OF ITO VS. LAKHMANI MEWAL DAS (SUPRA) AND NAVINCHANDRA MOHANLAL PARIK VS. WTO (124 ITR 68). THE REASONABILITY OF THE GROUNDS WHICH LED TO THE FORMATION OF BELIEF WARRANTING REOPENING IS TESTED FROM THE POINT OF VIEW WHETHER OR NOT THEY ARE GERMANE TO THE FORMATION OF BELIEF THAT INCOME ESCAPED ASSESSMENT AND AFTER 4 YEARS, AN ADDITIONAL SAFEGUARD OR CONDITION THAT ESCAPEMENT OF INCOME WAS DUE TO FAULT OF THE ASSESSEE, IN NOT FULLY AND TRULY DISCLOSING THE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT. THE HONBLE SUPREME COURT ENDORSING THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA) HELD IN ITS ORDER REPORTED IN 320 ITR 561, ..THAT ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE LINK WITH THE FORMATION OF BELIEF. THEREFORE, IF THE FRESH TANGIBLE MATERIAL WHICH THE AO HAS IN HIS POSSESSION IS RELEVANT TO HAVE NEXUS TO THE FORMATION OF BELIEF THEN, OF COURSE, THE AO WOULD HAVE THE NECESSARY JURISDICTION TO TAKE ACTION UNDER THE ACT. WHAT IS REQUIRED TO BE EXAMINED IS NOT THE ADEQUACY OR SUFFICIENCY OF THE GROUNDS BUT THE EXISTENCE OF BELIEF. IN OUR VIEW, ALL THAT ONE HAS TO EXAMINE IS THAT WHETHER THERE WAS SOME MATERIAL WHICH, GAVE RISE TO PRIMA FACIE VIEW THAT INCOME HAS ESCAPED ASSESSMENT AND THE BELIEF WAS FORMED IN GOOD FAITH OR WAS IT MERE PRETENCE FOR INITIATING ACTION U/S 147/148 OF THE ACT. 16 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 12. NOW LET US LOOK INTO THE FACTS PERTAINING TO THE ASSESSEE COMPANY TO EXAMINE THE LEGAL GROUNDS INVOLVED IN THE PRESENT APPEAL. FROM THE MATERIAL ON RECORD WE FIND THAT THE ENTIRE EDIFICE OF THE REASSESSMENT PROCEEDINGS WAS BASED ON THE LETTER 23.02.2016 WRITTEN BY THE DDIT(INV), UNIT 2(2), KOLKATA TO THE ACIT, CC-2(1), KOLKATA. THE SAID LETTER WAS WRITTEN IN THE CONTEXT OF SURVEY CONDUCTED ON 19.05.2015 IN THE CASE OF ASHIKA GROUP. WE NOTE THAT AT THE RELEVANT TIME WHEN THE LETTER WAS ISSUED IN FEBRUARY 2016, THE ACIT, CC- 2(1), KOLKATA DID NOT HAVE JURISDICTION OVER THE ASSESSEES CASE AND AS SUCH NO PROCEEDINGS COULD HAVE BEEN INITIATED BY THE SAID OFFICER AGAINST THE ASSESSEE WHO WAS NOT BEING ASSESSED IN HIS CHARGE. FROM THE LETTER DATED 23.02.2016 WHICH IS AT PAGES 8 & 9 OF THE PAPER BOOK, WE NOTE THAT THE SAID SURVEY PROCEEDINGS WERE CONDUCTED BY THE INVESTIGATION WING IN MAY 2015 AND THE MAIN FOCUS OF THE INVESTIGATION WAS THE ALLEGED BOGUS LTCG. IN THE SAID PROCEEDINGS AN EFFORT WAS ALSO ALLEGEDLY MADE TO FIND OUT THE GENUINENESS OF THE SHARE ALLOTMENTS MADE BY THE CONCERNED COMPANIES. IT WAS ALLEGEDLY FOUND THAT DURING THE INVESTIGATION IT WAS NOTED THAT ALLOTTEE COMPANIES WERE BOGUS / PAPER/ SHELL COMPANIES. IN THE SAID LETTER THE DDIT FURTHER STATED THAT DUE TO PAUCITY OF TIME, THE CASH/MONEY TRAIL COULD NOT BE MADE IN THE CASE OF SHARE CAPITAL. HE FURTHER INFORMED THAT OUT OF 97 SHARE APPLICANTS WHO HAD SUBSCRIBED TO THE SHARES OF THE ASSESSEE, 34 COMPANIES WERE SHELL COMPANIES CONTROLLED BY IDENTIFIED ACCOMMODATION ENTRY OPERATORS. IN SUPPORT OF THIS FINDING THE SAID DDIT(INV) MADE REFERENCE TO THE CONCERNED ENTRY OPERATORS STATEMENTS RECORDED BY THE INVESTIGATION WING ON SEVERAL OCCASIONS AND THESE STATEMENTS ACCORDING TO DDIT(INV) WAS A VALID REASON WITHIN THE MEANING OF SECTION 147 FOR REOPENING OF THE ASSESSMENT. SINCE THE RECIPIENT OF THE LETTER DID NOT HAVE JURISDICTION, BY HIS LETTER DATED 25.02.2016 RECEIVED ON 28.02.2016, THE DCIT, CIRCLE 6(2), KOLKATA WAS INFORMED ABOUT THE DDITS LETTER DATED 23.02.2016. IN THE SAID LETTER THE DCIT, CIRCLE 6(2), KOLKATA WAS REQUESTED TO TAKE SUITABLE ACTION AS PER THE PROVISIONS OF THE ACT AND WAS ALSO REQUESTED TO INFORM WHETHER THE ASSESSEE HAS FORWARDED THE SAME TO THE ASHIKA GROUP DURING FY 2008-09 FOR TAKING SUITABLE ACTION AT HIS END. WE FURTHER NOTE THAT BASED ON THE LETTER RECEIVED FROM THE ACIT, CC-2(1), KOLKATA, THE DCIT, CIRCLE 6(2), KOLKATA RECORDED HIS REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE REASONS, WHICH THE AO RECORDED, HAVE BEEN EXTRACTED IN PARA 2 IN THE FOREGOING. WE FURTHER NOTE THAT THE PR.CITS PERMISSION WAS SOUGHT ON 08.03.2016 AND 17 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 SUCH PERMISSION WAS ACCORDED BY THE PR.CIT-2, KOLKATA AS YES, I AGREE. SUBSEQUENTLY THE NOTICE U/S 148 WAS ISSUED ON 22.03.2016 AND THEREAFTER THE REASSESSMENT ORDER WAS PASSED ON 26.12.2016. 13. IN THE LIGHT OF THE FOREGOING FACTS WE SHALL NOW TEST VARIOUS LEGAL PROPOSITIONS PUT FORTH BY THE PARTIES TO ASCERTAIN WHETHER THE CONDITIONS PRECEDENT FOR ASSUMPTION OF VALID JURISDICTION U/S 147 WERE FULFILLED. 14. IN THE PRESENT CASE THE REGULAR ASSESSMENT U/S 143(3) WAS PASSED ON 19.12.2011. IN THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS THE AO HAD REQUIRED THE ASSESSEE TO FURNISH THE PARTICULARS OF SHARE CAPITAL ISSUED TOTALING RS.86.27 CRORES. IN RESPONSE THE ASSESSEE HAD FURNISHED THE PARTICULARS REQUISITIONED. THEREAFTER IN EXERCISE OF POWERS VESTED UNDER SECTION 133(6), THE AO HAD CONDUCTED INDEPENDENT ENQUIRIES FROM THE SHARE APPLICANTS ON TEST CHECK BASIS. THESE FACTS HAVE BEEN ADMITTED BY THE AO IN THE ORDER U/S 143(3) OF THE ACT. IN THE CIRCUMSTANCES WE NOTE THAT THE ENQUIRY WITH REGARD TO ISSUE OF SHARE CAPITAL DURING THE FY 2008-09 WAS CONDUCTED BY THE AO AND THEREFORE IT WAS NOT A CASE WHERE THE AO WAS UNAWARE ABOUT THE MATERIAL FACT THAT THE ASSESSEE HAD RAISED FRESH EQUITY CAPITAL OF RS.86.27 CRORES DURING THE RELEVANT YEAR. WE THEREFORE FIND THAT AS A CONSEQUENCE OF THE LETTER EITHER FROM THE INVESTIGATION OFFICER OR FROM THE ACIT, CC-2(1), KOLKATA; THE AO OF THE ASSESSEE DID NOT RECEIVE ANY FRESH INFORMATION IN RESPECT OF THE AMOUNTS RECEIVED DURING FY 2008-09 BY WAY OF SHARE SUBSCRIPTIONS. WE FIND THAT THE SURVEY U/S 133A WAS CONDUCTED IN THE CASE OF ASHIKA GROUP IN THE MONTH OF MAY 2015 AND IN THE COURSE OF THE SAID SURVEY CERTAIN INFORMATION WAS ALLEGEDLY GATHERED BY THE INVESTIGATION WING IN RESPECT OF TRANSACTIONS OF THE ASSESSEE DURING THE FY 2008-09. HOWEVER THE LETTER OF THE DDIT(INV) AS WELL AS THE LETTER OF THE ACIT, CC-2(1), KOLKATA IS FOUND TO BE CONSPICUOUSLY SILENT AS TO IN WHAT MANNER THE INFORMATION GATHERED IN THE CASE OF ASHIKA GROUP WAS RELATABLE TO THE ASSESSEES TRANSACTIONS INVOLVING ISSUE OF SHARES. WE FIND THAT THE LETTER OF THE DDIT(INV) IS CONSPICUOUSLY SILENT WITH REGARD TO IDENTITIES OF THE PERSONS WHO HAD SUBSCRIBED TO THE CAPITAL OF THE ASSESSEE OR THE NAMES OF THE ALLEGED ENTRY OPERATORS WHO HAD CONTROLLED THE SO CALLED 34 SHELL / PAPER COMPANIES. WE ALSO NOTE THAT EVEN THOUGH THE LETTER OF THE DDIT(INV) 18 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 ADMITTED THAT THE CAPITAL WAS SUBSCRIBED BY 97 COMPANIES IN HIS OPINION THE ALLEGED ACCOMMODATION ENTRIES IN THE FORM OF SHARE CAPITAL WERE GIVEN ONLY BY 34 COMPANIES. THE LETTER OF THE DDIT(INV) WAS HOWEVER SILENT WITH REGARD TO IDENTITIES OF THE SHARE SUBSCRIBER COMPANIES AS ALSO THE ALLEGED 34 SHELL / PAPER COMPANIES. 15. WE FIND THAT ON RECEIPT OF THE LETTER FROM THE ACIT, CC-2(1), KOLKATA, NEITHER THE AO ATTEMPTED TO VERIFY THE CORRECTNESS OF THE INFORMATION NOR MADE ANY ATTEMPT TO IDENTIFY THE ALLEGED 34 SHELL / PAPER COMPANIES BUT IN THE MOST MECHANICAL MANNER RECORDED HIS SATISFACTION THAT ENTIRE SHARE CAPITAL AMOUNT OF RS.86,24,30,000/- RECEIVED FROM 94 COMPANIES WAS INCOME ESCAPING ASSESSMENT DURING AY 2009-10. WE THUS FIND THAT EVEN THOUGH IN THE LETTER OF THE DDIT(INV) HAD OPINED THAT ONLY 34 COMPANIES WERE ALLEGEDLY PAPER / SHELL COMPANIES AND PROVIDED ACCOMMODATION ENTRIES, THE AO WITHOUT VERIFYING THE CORRECTNESS OR VERACITY OF INFORMATION AND WITHOUT IDENTIFYING EVEN A SINGLE SUCH ENTITY, PROCEEDED TO RECORD HIS REASONS THAT THE SHARE SUBSCRIPTION AMOUNTS RECEIVED FROM ALL 94 CORPORATE SUBSCRIBERS TOTALING RS. 86,24,30,000/-CONSTITUTED INCOME ESCAPING ASSESSMENT. IN CONTRADISTINCTION TO THE RECORDED REASONS WE FIND THAT IN THE COURSE OF PROCEEDINGS U/S 143(3), THE AO HAD NOT ONLY OBTAINED THE INFORMATION AND DETAILS WITH REGARD TO THE IDENTITIES OF ALL SHARE SUBSCRIBERS BUT HAVING CONDUCTED ENQUIRIES ON TEST CHECK BASIS, THE AO HAD ACCEPTED NOT ONLY THE IDENTITIES OF THE SHAREHOLDERS BUT ALSO ACCEPTED THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS. WE THEREFORE FIND THAT THE PARTIES WHOSE IDENTITIES & CREDITWORTHINESS WAS ACCEPTED BY THE AO IN THE ORIGINAL ASSESSMENT WAS SOUGHT TO BE NEGATED IN THE RECORDED REASONS BASED SOLELY ON THE LETTER OF THE DDIT(INV) DATED 23.02.2016. WE FIND THAT EXCEPT FOR THE TWO LETTERS DATED 23.02.2016 & 25.02.2016 WRITTEN BY DDIT(INV) & ACIT, CC-2(1), KOLKATA RESPECTIVELY, THERE WAS NO TANGIBLE MATERIAL AVAILABLE WITH THE AO ON THE BASIS OF WHICH HE COULD FORM HIS REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. MOREOVER WE FIND THAT EVEN IN THE DDITS LETTER, HE HAD EXPRESSED ONLY AN APPREHENSION THAT THE SHARE SUBSCRIPTION AMOUNT RECEIVED FROM 34 COMPANIES OUT OF TOTAL 94 COMPANIES TO WHOM THE ASSESSEE HAD ALLOTTED SHARES WERE PAPER / BOGUS / SHELL COMPANIES. WE THEREFORE FIND THAT EVEN AS PER THE INFORMATION RECEIVED IT WAS NOT THE REVENUES CASE THAT SHARE SUBSCRIPTION AMOUNTS RECEIVED FROM ALL 94 SHARE 19 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 SUBSCRIBERS WERE HAVING DUBIOUS ANTECEDENT. EVEN WITH REGARD TO THE 34 COMPANIES CLAIMED BY THE DDIT(INV) TO BE PAPER / BOGUS / SHELL COMPANIES, THEIR IDENTITIES AND THE AMOUNTS RECEIVED FROM EACH OF THEM WAS NOT REVEALED. IN THE CIRCUMSTANCES THEREFORE WE FIND THAT EVEN AS PER THE LETTERS RELIED UPON BY THE AO NO TANGIBLE MATERIAL OR INFORMATION WAS AVAILABLE BEFORE THE AO ON THE BASIS OF WHICH HE COULD HAVE FORMED REASON TO BELIEVE THAT THE ENTIRE SHARE SUBSCRIPTION AMOUNT RECEIVED REPRESENTED INCOME ESCAPING ASSESSMENT. WE THEREFORE FIND MERIT IN THE LD. ARS SUBMISSION THAT AFTER THE COMPLETION OF ASSESSMENT, NO TANGIBLE OR CREDIBLE INFORMATION WAS RECEIVED BY THE AO ON THE BASIS OF WHICH HE COULD HAVE VALIDLY FORMED REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WE FIND THAT EVEN THOUGH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE SHARE SUBSCRIPTION TRANSACTIONS WERE ACCEPTED IN THE REGULAR ASSESSMENT, THE PRESENT REASSESSMENT PROCEEDINGS WERE INITIATED BY THE AO UPON MERE CHANGE OF OPINION.THE OPINION WITH REGARD TO ESCAPEMENT INCOME WAS FORMED ONLY ON THE BASIS OF LETTERS DATED 23.02.2016 & 25.02.2016 WRITTEN BY DDIT(INV) & ACIT, CC-2(1), KOLKATA RESPECTIVELY AND WITHOUT ANY INDEPENDENT ENQUIRY BY THE AO HIMSELF. WE THEREFORE HOLD THAT THE INITIATION OF REASSESSMENT SUFFERED FROM INFIRMITY BECAUSE IT WAS BASED UPON CHANGE OF OPINION BY THE AO WITHOUT THERE BEING ANY MATERIAL CHANGE IN THE UNDERLYING FACTS AND WHICH WERE ALWAYS KNOWN TO THE AO AT THE TIME OF PASSING OF THE REGULAR ASSESSMENT. WE ALSO NOTE THAT EVEN THOUGH THE ALLEGED INFORMATION WITH REGARD TO INTRODUCTION OF MONIES IN THE FORM OF SHARE CAPITAL WAS IN RESPECT OF ONLY 34 COMPANIES WHOSE IDENTITIES WERE ALSO NOT DISCLOSED YET TREATING THE SHARE CAPITAL RECEIVED FROM ALL CORPORATE SHAREHOLDERS TO BE BOGUS THE AO RECORDED HIS REASONS TO BELIEVE THAT SHARE CAPITAL RECEIVED FROM ALL SHAREHOLDERS TOTALING RS.86,24,30,000/- IN HIS OPINION, CONSTITUTED INCOME ESCAPING ASSESSMENT. WE THEREFORE FIND SUFFICIENT FORCE IN THE LD. ARS SUBMISSION THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WAS BAD IN LAW AS IT WAS BASED PURSUANT TO CHANGE OF OPINION ON THE PART OF THE AO. AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS KELVINATORS OF INDIA LTD (SUPRA), IT WAS NOT OPEN FOR THE AO TO RESORT TO THE PROCEEDINGS U/S 147 ON ACCOUNT OF CHANGE OF OPINION. 20 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 16. IN OUR OPINION, THE ORIGINAL ASSESSMENT CAN BE REOPENED ONLY IF THERE IS ANY NEW TANGIBLE MATERIAL WHICH COMES IN AOS HANDS AND WHICH HAS A RATIONAL CONNECTION OR NEXUS OR WHICH CAN HAVE A RELEVANT BEARING ON THE FORMATION OF THE BELIEF, AS LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS (SUPRA) THAT, THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. FURTHER RELIANCE CAN BE PLACED ON THE DETAILED JUDGMENT IN THE CASE OF MADHUKAR KHOSLA VS. ACIT 367 ITR 165 (DELHI) WHEREIN IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT THE REOPENING IS NOT PERMITTED UNDER THE LAW UNLESS IT IS BASED ON FRESH TANGIBLE MATERIAL AND THAT IF THE REASONS TO BELIEVE ARE NOT BASED ON NEW, TANGIBLE MATERIALS, THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. IT HAS BEEN FURTHER OBSERVED THAT : THE FOUNDATION OF THE AOS JURISDICTION AND THE RAISON DETRE OF A REASSESSMENT NOTICE ARE THE REASONS TO BELIEVE . NOW THIS SHOULD HAVE A RELATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERIALS ON THE RECORD. SUCH EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH ENABLES THE AUTHORITY TO LEGITIMATELY RE-OPEN THE COMPLETED ASSESSMENT. IN ABSENCE OF THIS OBJECTIVE TRIGGER, THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE RE-OPENING OF ASSESSMENT AMOUNTS TO REVIEW OR CHANGE OF OPINION ARISES. IN OTHER WORDS, IF THERE ARE NO REASONS TO BELIEVE BASED ON NEW, TANGIBLE MATERIALS, THEN THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. HERE, IN THE INSTANT CASE BEFORE US, THERE IS NOTHING COGENT TO SHOW WHAT TRIGGERED THE ISSUANCE OF NOTICE OF REASSESSMENT AS NO TANGIBLE OR CREDIBLE INFORMATION OR NEW FACTS WERE 21 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 AVAILABLE WHICH LED THE AO TO BELIEVE THAT FULL DISCLOSURE HAD NOT BEEN MADE. IN THE PRESENT CASE, FROM A PERUSAL OF THE REASONS GIVEN BY THE AO TO REOPEN, IT IS CLEARLY DISCERNABLE THAT THERE WAS NO NEW MATERIAL WHICH HAS COME TO THE HANDS OF THE AO IN RESPECT TO THE RELEVANT AY 2009-10 WHICH COULD CONSTITUTE THE DRIVER OR THE KEY WHICH ENABLES THE AO TO LEGITIMATELY REOPEN THE COMPLETED ASSESSMENT. IN ABSENCE OF THIS OBJECTIVE TRIGGER, WE HOLD THAT THE AO DID NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT, AS HELD BY HONBLE HIGH COURT IN THE CASE OF MADHUKAR KHOSLA (SUPRA). 17. WE FIND THAT THE REOPENING U/S 147 IN THE PRESENT CASE WAS SOLELY BASED ON THE INFORMATION PASSED ON BY THE DDIT(INV) IN HIS LETTER DATED 23.02.2016. ON SCRUTINY OF THE DDITS LETTER, WE NOTE THAT EVEN THOUGH HE HAD NOT CONDUCTED ENQUIRY WITH REGARD TO ISSUE OF SHARE CAPITAL FOR PAUCITY OF TIME, NON THE LESS REQUIRED THE AO TO TAKE SUITABLE ACTION IN THE MATTER BECAUSE IN HIS OPINION INFORMATION CONTAINED IN HIS LETTER COULD ACT AS A STRONG VALID REASON WITHIN THE MEANING OF SECTION 147 FOR REOPENING OF THE ASSESSEES CASE. THE SAID DDIT HAD ALSO REQUESTED THE AO TO INTIMATE HIM AFTER THE CASE IS INITIATED FOR HIS INFORMATION. WE ALSO NOTE THAT AFTER HAVING RECEIVED THE LETTER FROM THE DDIT(INV), THE ACIT CC-2(1), KOLKATA IN HIS LETTER DATED 25.02.2016 HAD REQUIRED DCIT, CIRCLE 6(2), KOLKATA TO TAKE SUITABLE ACTION AS PER THE PROVISIONS OF THE ACT AS APPLICABLE TO THE CASE BASED ON THE LETTER OF THE DDIT(INV) DATED 23.02.2016. WE ALSO NOTE THAT EVEN THOUGH IN THE LETTER DATED 23.02.2016, THE SAID DDIT(INV) HAD ADMITTED THAT THE SURVEY IN THE CASE OF ASHIKA GROUP WAS CONDUCTED IN CONNECTION WITH THE ALLEGED BOGUS LTCG AND NOT IN CONNECTION WITH ISSUANCE OF SHARES, THE OPINION WAS EXPRESSED THAT OUT OF 97 SHARE SUBSCRIBERS, 34 SHARE SUBSCRIBERS WERE ALLEGED TO BE BOGUS / SHELL COMPANIES. EXCEPT FOR MAKING UNVERIFIED ALLEGATION THAT DDITS OBSERVATION WAS BASED ON THE STATEMENTS OF IDENTIFIED ENTRY OPERATORS, THE LETTER OF THE DDIT(INV) WAS SILENT WITH REGARD TO THE IDENTITIES OF THE ALLEGED ENTRY OPERATORS AND IN WHAT MANNER THE SAID STATEMENTS LED HIM TO BELIEVE THAT THE CAPITAL CONTRIBUTED BY UNKNOWN OR UNIDENTIFIED 34 COMPANIES WAS IN THE NATURE OF ACCOMMODATION ENTRIES. WE THEREFORE FIND THAT EXCEPT FOR MAKING UNVERIFIED AND UNSUBSTANTIATED AVERMENTS, THE DDITS LETTER WAS BEREFT OF ANY SPECIFIC FACTS ON THE BASIS OF WHICH THE AO COULD VALIDLY FORM HIS REASONS TO BELIEVE THAT ASSESSEES INCOME HAD ESCAPED 22 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 ASSESSMENT. WE ALSO FIND THAT IN THE SAID LETTER, THE DDIT HAD HIMSELF ADMITTED THAT NO ENQUIRY WITH REGARD TO CASH TRAIL WAS CONDUCTED BY HIM IN RESPECT OF ALLOTMENT OF SHARES DUE TO PAUCITY OF TIME AND HAD RECOMMENDED IN-DEPTH ENQUIRY BY THE AO. YET TREATING THE INFORMATION SO RECEIVED FROM THE DDIT(INV) TO BE FOUNDATIONAL FACT, THE AO WITHOUT HIMSELF CONDUCTING ANY FURTHER ENQUIRY AND APPLICATION OF HIS OWN MIND OBJECTIVELY, RECORDED HIS SATISFACTION THAT ENTIRE SHARE SUBSCRIPTION MONIES RECEIVED FROM ALL 94 SHARE APPLICANTS TOTALING RS.86,24,30,000/- REPRESENTED INCOME ESCAPING ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. WE THEREFORE FIND THAT EVEN THOUGH IT WAS NOT THE DDITS CASE THAT ALL SHARE APPLICANTS WERE PAPER OR SHELL COMPANIES, THE AO WITHOUT HAVING ANY MATERIAL OR FACTS AND WITHOUT CONDUCTING ANY ENQUIRY OF HIS OWN, PROCEEDED TO FORM REASON TO BELIEVE THAT THE ENTIRE SHARE SUBSCRIPTION AMOUNT RECEIVED WAS IN THE NATURE OF INCOME ESCAPING ASSESSMENT. ON THESE FACTS THEREFORE WE HAVE NO HESITATION IN HOLDING THAT THE REOPENING OF THE ASSESSMENT WAS BASED ON THE DICTATE AND SATISFACTION BORROWED FROM THE LETTER OF THE DDIT(INV) DATED 23.02.2016 AS WELL AS THE LETTER OF ACIT, CC-2(1), KOLKATA DATED 25.02.2016. 18. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES DISCUSSED ABOVE, WE THEREFORE NOTE THAT BASED ON THE RECOMMENDATION OF THE DDIT (INV.) AND ACIT, CC(2), KOLKATA, ALONE THE AO INITIATED REPORT FOR SANCTION U/S 151 AND ISSUED NOTICE, WHICH WAS NOTHING BUT BORROWED BELIEF. IT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN ANIRUDHSINHJI KARANSINHJI JADEJA & ANR. VS. STATE OF GUJARAT (1995) 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 DIRECTION OR IN COMPLIANCE WITH SOME HIGHER AUTHORITYS INSTRUCTIONS, THEN IT WILL BE A CASE OF FAILURE TO EXERCISE DISCRETION ALL TOGETHER. IT HAS TO BE KEPT IN MIND THAT SATISFACTION RECORDED SHOULD BE INDEPENDENT AND NOT BORROWED OR DICTATED SATISFACTION. THUS, WE FIND THERE WAS NO FRESH TANGIBLE MATERIAL FOR AY 2009-10 EITHER WITH THE DDIT(INV) OR WITH THE ACIT, CC-2(1), KOLKATA OR WITH THE DCIT, CIRCLE 6(2), KOLKATA BEFORE THE REASONS WERE RECORDED AND THE NOTICE WAS ULTIMATELY ISSUED U/S 147. INSTEAD THE NOTICE WAS ISSUED ONLY ON THE BASIS OF THE BORROWED BELIEF OF DDIT (INV.). 23 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 19. GAINFUL REFERENCE IN THIS REGARD MAY BE MADE TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX, IV VS.INSECTICIDES (INDIA) LTD[2013] 357 ITR 330 (DELHI) HOLDING AS FOLLOWS:- 7. WE MAY POINT OUT AT THIS JUNCTURE ITSELF THAT THE TRIBUNAL DID NOT GO INTO THE QUESTION OF MERITS. IT ONLY EXAMINED THE QUESTION OF THE VALIDITY OF THE PROCEEDINGS UNDER SECTION 147 OF THE SAID ACT. THE TRIBUNAL, IN ESSENCE, HELD THAT THE PURPORTED REASONS FOR REOPENING THE ASSESSMENTS WERE ENTIRELY VAGUE AND DEVOID OF ANY MATERIAL. AS SUCH, ON THE AVAILABLE MATERIAL, NO REASONABLE PERSON COULD HAVE ANY REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, THE TRIBUNAL HELD THAT THE PROCEEDINGS UNDER SECTION 147 OF THE SAID ACT WERE INVALID. 8. THE TRIBUNAL GAVE DETAILED REASONS FOR CONCLUDING THAT THE PROCEEDINGS UNDER SECTION 147 WERE INVALID. INSTEAD OF ADDING ANYTHING TO THE SAID REASONS, WE THINK IT WOULD BE APPROPRIATE IF THE SAME ARE REPRODUCED: 'IN THE CASE AT HAND, AS IS SEEN FROM THE REASONS RECORDED BY THE AO, WE FIND THAT THE AO HAS MERELY STATED THAT IT HAS BEEN INFORMED BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETTER DATED 16.06.2006 THAT THE ABOVE NAMED COMPANY WAS INVOLVED IN GIVING AND TAKING BOGUS ENTRIES/TRANSACTIONS DURING THE RELEVANT YEAR, WHICH IS ACTUALLY UNEXPLAINED INCOME OF THE ASSESSEE COMPANY. THE AO HAS FURTHER STATED THAT THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND SOURCE OF THESE FUNDS ROUTED THROUGH BANK ACCOUNT OF THE ASSESSEE COMPANY. IN THE REASONS RECORDED, IT IS NOWHERE MENTIONED AS TO WHO HAD GIVEN BOGUS ENTRIES/TRANSACTIONS TO THE ASSESSEE OR TO WHOM THE ASSESSEE HAD GIVEN BOGUS ENTRIES 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 WAS THE INFORMATION GIVEN BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETTER DATED 16.06.2006 HAS ALSO NOT BEEN MENTIONED. IN OTHER WORDS, THE CONTENTS OF THE LETTER DATED 16.06.2006 OF THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI HAVE NOT BEEN GIVEN. THE AO HAS VAGUELY REFERRED TO CERTAIN COMMUNICATIONS THAT HE HAD RECEIVED FROM THE DIT(INV.), NEW DELHI; THE AO DID NOT MENTION THE FACTS MENTIONED IN THE SAID COMMUNICATION EXCEPT THAT FROM THE INFORMATIONS GATHERED BY THE DIT (INV.), NEW DELHI THAT THE ASSESSEE WAS INVOLVED IN GIVING AND TAKING ACCOMMODATION ENTRIES ONLY AND REPRESENTED UNSECURED MONEY OF THE ASSESSEE COMPANY IS ACTUALLY UNEXPLAINED INCOME OF THE ASSESSEE COMPANY 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 TAKING BOGUS ENTRIES/TRANSACTIONS DURING THE RELEVANT FINANCIAL YEAR. THE AO DID NOT MENTION THE DETAILS OF TRANSACTIONS THAT REPRESENTED UNEXPLAINED INCOME OF THE ASSESSEE COMPANY. THE INFORMATION ON THE BASIS OF WHICH THE AO HAS INITIATED PROCEEDINGS U/S 147 OF THE ACT ARE UNDOUBTEDLY VAGUE AND UNCERTAIN AND CANNOT BE CONSTRUED TO BE SUFFICIENT AND RELEVANT MATERIAL ON THE BASIS OF WHICH A REASONABLE PERSON 24 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 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. THEY ARE NOT CLEAR AND UNAMBIGUOUS BUT SUFFER FROM VAGUENESS. THE REASONS RECORDED BY THE AO DO NOT DISCLOSE THE AO'S MIND AS TO WHAT WAS THE NATURE AND AMOUNT OF TRANSACTION OR ENTRIES, WHICH HAD BEEN GIVEN OR TAKEN BY THE ASSESSEE IN THE RELEVANT YEAR. THE REASONS RECORDED BY THE AO ALSO DO NOT DISCLOSE HIS MIND AS TO WHEN AND IN WHAT MODE OR WAY THE BOGUS ENTRIES OR TRANSACTIONS WERE GIVEN OR TAKEN BY THE ASSESSEE. FROM THE REASONS RECORDED, NOBODY CAN KNOW WHAT WAS THE AMOUNT AND NATURE OF BOGUS ENTRIES OR TRANSACTIONS GIVEN AND TAKEN BY THE ASSESSEE IN THE RELEVANT YEAR AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. AS ALREADY NOTED ABOVE, IT IS WELL SETTLED THAT ONLY THE REASONS RECORDED BY THE AO FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT ARE TO BE LOOKED AT OR EXAMINED FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED U/S 148 OF THE ACT. THE REASONS ARE REQUIRED 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 ENTRIES OR AMOUNT MENTIONED IN THE ASSESSMENT ORDER AND IN RESPECT OF WHICH ULTIMATE ADDITION HAS BEEN MADE BY THE AO, CANNOT BE MADE A BASIS TO SAY THAT THE REASONS RECORDED BY THE AO WERE WITH REFERENCE TO THOSE AMOUNTS MENTIONED IN THE ASSESSMENT ORDER. THE REASONS RECORDED BY THE AO ARE TOTALLY SILENT WITH REGARD TO THE AMOUNT AND NATURE OF BOGUS ENTRIES AND TRANSACTIONS AND THE PERSONS WITH WHOM THE TRANSACTIONS 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 PROCEEDINGS U/S 147 OF THE ACT DID INDICATE THE SOURCE OF THE CAPITAL GAIN AND NOBODY KNEW WHICH SHARES WERE TRANSACTED AND 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 DELHI 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 LAW. THE RECENT DECISION OF HON'BLE JURISDICTIONAL HIGH 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 EXPRESSED BY THE TRIBUNAL. NO SUBSTANTIAL QUESTION OF LAW ARISES FOR OUR CONSIDERATION. THE APPEALS ARE DISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. 20. THE HONBLE HIGH COURT IN THE CASE OF PRINCIPAL CIT VS G&G PHARMA INDIA LTD. IN ITA 545/2015 VIDE ORDER DT. 08.10.2015 AT PARAS 12 AND 13 HELD AS FOLLOWS: 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEB. 2003, FROM FOUR ENTRIES WHICH WERE RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEB. 2003, FROM FOUR ENTRIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTOR INVESTIGATION, THE A.O. STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND 25 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS, INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE A.O. APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE A.O., IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER, 2004 AND WAS PROCESSED 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 ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISION DISCUSSED, THE BASIC REQUIREMENT THAT THE A.O. MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 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 HIGH COURT IN G&G PHARMA INDIA (SUPRA) WE HOLD THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW 21. THE HONBLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTELS (P) LTD. VS ITO AND ANOTHER, REPORTED IN 338 ITR 51 (DELHI) UNDER SIMILAR CIRCUMSTANCES HELD AS FOLLOWS: FOR THE A.Y. 2003-04, THE RETURN OF INCOME OF THE ASSESSEE COMPANY WAS ACCEPTED U/S 143(1) OF THE INCOME-TAX ACT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S 148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME-TAX ACT, 1961, IS WIDE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIRED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. (II) A NOTICE U/S 148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISCERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER WHEN HE RECORDED THE REASONS. THERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. 26 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y.2002-03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE COMPANY, S, BAD A PAID UP CAPITAL OF RS. 90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE QUASHED. 22. IN THE CASE OF CIT VS ATUL JAIN REPORTED IN 299 ITR 383 IT HAS BEEN HELD AS FOLLOWS: HELD DISMISSING THE APPEALS, THAT THE ONLY INFORMATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE A.O. DID NOT VERIFY THE CORRECTNESS OF INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE INFORMATION IN A MECHANICAL MANNER. THE A.O. HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE U/S 148. WHAT HAD BEEN RECORDED BY THE A.O. AS HIS REASONS TO BELIEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORDING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE A.O. HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE ACTION OF THE A.O. WAS NOT SUSTAINABLE 23. USEFUL REFERENCE IN THIS REGARD IS FURTHER MADE TO THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN ACIT VS. MEENAKSHI OVERSEAS (P) LTD. (2017) 82 TAXMANN.COM 300 (DEL) WHEREIN IT HAS BEEN HELD AS UNDER: 22. AS RIGHTLY POINTED OUT BY THE ITAT, THE 'REASONS TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIONS, ONE AFTER THE OTHER. THE EXPRESSION 'ACCOMMODATION ENTRY' IS USED TO 27 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 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 DISCLOSED. 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 CONCLUSIONS, 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 EVIDENT, THEY MUST SPEAK FOR THEMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE BASIS FOR THE BELIEF 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 HAS 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 EITHER 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 SINCE 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 REOPENING IN THE PRESENT CASE WAS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY, IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRULY 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 ASSESSMENT. 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 INDEPENDENTLY ON AN OBJECTIVE CRITERIA. WHILE THE REPORT OF THE INVESTIGATION WING MIGHT CONSTITUTE THE MATERIAL ON THE BASIS OF WHICH HE FORMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVING AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. THE RECORDING 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 BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 28 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 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 LEGAL REQUIREMENT THAT REQUIRES TO BE SATISFIED BY THE AO FOR A VALID ASSUMPTION OF JURISDICTION 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: '11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.- INFORMATION IS RECEIVED FROM THE DIT (INV.-1), NEW DELHI THAT THE ASSESSEE HAS INTRODUCED MONEY AMOUNTING TO RS. 5 LAKH DURING THE F.Y. 2002-03 RELATING TO A.Y. 2003-04. DETAILS ARE CONTAINED IN ANNEXURE. AS PER INFORMATION AMOUNT RECEIVED IS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE IS A BENEFICIARY.' 28.2 THE ANNEXURE TO THE SAID PROFORMA GAVE THE NAME 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 HAD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING FINANCIAL YEAR 2002-03 AS PER THE DETAILS GIVEN IN ANNEXURE. THE SAID ANNEXURE, REPRODUCED ABOVE, RELATES TO A CHEQUE RECEIVED BY THE 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 RECEIVED WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. 15. THE AFORESAID REASONS DO NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFERRED TO IS EXTREMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT ANNEXURE, WHICH HAS BEEN QUOTED ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA 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 MATERIAL OF THE INFORMATION. THE ASSESSING OFFICER ACCEPTED THE PLEA ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANNER. THE COMMISSIONER ALSO ACTED ON THE SAME BASIS BY MECHANICALLY 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-TAX (INVESTIGATION) AND ARRIVE AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT.' 29 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 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 AGAINST 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 UNDER: 'CERTAIN INVESTIGATIONS WERE CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI IN RESPECT OF THE BOGUS/ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES. THE NAME OF THE ASSESSEE FIGURES 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 REPORTED AS UNDER: 'ENTRIES ARE BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC., IN THE FORM OF GIFTS, 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. IT HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAVE BEEN RECEIVED BY THE ASSESSEE:....' 29.2 THE DETAILS OF SIX ENTRIES WERE THEN SET OUT IN THE ABOVE 'REASONS'. THESE INCLUDED NAME OF THE BENEFICIARY, THE BENEFICIARY'S BANK, VALUE OF THE ENTRY TAKEN, INSTRUMENT NUMBER, DATE, NAME OF THE ACCOUNT IN WHICH ENTRY WAS TAKEN AND THE ACCOUNT FROM WHERE THE ENTRY WAS GIVEN THE DETAILS OF THOSE BANKS. THE REASONS THEN RECORDED: 'THE TRANSACTIONS INVOLVING RS. 27,00,000/-, MENTIONED IN THE MANNER ABOVE, CONSTITUTES FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME/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 BYSECTION 147OF THE INCOME TAX ACT. THEREFORE, THIS IS A FIT CASE FOR THE ISSUANCE OF THE 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 PERUSAL OF THE ABOVE REASONS REVEALS THAT THE AO DOES NOT MERELY REPRODUCE THE INFORMATION BUT TAKES THE EFFORT OF REVEALING WHAT IS CONTAINED IN THE INVESTIGATION REPORT SPECIFIC TO THE ASSESSEE. IMPORTANTLY HE NOTES THAT THE INFORMATION OBTAINED WAS 'FRESH' AND HAD NOT BEEN OFFERED 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, HOWEVER, THE AO HAS MADE NO EFFORT TO SET OUT THE PORTION OF THE INVESTIGATION REPORT WHICH CONTAINS THE INFORMATION SPECIFIC TO THE ASSESSEE. HE 30 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 DOES NOT ALSO EXAMINE THE RETURN ALREADY FILED TO ASCERTAIN IF THE ENTRY HAS BEEN DISCLOSED THEREIN. 30.1 IN COMMISSIONER OF INCOME TAX, NEW DELHI V. HIGHGAIN 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 THAT THIS COMPANY WAS INVOLVED IN THE GIVING AND TAKING BOGUS ENTRIES/ TRANSACTIONS DURING THE FINANCIAL 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 PARTICULARS 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 ENTRIES APART FROM THE ABOVE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 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 AMOUNT OF SUCH TRANSACTIONS PARTICULARLY THAT OF RS. 5,00,000 (AS MENTIONED ABOVE) HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF THE PROVISO TO SECTION 147 AND CLAUSE (B) TO THE EXPLANATION 2 OF THIS SECTION. SUBMITTED TO THE ADDITIONAL CIT, RANGE -12, NEW DELHI 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 INFORMATION RECEIVED FROM THE INVESTIGATION BUT TOOK THE EFFORT OF REFERRING TO THE DEPOSITION MADE DURING THE SURVEY BY THE CHARTERED ACCOUNTANT THAT THE ASSESSEE COMPANY WAS INVOLVED IN THE GIVING AND TAKING OF BOGUS ENTRIES. THE AO THUS INDICATED WHAT THE TANGIBLE MATERIAL WAS WHICH ENABLED HIM TO FORM THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IT WAS IN THOSE CIRCUMSTANCES THAT IN THE CASE, THE COURT CAME TO THE CONCLUSION THAT THERE WAS PRIMA FACIE MATERIAL FOR THE AO TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD NOT MADE A FULL AND 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 INFORMATION RECEIVED FROM THE DIT (I). THERE AGAIN THE DETAILS OF THE ENTRY PROVIDED WERE SET OUT 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 ORDER TO FORM REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT HAD NOT BEEN FULFILLED. LIKEWISE IN CIT-4 V. INDEPENDENT MEDIA P. LIMITED (SUPRA) THE COURT IN SIMILAR CIRCUMSTANCES 31 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 INVALIDATED THE INITIATION OF THE PROCEEDINGS TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. 32. IN ORIENTAL INSURANCE COMPANY LIMITED V. COMMISSIONER OF INCOME TAX 378 ITR 421 (DEL) IT WAS HELD THAT 'THEREFORE, EVEN IF IT IS ASSUMED THAT, IN FACT, THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, THE AO WOULD HAVE NO JURISDICTION TO ASSESS THE SAME IF HIS REASONS TO BELIEVE WERE NOT BASED ON ANY COGENT MATERIAL. IN ABSENCE 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 REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS HAD ESCAPED ASSESSMENT. CONCEDEDLY, THE AO HAD NO TANGIBLE MATERIAL IN REGARD TO ANY OF THE TRANSACTIONS PERTAINING TO THE RELEVANT ASSESSMENT YEARS. ALTHOUGH THE AO MAY HAVE ENTERTAINED A SUSPICION THAT THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, SUCH SUSPICION COULD NOT FORM THE BASIS OF INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT. A REASON TO BELIEVE - NOT REASON TO SUSPECT - IS THE PRECONDITION FOR EXERCISE OF JURISDICTION UNDERSECTION 147 OF THE ACT. ' 34. RECENTLY IN AGYA RAM V. CIT (SUPRA), IT WAS EMPHASIZED THAT THE REASONS TO BELIEVE 'SHOULD HAVE A LINK WITH AN OBJECTIVE FACT IN THE FORM OF INFORMATION OR 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 INFORMATION FROM ANY SOURCE WOULD NOT BY ITSELF TANTAMOUNT TO REASON TO BELIEVE THAT INCOME CHARGEABLE 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 AO 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 THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT, FORM A BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT.' 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE REASONS TO BELIEVE CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE TANGIBLE MATERIAL WHICH FORMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT. INDEED IT IS A 'BORROWED SATISFACTION'. THE REASONS FAIL TO DEMONSTRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 32 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMITTED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QUESTION DOES NOT SATISFY THE REQUIREMENT OF LAW. 38. THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS, ACCORDINGLY, DISMISSED BUT WITH NO ORDERS AS TO COSTS. 24. THE HONBLE BOMBAY HIGH COURT IN PR.CIT VS. SHODIMAN INVESTIMENTS (P) LTD. (2018) 93 TAXMANN.COM 153 (BOM) 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-OPENING NOTICE IN ITS ENTIRETY, TO THE RESPONDENT-ASSESSEE. THIS WAS CONTRARY TO AND IN DEFIANCE OF THE DECISION OF THE APEX COURT IN GKN DRIVESHAFTS V. ITO [2002] 125 TAXMAN 963/ [2003]259 ITR 19. THE ENTIRE OBJECTS OF REASONS FOR RE- OPENING NOTICE AS RECORDED BEING MADE AVAILABLE TO AN ASSESSEE, IS TO ENABLE THE ASSESSING OFFICER TO HAVE A SECOND LOOK AT HIS REASONS RECORDED BEFORE HE PROCEEDS TO ASSESS THE INCOME, WHICH ACCORDING TO HIM, HAS ESCAPED ASSESSMENT. IN FACT, NON FURNISHING OF REASONS WOULD MAKE AN ASSESSMENT ORDER BAD AS HELD BY THIS COURT IN CIT V. VIDESH SANCHAR NIGAM LTD. [2012] 21 TAXMANN.COM 53, 340 ITR 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 ITSELF, 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 THE 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 WHATEVER 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 TAXMAN 442/198 ITR 297 (SC). IT MAY BE USEFUL TO REPRODUCE THE CONTEXT IN WHICH THE SENTENCE IN RAJESH JHAVERI STOCK BROKERS (P) LTD. 'S CASE (SUPRA) BEING RELIED UPON BY THE REVENUE 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 FROM 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 ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED TO CONFER JURISDICTION UNDER SECTION 147(A) TWO CONDITIONS WERE REQUIRED TO BE SATISFIED: FIRSTLY THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT 33 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 INCOME, PROFITS OR GAINS CHARGEABLE TO, INCOME TAX HAVE ESCAPED ASSESSMENT, AND SECONDLY HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEMENT 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 THESE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE ASSESSING OFFICER COULD HAVE JURISDICTION TO ISSUE NOTICE UNDER SECTION 148 READ WITH SECTION 147(A). BUT UNDER THE SUBSTITUTED SECTION 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' THAT IN CASE OF ESCAPED ASSESSMENT, IS SUFFICIENT TO RE-OPEN THE ASSESSMENT. THIS UNLIKE THE EARLIER PROVISION OF SECTION 147(A) OF THE ACT WHICH REQUIRED TWO CONDITIONS I.E. FAILURE TO DISCLOSE FULLY AND TRULY ALL FACTS NECESSARY FOR ASSESSMENT AND REASON TO BELIEVE THAT INCOME HAS 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, FORMED TO CONCLUDE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. MR. MOHANTY, LEARNED 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 REASONS ONLY MEANS ANY TANGIBLE MATERIAL WHICH WOULD ON APPLICATION OF THE FACTS ON RECORD LEAD TO REASONABLE BELIEF THAT INCOME CHARGEABLE, TO TAX HAS ESCAPED, ASSESSMENT THIS MATERIAL WHICH, FORMS THE BASIS, IS NOT RESTRICTED, BUT THE MATERIAL MUST LEAD TO THE FORMATION OF REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT MERE OBTAINING, 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 RAJESH JHAVERI STOCK BROKERS (P) LTD. 'S, CASE (SUPRA), IT IS OBSERVED THAT THE WORD 'REASON' IN THE '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 BEING GIVEN TO THE WORDS 'TO BELIEVE' AS FOUND IN SECTION 147 OF THE ACT. THEREFORE, THE WORDS '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 INCOME 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 THE 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 INDICATE THE MATERIAL (WHATEVER REASONS) WHICH FORM THE BASIS OF RE-OPENING . ASSESSMENT AND ITS REASONS WHICH WOULD EVIDENCE THE 34 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 LINKAGE/NEXUS TO THE CONCLUSION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT THIS IS A SETTLED POSITION AS OBSERVED BY THE SUPREME COURT IN S. NARAYANAPPA V. CIT [1967] 63 ITR 219, THAT IT IS OPEN TO EXAMINE WHETHER THE REASON TO BELIEVE HAS RATIONAL CONNECTION WITH THE FORMATION OF THE BELIEF. TO THE SAME EFFECT, THE APEX COURT IN ITO V. LAKHMANI MERWAL DAS [1976] 103 ITR 437 HAD LAID DOWN THAT THE 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 AFORESAID REQUIREMENT ARE NOT MET, THE ASSESSEE IS ENTITLED TO CHALLENGE THE VERY ACT OF RE-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 RECEIVED FROM THE DIT (INVESTIGATION) ABOUT A PARTICULAR ENTITY, ENTERING INTO SUSPICIOUS TRANSACTIONS. HOWEVER, THAT MATERIAL IS NOT FURTHER LINKED BY ANY REASON TO COME TO THE CONCLUSION THAT THE RESPONDENT-ASSESSEE HAS INDULGED IN ANY ACTIVITY WHICH COULD GIVE RISE TO REASON 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 THE 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 ASSESSING 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 INTIMATION REGARDING RE-OPENING NOTICE FROM THE DDIT (INV.) THIS IS CLEARLY IN BREACH OF THE SETTLED POSITION IN LAW THAT RE- OPENING NOTICE HAS TO BE ISSUED BY THE ASSESSING OFFICE ON HIS OWN SATISFACTION AND NOT ON BORROWED SATISFACTION. 15. THEREFORE, IN THE ABOVE FACTS, THE VIEW TAKEN BY THE IMPUGNED ORDER OF THE TRIBUNAL CANNOT BE FOUND FAULT WITH. THIS VIEW OF THE TRIBUNAL IS IN ACCORDANCE WITH THE SETTLED POSITION IN LAW. ' 16. THEREFORE, THE QUESTION; AS FRAMED DOES NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THUS, NOT ENTERTAINED.' 25. WE ALSO NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL 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 SUBMISSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. IT IS CLEAR FROM THE REASONS RECORDED BY THE AO THAT THE AO ACTED ONLY ON THE 35 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 BASIS OF A LETTER RECEIVED FROM INVESTIGATION WING, NEW DELHI. THE REASONS RECORDED DOES NOT GIVE AS TO WHO HAS GIVEN THE BOGUS ENTRIES TO THE ASSESSEE. THE REASONS RECORDED ALSO DOES NOT MENTION AS TO ON WHICH DATES AND THROUGH WHICH MODE THE BOGUS ENTRIES WERE MADE BY THE ASSESSEE. THE REASONS RECORDED WHICH ARE EXTRACTED IN THE EARLIER PART OF THE ORDER DOES NOT SHOW, WHAT WAS THE INFORMATION GIVEN BY DIT(INV.),NEW DELHI. THE DATE OF THE INFORMATION RECEIVED BY THE AO WERE NOT SPELT OUT IN THE REASONS RECORDED. THE INVOLVEMENT OF THE ASSESSEE IS ALSO NOT SPELT OUT, EXCEPT MENTIONING THE CORPORATE BODIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE WERE 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 RELEVANT 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'BLE DELHI HIGH COURT ULTIMATELY HELD THAT INITIATION OF PROCEEDINGS U/S 148 OF THE ACT WAS 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 HON'BLE DELHI HIGH COURT. FOLLOWING THE SAID DECISION WE HOLD THAT INITIATION OF RE- ASSESSMENT PROCEEDINGS IS NOT VALID. ON THIS GROUND, THE ASSESSMENT IS LIABLE TO BE ANNULLED.' 26. IN LIGHT OF THE ABOVE JUDGMENTS WE NOW EXAMINE THE REASONS RECORDED BY THE AO ON A STANDALONE BASIS. FROM THE RECORDED REASONS WE NOTE THAT THE AO IN THE FIRST INSTANCE MADE REFERENCE TO THE SURVEY U/S 133A CONDUCTED IN THE CASE OF M/S ASHIKA GROUP. THE AO THEREAFTER STATES THAT IT WAS FOUND FROM THE EVIDENCE THAT THE ASSESSEE HAD RAISED SHARE CAPITAL OF RS.86,24,30,000/- DURING FY 2008-09 RELEVANT TO AY 2009-10. WE FIND THAT ALTHOUGH THE REFERENCE TO SURVEY OPERATIONS AGAINST ASHIKA GROUP IS MADE FOR JUSTIFYING REOPENING OF ASSESSMENT, NOWHERE ANY COGENT TANGIBLE OR REAL CONNECTION OF THE SAID SURVEY PROCEEDINGS HAS BEEN ESTABLISHED BY THE AO WITH FORMATION OF HIS BELIEF THAT ANY INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE FACT THAT THE ASSESSEE HAD RAISED SHARE CAPITAL OF RS.86.24 CRORES DURING FY 2008-09 WAS ALREADY KNOWN TO THE AO MUCH PRIOR TO SURVEY U/S 133A AGAINST ASHIKA GROUP AND THEREFORE WE FIND THAT THE SAID SURVEY PROCEEDINGS DID NOT HAVE ANY MANNER OF TANGIBLE CONNECTION WITH FORMATION OF AOS BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. WE THEREFORE FIND THAT THERE WAS NOT EVEN REMOTE CONNECTION BETWEEN THE FACT THAT A SURVEY U/S 133A WAS CONDUCTED IN THE CASE OF ASHIKA GROUP AND FORMATION OF AOS BELIEF THAT AS A CONSEQUENCE OF THE SAID SURVEY HE COULD FORM A REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX IN THE FORM OF SHARE SUBSCRIPTION AMOUNT HAD ESCAPED ASSESSMENT. 36 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 27. WE FURTHER NOTE THAT IN THE SECOND PARAGRAPH OF THE RECORDED REASONS, THE AO HAS MADE A REFERENCE TO THE LETTER OF DDIT(INV), UNIT 2(2), KOLKATA DATED 23.02.2016 AND STATES THAT WITH REFERENCE TO THE SAME HE HAD FOUND THAT THE ASSESSEE HAD ALLOTTED SHARES TO DIFFERENT COMPANIES WHICH WERE BOGUS / PAPER/ SHELL COMPANIES. IT IS FURTHER CLAIMED THAT THE SHARES WERE ALLOTTED ON 31.03.2009 TO ALL THE ALLOTEE COMPANIES AT A PREMIUM OF RS.190/SHARE. HENCE IT WAS OBSERVED THAT IT WAS NOTHING BUT ACCOMMODATION ENTRY IN THE FORM OF BOGUS SHARE CAPITAL ROUTED THROUGH PAPER / BOGUS / SHELL COMPANIES. WE HOWEVER FIND THAT MERELY WITH REFERENCE TO INFORMATION PASSED ON BY THE DDIT(INV), UNIT 2(2), KOLKATA, THE AO COULD NOT STRAIGHTAWAY REACH EVEN PRIMA FACIE CONCLUSION THAT ALL THE 94 ALLOTEE COMPANIES WERE PAPER / BOGUS / SHELL COMPANIES. IN FACT FROM THE PERUSAL OF THE DDITS LETTER, DISCUSSED IN THE FOREGOING, IT WAS APPARENT THAT THE DDIT HIMSELF HAD ADMITTED THAT THE SURVEY OPERATIONS AND SUBSEQUENT ENQUIRIES WERE FOCUSED ONLY ON THE ISSUE OF BOGUS LTCG IN THE CASE OF ASHIKA GROUP. HE HAD ALSO ADMITTED THAT NO ENQUIRY WITH REGARD TO CASH TRAIL OF SHARE CAPITAL ISSUED WAS CARRIED OUT BY HIM DUE TO PAUCITY OF TIME. IN THIS BACKGROUND, THE DDIT HAD MERELY RECOMMENDED THAT DETAILED ENQUIRY SHOULD BE CARRIED OUT BY THE AO. WE ALSO FIND THAT EVEN THE DDIT IN HIS LETTER HAD ALLEGED THAT OUT OF 97 ALLOTTEES, ONLY 34 BODIES CORPORATE WERE SUSPECTED TO BE PAPER / BOGUS / SHELL COMPANIES AND AS SUCH IT WAS NOT EVEN THE DDITS CASE THAT ALL SHARE SUBSCRIBERS WERE PAPER / BOGUS / SHELL COMPANIES. WE THEREFORE FIND THAT THERE WAS NO COGENT AND TANGIBLE NEXUS BETWEEN THE INFORMATION ALLEGEDLY PROVIDED BY THE DDIT(INV) AND THE FORMATION OF BELIEF BY THE AO THAT ASSESSEES INCOME TO THE EXTENT OF RS.86,24,30,000/- HAD ESCAPED ASSESSMENT. 28. IN THE WRITTEN SYNOPSIS AS WELL AS IN THE COURSE OF HEARING, THE LD. CIT, DR PLACED HEAVY RELIANCE ON THE JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT IN THE CASES OF ARADHNA ESTATE (P) LTD. V.S DCIT (SUPRA), PEASS INDUSTRIAL ENGINEERS(P) LTD. V.S DCIT (SUPRA) &ANKIT FINANCIAL SERVICES LTD. VS DCIT (SUPRA), TO SUPPORT THE ACTION OF THE AO. IT IS HOWEVER NOTED THAT IN THE DECIDED CASES THE AO HAD RECEIVED SPECIFIC INFORMATION FROM THE INVESTIGATION WING CONCERNING THE IDENTITIES AND COMPLETE DETAILS OF THE SHARE SUBSCRIBERS / ENTRY OPERATORS WHO HAD PROVIDED ACCOMMODATION ENTRIES IN FORM OF SHARE CAPITAL OR BOGUS 37 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 EXPENDITURE. THE AO ALSO HAD IN HIS POSSESSION THE SPECIFIC DETAILS OF ENTRY OPERATORS WHO HAD PROVIDED THESE ENTRIES TO THE ASSESSEE AND IT WAS FOUND THAT THE COMPLETE MODUS OPERANDI IN WHICH THE ASSESSEE OBTAINED SUCH ACCOMMODATION ENTRIES WAS RECEIVED IN THE INFORMATION FROM THE INVESTIGATION WING. IT WAS ALSO FOUND THAT THE AOS HAD INDEPENDENTLY APPLIED THEIR MIND TO THE INFORMATION RECEIVED AND THEREAFTER IDENTIFIED THE SPECIFIC ENTITIES WHO HAD PROVIDED ACCOMMODATION ENTRIES TO THE ASSESSEE. IT IS ON THESE FACTS THAT THE HONBLE HIGH COURT HELD THAT THERE WAS SUFFICIENT TANGIBLE MATERIAL AT THE COMMAND OF THE AO TO INITIATE REASSESSMENT AND THEREFORE UPHELD THE VALIDITY OF THE PROCEEDINGS. HOWEVER AS DISCUSSED IN THE FOREGOING, IN THE GIVEN FACTS OF THE PRESENT CASE THE DDIT(INV) HAD NOT PROVIDED THE IDENTITIES OF THE 34 OUT OF 97 SHARE SUBSCRIBERS WHO ACCORDING TO HIM WERE PAPER / BOGUS / SHELL COMPANIES BUT HAD MADE GENERAL ASSERTIONS IN HIS CORRESPONDENCE. IN FACT THE DDIT(INV) HIMSELF ADMITTED THAT HE HAD NOT CONDUCTED ANY DETAILED ENQUIRIES ON HIS OWN OR PREPARED ANY CASH/MONEY TRAIL BUT BASED ON EARLIER STATEMENTS OF UNNAMED ENTRY OPERATORS HE HAD SUSPECTED THE SHARE SUBSCRIPTION MONIES RECEIVED BY THE ASSESSEE TO BE UNEXPLAINED. WE THEREFORE FIND THAT THE FACTS INVOLVED IN THE JUDGMENTS OF THE HONBLE GUJARAT HIGH COURT WERE TOTALLY DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE AND HENCE NOT APPLICABLE. 29. FOR THE REASONS SET OUT ABOVE WE FIND THAT THE AO HAS SIMPLY GULPED THE INFORMATION FROM DIT(INV) TO FORM A CONCLUSION ABOUT ESCAPEMENT OF INCOME, WHICH ITSELF IS FLAWED AND CANNOT PASS THE TEST OF REASON TO BELIEVE AS LAID BY JUDICIAL PRECEDENTS AS DISCUSSED ABOVE. WE THEREFORE HOLD THAT SINCE THERE WAS NO RATIONALE NEXUS BETWEEN THE INFORMATION RECEIVED BY THE AO WITH FORMATION OF HIS BELIEF, THE INITIATION OF REASSESSMENT PROCEEDINGS STOOD VITIATED AND CONSEQUENTLY THEREFORE THE ORDER PASSED ALSO WAS BAD IN LAW. 30. WE FURTHER FIND THAT EVEN THOUGH THE ASSESSMENT WAS REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE RECORDED REASONS DID NOT MAKE OUT A CASE THAT THE ASSESSEE HAD SUPPRESSED ANY MATERIAL FACTS OR MISGUIDED THE AO DURING ORIGINAL ASSESSMENT COMPLETED U/S 143(3). IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE AO HAD REQUISITIONED THE DETAILS OF SHARE SUBSCRIBERS. THE ASSESSMENT U/S 143(3) WAS PASSED 38 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 ONLY AFTER THE AO HAD OBTAINED SUCH INFORMATION AND THEREAFTER HAD CONDUCTED HIS INDEPENDENT ENQUIRIES ON TEST CHECK BASIS UNDER SECTION 133(6) OF THE ACT IT IS ONLY AFTER THE DUE ENQUIRIES WERE MADE, THE ASSESSMENT U/S 143(3) WAS PASSED ACCEPTING THE IDENTITY, CREDITWORTHINESS OF THE SHARE SUBSCRIBERS AND THE GENUINENESS OF THE TRANSACTIONS. WE FIND THAT EXCEPT FOR RECEIPT OF INFORMATION FROM THE DDIT(INV), THE AO DID NOT HAVE ANY CREDIBLE AND INDEPENDENT INFORMATION TO CORROBORATE HIS BELIEF THAT ALL SHARE SUBSCRIBERS FROM WHOM SHARE CAPITAL WAS RECEIVED WERE PAPER / BOGUS / SHELL COMPANIES. IN FACT IT WAS NOT EVEN THE DDIT(INV)S CASE THAT ALL SHARE SUBSCRIBERS HAD INDULGED IN PROVIDING ACCOMMODATION ENTRIES. WE THEREFORE FIND THAT NO CASE WAS MADE OUT BY THE AO WHILE RECORDING THE REASONS THAT ALLEGED ESCAPEMENT OF INCOME WAS ON ACCOUNT OF ASSESSEES FAILURE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR AY 2009-10. 31. THE IMPORTANT ASPECT, WHICH THUS NEEDS TO BE EMPHASIZED, IS THAT THE PROVISO TO SECTION 147,WHICH IS APPLICABLE IN THIS CASE WAS NOT SATISFIED. ADMITTEDLY, IN THIS MATTER, THE REOPENING IS DONE AFTER EXPIRY OF FOUR YEARS AND AS PER LAW, IT CAN BE DONE ONLY IF THE AO IS ABLE TO DEMONSTRATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING THE MATERIAL FACTS. IN THIS REGARD, IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER THE FIRST PROVISO TO SECTION 147 OF THE ACT :- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: 32. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. AVADH TRANSFORMERS (P.) LTD. 51 TAXMANN.COM 369 UPHELD THE JUDGMENT OF THE ALLAHABAD HIGH COURT, WHEREIN IT WAS HELD BY THE HONBLE HIGH COURT THAT IN ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERIAL FACTS, THE REASSESSMENT PROCEEDINGS COULD NOT BE INITIATED AFTER EXPIRY OF FOUR YEARS. 39 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 33. THE WELL SETTLED LAW IS THAT NEW TANGIBLE INFORMATION WHICH THE AO GOT IN HIS POSSESSION MUST HAVE AN INEVITABLE LINK WITH ESCAPEMENT OF INCOME WHICH TRIGGERS THE AO TO FORM A BELIEF THAT THERE IS AN ESCAPEMENT OF INCOME, HOWEVER, WHEN THIS INFORMATION IS REGARDING AN ASSESSMENT YEAR WHICH IS FOUR YEARS BEFORE THEN AN ADDITIONAL REQUIREMENT OF LAW HAS TO BE ALSO SATISFIED, I.E., EVEN IF THERE IS AN ESCAPEMENT OF INCOME, STILL IT HAS TO BE SEEN WHETHER THE ASSESSEE HAS FURNISHED TRUE AND FULL DISCLOSURE OF THE MATERIAL FACTS BEFORE THE AO DURING THE ORIGINAL ASSESSMENT. IF THE ASSESSEE HAS MADE TRUE AND FULL DISCLOSURE OF MATERIAL FACTS REGARDING THE NEW INFORMATION WHICH IS NOW IN THE HAND OF THE AO, THEN THE AO CANNOT REOPEN THE ASSESSMENT. THE APEX COURT HAS TIME AND AGAIN UNDERSCORED THE NECESSITY OF FRESH TANGIBLE MATERIAL SHOULD BE SUCH ON THE BASIS OF WHICH THE AO COULD DEMONSTRATE WITH REASONABLE CERTAINTY THAT THE FACTS, MATERIAL AND INFORMATION DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT BY THE ASSESSEE DID NOT AMOUNT TO TRUE & FULL DISCLOSURE OF MATERIAL FACTS NECESSARY FOR ASSESSMENT. 34. AFTER PERUSING THE RECORDS SUBMITTED DURING ORIGINAL ASSESSMENT U/S143(3), WE FIND THAT THE SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT TRUE AND FULL DISCLOSURE WAS MADE BY IT DURING ORIGINAL ASSESSMENT U/S 143(3).WE NOTE THAT EVEN THE LD. DR DID NOT CONTROVERT ON THIS ASPECT NOR MADE ANY WRITTEN SUBMISSIONS COUNTERING THE LD. CIT(A)S FINDING IN THIS REGARD. IT IS BY NOW WELL SETTLED THAT THE CONCEPT OF THE ASSESSMENT IS GOVERNED BY THE TIME BARRING RULE AND THE ASSESSEE ACQUIRES A RIGHT AS TO THE FINALITY OF THE PROCEEDINGS. QUIETUS OF THE COMPLETED ASSESSMENT CAN BE DISTURBED ONLY WHEN THERE IS INFORMATION OR EVIDENCE REGARDING UNDISCLOSED INCOME OR AO HAD INFORMATION IN HIS POSSESSION SHOWING ESCAPEMENT OF INCOME. FOR THAT THE PARLIAMENT IN ITS WISDOM HAS EMPOWERED THE AO TO RE-OPEN THE ASSESSMENT OF EARLIER YEARS IN ACCORDANCE WITH SECTION 147 R.W.S 148 OF THE ACT. THE CONDITION PRECEDENT FOR RE-OPENING OF ASSESSMENT IS THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT . REASON TO BELIEVE POSTULATES FOUNDATION BASED ON INFORMATION AND BELIEF BASED ON REASON EVEN AFTER FOUNDATION BASED ON INFORMATION IS THERE, STILL THERE MUST BE REASON TO WARRANT HOLDING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF M/S. GANGA SARAN & 40 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 SONS PVT. LTD VS. ITO REPORTED IN 131 ITR 1 (SC) HELD THAT EXPRESSION REASON TO BELIEVE OCCURRING IN SECTION 147 IS STRONGER THAN THE EXPRESSION IS SATISFIED AND THIS LEGAL REQUIREMENT HAS TO BE MET IN THE REASONS RECORDED BEFORE RE-OPENING. HOWEVER, IT HAS TO BE KEPT IN MIND THAT IF AN ASSESSMENT (ORIGINAL ASSESSMENT) HAS BEEN MADE U/S. 143(3), THE PROVISO TO SEC. 147 MANDATES THAT NO ACTION SHALL BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR . THUS IN A CASE WHERE ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT AND ARE SOUGHT TO BE REOPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN ORDER TO ASSUME JURISDICTION U/S. 147 OF THE ACT, ONE OF THE CONDITION PRECEDENTS IS THAT RECORDED REASONS SHOULD POINT OUT THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. SO, ONCE THE AO COMES TO A FINDING OF FACT THAT THERE WAS A FAILURE OR THERE WAS AN IMPROPER DISCLOSURE ON THE PART OF THE ASSESSEE, HE HAS TO RECORD THE SAME BY INCORPORATING IT IN THE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THEN ONLY THE AO CAN ASSUME JURISDICTION OR ELSE HE CANNOT. SO WHILE DETERMINING THE VALIDITY OF THE ACTION OF AO WHEN HE INTENDS TO RE-OPEN A SCRUTINIZED ASSESSMENT AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS CONCERNED, ONE HAS TO KEEP IN MIND THE AFORESAID CONDITION PRECEDENT WHICH IS THE JURISDICTIONAL FACT, NECESSARY FOR THE SUCCESSFUL USURPATION OF JURISDICTION. FOR THAT WE NEED TO AGAIN TAKE A LOOK INTO THE REASONS RECORDED FOR RE-OPENING :- A SURVEY OPERATION U/S 133A WAS CONDUCTED IN THE CASE OF M/S ASHIKA GROUP. IT IS FOUND FROM THE EVIDENCE THAT M/S YADUKA FINANCIAL SERVICES LTD. (FOEMERLY KNOWN AS M/S PR VANIJYA PVT. LTD.) RAISED SHARE CAPITAL OF RS.86,30,000/- DURING THE FINANCIAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10. ON PERUSAL OF THE LETTER NUMBER DDIT(INV.)/U-2(2)/2015-15/KOL/3628 DATED 23.02.2016. IT IS FOUND THAT M/S YADUKA FINANCIAL SERVICES LTD. HAS ALLOTTED SHARES TO DIFFERENT COMPANIES ARE PAPE/BOGUS/SHELL COMPANIES. SHARES HAVE BEEN ALLOTTED ON 31.03.2009 TO ALL THE ALLOTTEE COMPANIES AT HIGH PREMIUM @ RS.190 PER SHARE. HENCE, IT IS OBSERVED THAT IT WAS NOTHING BUT ACCOMMODATION ENTRY IN THE FORM OF BOGUS SHARE CAPITAL ROUTED THROUGH THE PAPER/BOGUS/SHELL COMPANIES. 41 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 THUS IT IS DETECTED THAT M/S YADUKA FINANCIAL SERVICES LTD. HAS ROUTED THEIR UNACCOUNTED INCOME THROUGH THE PAPER/BOGUS/SHELL COMPANIES. HENCE, IT IS REASON TO BELIEVE THAT THE AMOUNT OF RS.86,24,30,000/- HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2009-10 WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT. 35. THE NOTICE PROPOSING THE AOS DESIRE TO REOPEN WAS ISSUED ON 22.03.2016, WHICH IS ADMITTEDLY AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A.Y. UNDER CONSIDERATION. IN SUCH A SCENARIO ONE OF THE ADDITIONAL CONDITION PRECEDENT WHICH ALSO IS REQUIRED TO BE SATISFIED IS THAT THE REASONS RECORDED SHOULD POINT OUT WHAT WAS THE MATERIAL FACTS THE ASSESSEE FAILED TO DISCLOSE FULLY & TRULY NECESSARY FOR ASSESSMENT. A BARE PERUSAL OF THE REASONS RECORDED WHICH IS SET OUT ABOVE DOES NOT REVEAL ANY STATEMENT TO THE EFFECT WHICH WOULD THROW LIGHT AS TO WHAT WAS FOUND BY THE AO WHICH CAN BE CONSTRUED TO BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY & TRULY THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT DURING ORIGINAL ASSESSMENT, WHICH RECORDING OF WHICH WAS SINE QUA NON AND HAD TO BE SPELT OUT BY THE AO IN THE REASONS RECORDED TO VALIDLY ASSUME JURISDICTION U/S. 147 OF THE ACT. IN THIS CASE, FROM A PLAIN READING OF REASONS RECORDED, WE NOTE THAT THE AO HAS NOT SATISFIED THIS JURISDICTIONAL FACT. THUS, USURPATION OF JURISDICTION U/S. 147 TO RE-OPEN THE ASSESSMENT COMPLETED U/S. 147, AFTER FOUR YEARS HAS TO BE STRUCK DOWN FOR NOT SATISFYING THE JURISDICTIONAL FACT WHICH IS A CONDITION PRECEDENT TO LEGALLY ASSUME JURISDICTION TO REOPEN ASSESSMENT AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE JUDICIAL PRINCIPLE AS SET OUT IN THE FOREGOING FINDS SUPPORT IN THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CALCUTTA DISCOUNT CO LTD (41 ITR 191)WHEREIN THE APEX COURT HAD HELD AS FOLLOWS: 'BOTH THE CONDITIONS, (I) THE INCOME-TAX OFFICER HAVING REASON TO BELIEVE THAT THERE HAS BEEN UNDER-ASSESSMENT AND (II) HIS HAVING REASON TO BELIEVE THAT SUCH UNDER- ASSESSMENT HAS RESULTED FROM NONDISCLOSURE OF MATERIAL FACTS, MUST CO-EXIST BEFORE THE INCOME-TAX OFFICER HAS JURISDICTION TO START PROCEEDINGS AFTER THE EXPIRY OF FOUR YEARS.' 42 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 36. USEFUL REFERENCE CAN ALSO BE MADE TO THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. VS. ACIT (SUPRA). THE RELEVANT OBSERVATIONS OF THE HONBLE COURT WERE AS FOLLOWS: 19. IN THE CASE IN HAND IT IS NOT IN DISPUTE THAT THE ASSESSMENT YEAR INVOLVED IS 1996- 97. THE LAST DATE OF THE SAID ASSESSMENT YEAR WAS 31ST MARCH, 1997 AND FROM THAT DATE IF FOUR YEARS ARE COUNTED, THE PERIOD OF FOUR YEARS EXPIRED ON 1ST MARCH, 2001. THE NOTICE ISSUED IS DATED 5TH NOVEMBER, 2002 AND RECEIVED BY THE ASSESSEE ON 7TH NOVEMBER, 2002. UNDER THESE CIRCUMSTANCES, THE NOTICE IS CLEARLY BEYOND THE PERIOD OF FOUR YEARS. 20. THE REASONS RECORDED BY THE ASSESSING OFFICER NOWHERE STATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEAR. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BASED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MANIFESTATION OF MIND OF THE ASSESSING OFFICER. 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 ASSESSING OFFICER, 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 DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER 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. 21. HAVING RECORDED OUR FINDING THAT THE IMPUGNED NOTICE ITSELF IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR 1996-97 AND DOES NOT COMPLY WITH THE REQUIREMENTS OF PROVISO TO SECTION 147 OF THE ACT, THE ASSESSING OFFICER HAD NO JURISDICTION TO REOPEN THE ASSESSMENT PROCEEDINGS WHICH WERE CONCLUDED ON THE BASIS OF ASSESSMENT UNDER SECTION 43 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 143(3) OF THE ACT. ON THIS SHORT COUNT ALONE THE IMPUGNED NOTICE IS LIABLE TO BE QUASHED AND SET ASIDE. 37. THIS JUDGMENT OF THE HONBLE BOMBAY HIGH COURT WAS FOLLOWED WITH APPROVAL BY THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF AMIYA SALES & INDUSTRIES LTD VS CIT (SUPRA). IN THE SAID JUDGMENT, THE HONBLE HIGH COURT HELD AS UNDER: IN A CASE WHERE ASSESSMENT IS MADE UNDER SECTION 143(3) AND IS SOUGHT TO BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN ORDER TO ASSUME JURISDICTION UNDER SECTION 147, ONE OF THE CONDITIONS PRECEDENT IS THAT THE RECORDED REASONS SHOULD POINT OUT THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT. ONCE THE ASSESSING OFFICER COMES TO A FINDING THAT THERE WAS FAILURE OR THERE WAS NO IMPROPER DISCLOSURE ON THE PART OF THE ASSESSEE, HE FORMS THE BELIEF WHICH IS RECORDED AND ASSUMES JURISDICTION UNDER SECTION 147. IN THE INSTANT CASE, THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS WERE MADE UNDER SECTION 143(3). THERE WAS NO DISPUTE THAT THE NOTICES UNDER SECTION 147 WERE ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS. THUS, IN ORDER TO INITIATE ACTION UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEARS, THERE SHOULD HAVE BEEN EITHER FAILURE OR NON-DISCLOSURE ON THE PART OF THE ASSESSEE. FROM THE RECORDED REASONS IT WAS FOUND THAT THE ASSESSING OFFICER WAS SEEKING TO REOPEN THE ASSESSMENTS SINCE THERE WAS AN INCORRECT INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER AND FOR THAT THE ASSESSEE GOT THE BENEFIT OF LOSS FOR THE ASSESSMENT YEAR 1992-93 WHICH WAS CARRIED FORWARD TO THE SUBSEQUENT YEARS. IN THE INSTANT CASE, IT HAD NOWHERE BEEN RECORDED THAT THERE WAS FAILURE OR IMPROPER DISCLOSURE ON THE PART OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENTS AS THERE WAS INCORRECT INTERPRETATION OF ACCOUNT BY THE ASSESSING OFFICER. THE RECORDED REASONS DID NOT SPEAK OF ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE. THUS, ADMITTEDLY THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE ASSESSMENT. INCORRECT INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER COULD NOT CONFER JURISDICTION ON THE ASSESSING OFFICER TO ISSUE NOTICES UNDER SECTION 148 FOR REOPENING THE ASSESSMENTS AS SOUGHT TO BE MADE IN THE INSTANT CASE. IF THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE FULLY AND TRULY THE MATERIAL FACTS, WRONG INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER LEADING TO EXCESSIVE RELIEF CANNOT BE A GROUND FOR REOPENING AND THUS CANNOT CONFER JURISDICTION ON THE ASSESSING OFFICER. EXPLANATION 2 CANNOT BE READ IN ISOLATION OF SECTION 147. IT SHOULD BE READ IN CONJUNCTION WITH THE PROVISIONS IN THE SECTION. THE WORDS FOR THE PURPOSE OF THIS SECTION APPEARING IN 44 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 EXPLANATION 2 SHOW THAT THE CONDITIONS PRECEDENT FOR REOPENING ASSESSMENT AS LAID DOWN IN SECTION 147 HAVE TO BE COMPLIED WITH. IN INSTANT CASE, SINCE THE CONDITIONS FOR ASSUMING OF JURISDICTION UNDER SECTION 147 WERE NOT FULFILLED, THE NOTICES UNDER SECTION 148 WERE UNCALLED FOR AND WARRANTED INTERFERENCE BY APPEARING ORDERS. IF AN AUTHORITY ASSUMES JURISDICTION ILLEGALLY WHICH IS NOT VESTED UNDER THE LAW IT WOULD BE FIT AND PROPER FOR THE WRIT COURT TO INTERVENE. IN THE INSTANT CASE, AS THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS IN THE RETURN, AS THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENTS DUE TO WRONG INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER WHICH WAS NOT PERMISSIBLE UNDER SECTION 147 TO ASSUME JURISDICTION, THE ASSESSEE WAS JUSTIFIED IN INVOKING THE WRIT PETITION. THUS, THE INSTANT PETITION WAS TO BE ALLOWED AND, CONSEQUENTLY IMPUGNED NOTICES UNDER SECTION 147/148 WERE TO BE QUASHED. 38. IN THE CASE OF ASSAM CO. LTD VS UNION OF INDIA (150 TAXMAN 571), THE HONBLE GAUHATI HIGH COURT HAS HELD AS UNDER: 43. AS NOTICED HEREINABOVE, EXCEPT IN W.P. (C) NO. 1163 AND W.P. (C) NO. 1258 OF 2003, THE IMPUGNED NOTICES HAD BEEN ISSUED BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE ATTEMPT MADE ON THE PART OF THE RESPONDENTS TO CONTEND THAT THE OMISSION ON THE PART OF THE ASSESSEES TO MENTION IN THEIR RETURN THAT THE CESS ON GREEN TEA LEAVES WAS PAID UNDER THE 1990 ACT AMOUNTS TO FAILURE TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENTS HAS TO BE MENTIONED ONLY TO BE REJECTED. THERE IS NO DISPUTE THAT AT THE TIME OF ASSESSMENT, THE ASSESSEES WERE PERMITTED DEDUCTION ON THE ABOVE COUNT AND THE COMPOSITE INCOME UNDER RULE 8(1) WAS ACCORDINGLY COMPUTED. AT NO POINT OF TIME WAS ANY RESERVATION EXPRESSED BY THE RESPONDENT AUTHORITIES AS TO THE NATURE OF THE PAYMENT OR THE ENTITLEMENT OF THE ASSESSEES TO BE EXTENDED THE BENEFIT OF DEDUCTION THEREOF ON THE BASIS OF THE DISCLOSURE MADE IN THE RETURNS. THE RESPONDENT AUTHORITIES THUS HAVE TO BE FIRMLY HELD ONLY TO THE REASONS AND/ OR THE GROUNDS NARRATED IN THE IMPUGNED NOTICES. NOT ONLY IS THIS STAND ABSENT IN THE IMPUGNED NOTICES, THE SAME DO NOT INDICATE AS WELL AS TO WHAT MATERIAL FACTS HAD NOT BEEN FULLY AND TRULY DISCLOSED BY THE ASSESSEES. 44. THE APEX COURT WHILE DWELLING ON THE SCOPE OF THE REQUIREMENT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AS COMPREHENDED IN THE PROVISO TO SECTION 147 HELD IN PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC), THAT THE DUTY OF THE ASSESSEE IN ANY CASE DOES NOT EXTEND BEYOND MAKING A TRUE AND FULL DISCLOSURE OF PRIMARY FACTS AND IT IS NOT ITS RESPONSIBILITY TO ADVISE THE ASSESSING OFFICER WITH REGARD TO THE INFERENCE WHICH HE SHOULD DRAW THEREFROM. IF SUCH OFFICER DRAWS ANY INFERENCE WHICH APPEARS TO BE SUBSEQUENTLY 45 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 ERRONEOUS, A MERE CHANGE OF OPINION WOULD NOT JUSTIFY INITIATION OF ACTION FOR REOPENING THE ASSESSMENT, IT HELD. 45. THE SAME VIEW WAS EXPRESSED IN ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. V. CIT [1997] 224 ITR 5601 (SC). THE BOMBAY HIGH COURT ON THE SAME ISSUE IN HINDUSTAN LEVER LTD. V. R.B. WADKAR, ASSTT. CIT (NO. 1) [2004] 268 ITR 3322, HELD THAT THE REASONS IN SUPPORT OF THE PROPOSED ACTION UNDER SECTION 147 OF THE ACT MUST NECESSARILY REVEAL ALL FACTS OR MATERIALS THAT HAD NOT BEEN DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT SO AS TO ESTABLISH THE LINK BETWEEN THE REASONS AND EVIDENCE. IT WAS FURTHER HELD THAT THE REASONS SO RECORDED CANNOT BE SUPPLEMENTED BY ANY AFFIDAVIT OR ORAL SUBMISSIONS AS OTHERWISE THE REASONS WHICH WERE LACKING IN THE MATERIAL PARTICULARS WOULD RECEIVE SUPPLEMENTATION BY THE TIME THOSE ARE SUBJECTED TO COURT S SCRUTINY. 46. THE NOTICES ADMITTEDLY DO NOT EXHIBIT AS TO WHAT MATERIAL FACTS WERE NOT TRULY AND FULLY DISCLOSED BY THE ASSESSEES NECESSARY FOR ASSESSMENT FOR THE ASSESSMENT YEARS IN QUESTION. THE RETURNS ADMITTEDLY MENTION ABOUT THE CESS ON GREEN LEAVES PAID AND DEDUCTIONS AS PERMISSIBLE WERE ALLOWED. IN VIEW OF THE EXPOSITION OF LAW ON THE POINT MENTIONED HEREINABOVE, THE INESCAPABLE CONCLUSION IS THAT THE IMPUGNED NOTICES IN W.P. (C) NO. 1163 OF 2003 AND W.P. (C) NO. 1258 OF 2003 ARE ALSO NOT SUSTAINABLE BEING BARRED BY TIME. 39. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TAO PUBLISHING PVT LTD VS DCIT (370 ITR 115) HAS HELD THAT WHERE THE REASONS SUPPLIED BY THE AO DO NOT DISCLOSE THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO PROVIDE ALL THE MATERIAL FACTS, THEN IT WILL HAVE TO BE PRESUMED THAT THE ASSESSEE DID NOT FAIL TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS AND HENCE THE JURISDICTIONAL REQUIREMENT SET OUT IN FIRST PROVISO TO SECTION 147 FOR INITIATING REASSESSMENT, AFTER THE EXPIRY OF PERIOD OF FOUR YEARS, SHALL BE HELD TO BE NOT FULFILLED. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT IS EXTRACTED BELOW: 9. THE LEARNED COUNSEL FOR THE PETITIONER RIGHTLY POINTED OUT THAT THE GROUND THAT THE PETITIONER HAD FAILED TO DISCLOSE ALL THE RELEVANT MATERIAL WAS NOT INCORPORATED IN THE REASONS SUPPLIED TO THE PETITIONER. THE OBJECT OF FURNISHING REASONS FOR REOPENING, IS TO PUT THE ASSESSEE TO NOTICE AS TO WHY THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. APART FROM THIS POSITION, IN THE PRESENT CASE THE REASONS SUPPLIED DO NOT STATE THAT THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER TO PROVIDE MATERIAL PARTICULARS. THAT AN ASSESSEE HAS NOT MADE A FULL AND TRUE DISCLOSURE OF FACTS, IS ONE OF THE JURISDICTIONAL REQUIREMENT FOR PROCEEDING WITH REASSESSMENT AFTER A PERIOD OF FOUR YEARS. IN THE CASE OF HINDUSTAN LEVERS V. R.B. WADKAR, [2004] 268 ITR 332/137 TAXMAN 479 , THIS COURT HAD HELD THAT THE NOTICES FOR REASSESSMENT WOULD STAND OR FALL ON THE BASIS OF REASONS AND THE REASONS 46 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 CANNOT BE IMPROVED UPON, SUBSTITUTED OR SUPPLEMENTED. THIS VIEW HAS BEEN FOLLOWED BY THIS COURT IN SEVERAL OTHER CASES. 10. AS STATED ABOVE, THE REASONS SUPPLIED TO THE PETITIONER DO NOT DISCLOSE THAT THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER TO PROVIDE ALL THE MATERIAL FACTS. THAT BEING THE POSITION, THIS GROUND COULD NOT HAVE BEEN TAKEN UP AGAINST THE PETITIONER AT THE TIME OF DISPOSING OF THE OBJECTIONS. ONCE THIS WAS NOT THE BASIS FOR ISSUANCE OF NOTICE FOR REASSESSMENT, IT CANNOT BE HELD AGAINST THE PETITIONER THAT THE PETITIONER HAD FAILED TO MAKE A TRUE AND FULL DISCLOSURE. IT WILL HAVE TO BE HELD THAT THE PETITIONER DID NOT FAIL TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS. THE JURISDICTIONAL REQUIREMENT FOR CARRYING OUT THE REASSESSMENT, AFTER THE EXPIRY OF PERIOD OF FOUR YEARS, IS NOT FULFILLED IN THE PRESENT CASE. 40. IDENTICAL VIEW HAS ALSO BEEN EXPRESSED BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NIKHIL K KOTAK VS MAHESH KUMAR (319 ITR 445). THE RELEVANT REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT AND THE OBSERVATIONS MADE BY THE HONBLE HIGH COURTARE REPRODUCED BELOW: 5. SECTION 147 OF THE ACT PERMITS REOPENING OF A COMPLETED ASSESSMENT IN A CASE WHERE INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT. HOWEVER, PROVISO UNDER THE SAID SECTION CARVES OUT AN EXCEPTION AND SHIFTS THE BURDEN ON REVENUE IN A CASE WHERE A PERIOD OF FOUR YEARS HAS ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE PROVISO STIPULATES THREE CONDITIONS. THE REVENUE IS REQUIRED TO SHOW FROM THE RECORD AND THE FACTS OF THE CASE THAT ANY ONE OF THE THREE CONDITIONS STANDS SATISFIED BEFORE THE ASSESSING OFFICER CAN ASSUME JURISDICTION TO ISSUE NOTICE FOR REASSESSMENT. 6. IN THE PRESENT CASE, ADMITTEDLY, THE CONDITIONS REGARDING NON-FILING OF RETURN AND THE CONDITION REGARDING NON-RESPONDING TO STATUTORY NOTICE ARE NOT APPLICABLE. THE THIRD CONDITION REQUIRES THE REVENUE TO ESTABLISH THAT THERE WAS ANY OMISSION OR FAILURE ON THE PART OF THE PETITIONER-ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT OF THE ASSESSMENT YEAR IN QUESTION. THE REASONS RECORDED READ AS UNDER : 'REASONS RECORDED FOR ISSUE OF NOTICE UNDER SECTION 148 REG. : SHRI NIKHIL K. KOTAK, AHMEDABAD. ASSESSMENT YEAR 1992-93 THE ASSESSEE HAD CLAIMED EXEMPTION UNDER SECTION 54 OF RS. 11,36,477, I.E., L/3RD SHARE OF RS. 34,09,430 FOR INVESTMENT IN NEW HOUSE AGAINST THE INCOME FROM LONG-TERM CAPITAL GAIN. THE DETAILS OF INVESTMENT WAS AS UNDER : RS. 47 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 (1) PURCHASE COST OF NEW HOUSE 23,62,500 (2) COST OF IMPROVEMENT ON NEW ASSET 10,46,930 34,09,430 THE EXEMPTION UNDER SECTION 54 WAS ACTUALLY ALLOWABLE ON THE COST OF PURCHASE OF NEW ASSET (I.E., RESIDENTIAL HOUSE) OR COST OF CONSTRUCTION OF NEW ASSET ONLY. THUS, THE COST OF IMPROVEMENT OF THE PROPERTY INCURRED LATER ON WILL NOT BE QUALIFIED FOR EXEMPTION UNDER SECTION 54. THE INCORRECT EXEMPTION GRANTED RESULTED IN UNDERASSESSMENT OF INCOME OF RS. 3,48,977.' 7. ON A PLAIN READING OF THE AFORESAID REASONS RECORDED BY THE RESPONDENT-AUTHORITY IT BECOMES CLEAR THAT IT IS NOT EVEN THE CASE OF THE REVENUE THAT THERE WAS ANY OMISSION OR FAILURE ON PART OF THE PETITIONER ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT OF THE ASSESSMENT YEAR IN QUESTION. IN FACT WHEN ONE GOES THROUGH ANNEXURE B, WHICH IS THE STATEMENT SHOWING COMPUTATION OF TOTAL INCOME, IT BECOMES CLEAR THAT ALL RELEVANT DETAILS FOR COMPUTING LONG-TERM CAPITAL GAINS HAVE BEEN SHOWN BY THE PETITIONER-ASSESSEE. NOT ONLY THAT, DETAILS OF EXEMPTION CLAIMED UNDER SECTION 54 OF THE ACT IN RESPECT OF INVESTMENT IN THE NEW HOUSE HAVE ALSO BEEN SHOWN ON A SEPARATE SHEET. IN FACT THE FIGURES RECORDED BY THE ASSESSING OFFICER, IN THE REASONS REPRODUCED HEREINABOVE, APPEAR ONLY FROM THE DETAILS OF EXEMPTION PLACED ON RECORD BY THE PETITIONER-ASSESSEE. 41. AS FAR AS THE RELIANCE PLACED BY THE LD. CIT, DR ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF GIRILAL & CO. V ITO (SUPRA) AND HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT-KOL-II V EUREKA STOCK AND SHARE STOCK & SHARE BROKING SERVICES LTD (SUPRA) IS CONCERNED, WE FIND IT TO BE FACTUALLY MISPLACED. THE FACTS INVOLVED IN THESE CASES ARE COMPLETELY DISTINGUISHABLE IN AS MUCH AS IT WAS FOUND IN THESE JUDGMENTS THAT THE ASSESSEE HAD DELIBERATELY MISREPRESENTED FACTS IN THE COURSE OF ORIGINAL ASSESSMENT AND HENCE IT WAS HELD THAT THE CONDITION PRECEDENT IN PROVISO TO SECTION 147 WAS SATISFIED. HOWEVER AS NOTED IN THE FOREGOING, IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAD MISREPRESENTED OR CONCEALED ANY MATERIAL FACTS IN THE COURSE OF ASSESSMENT. ACCORDINGLY THE JUDGMENTS CITED BY THE REVENUE ARE FOUND TO BE NOT APPLICABLE IN THE GIVEN FACTS OF THE PRESENT CASE. 42. HENCE APPLYING THE RATIO LAID DOWN IN THE ABOVE CITED DECISIONS, WE HOLD THAT IN THE PRESENT CASE THE RECORDED REASONS NOWHERE MADE OUT ANY CASE THAT THE ALLEGED ESCAPEMENT 48 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 WAS RESULTED AS A CONSEQUENCE OF THE ASSESSEES OMISSION OR FAILURE TO DISCLOSE TRULY & FULLY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IN FACT WE NOTE THAT IN THE REASONS RECORDED, THE AO HAD NOT SPOKEN ANY FACTS WHICH WOULD THROW LIGHT THAT THE DISCLOSED FACTS OF SHARE SUBSCRIPTION MONIES RECEIVED DURING THE YEAR COULD BE TAKEN AS FALSE OR UNTRUE OR FROM WHICH IT COULD BE INFERRED THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT OF THE ASSESSEE. WE THEREFORE DO FIND ANY REASONS TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) HOLDING THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WAS BAD IN LAW AS IT DID NOT SATISFY THE CONDITIONS PRECEDENT IN PROVISO TO SECTION 147 OF THE ACT. 43. NOW LET US EXAMINE THE SANCTION GRANTED BY THE COMMISSIONER OF INCOME-TAX U/S 151 OF THE ACT WAS IN A MECHANICAL MANNER OR UPON DUE APPLICATION OF MIND. 44. IN THE PRESENT CASE THE AO RECORDED THE REASONS TO REOPEN ON 08.03.2016 AND THE PR. CIT GRANTED SANCTION ON 17.03.2016.IN THE PRESENT CASE THE ASSESSMENT WAS REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND THEREFORE IN TERMS OF SECTION 151 IT WAS INCUMBENT ON THE JURISDICTIONAL COMMISSIONER TO ACCORD HIS APPROVAL BEFORE THE NOTICE U/S 148 COULD BE ISSUED. THE RELEVANT SECTION 151(1) PROVIDES THAT NO NOTICE U/S 148 SHALL BE ISSUED BY AN AO AFTER THE EXPIRY OF FOUR YEARS UNLESS THE COMMISSIONER IS SATISFIED, AND ON THE REASONS RECORDED BY THE AO THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE. THE READING OF THE RELEVANT PROVISION INDICATES THAT THE SATISFACTION AS CONTEMPLATED BY THE LEGISLATURE IS NOT AN EMPTY FORMALITY TO BE OBSERVED MECHANICALLY. THE OBJECTIVE SATISFACTION OF THE CIT WITH REGARD TO FITNESS OF THE CASE FOR ISSUE OF THE NOTICE WITH REFERENCE TO REASONS RECORDED BY THE AO MUST BE APPARENT. IT IS THEREFORE ESSENTIAL THAT THE MIND OF THE CIT WHILE ACCORDING HIS SANCTION SHOULD REFLECT IN THE SATISFACTION RECORDED. THE SATISFACTION AS CONTEMPLATED BY SECTION 151(1) MUST BE BACKED BY THE REASONS WHICH THE CIT HAS RECORDED JUSTIFYING HIS SATISFACTION. WE FIND THAT THE LEGISLATURE HAS PROVIDED THIS SAFEGUARD TO KEEP A CHECK ON THE AO NOT TO REOPEN CASUALLY AN ASSESSMENT WHICH HAS BEEN COMPLETED U/S 143(3) AFTER 4 YEARS. 49 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 45. WE FIND THAT ON THE PROFORMA WHICH IS AVAILABLE AT PAGES 10&11 OF THE PAPER BOOK, THE COMMISSIONER HAS SIMPLY WRITTEN YES I AGREE WHICH DOES NOT IN ANY MANNER SHED ANY LIGHT AS TO WHETHER THERE WAS ANY APPLICATION OF MIND AT ALL BY THE PR.CIT, WHO WAS DUTY BOUND TO HAVE LOOKED IN TO CAREFULLY THE REASONS RECORDED BY THE AO AND SEEN THE HISTORY BEHIND THE ASSESSMENT WHICH WAS PROPOSED TO BE REOPENED BY THE AO. WHEN A SUPERIOR AUTHORITY IS GIVEN POWER BY THE LEGISLATURE, TO GRANT SANCTION TO DO AN ACT BY AN AUTHORITY BELOW HIM, THEN THAT POWER NEEDS TO BE EXERCISED WITH DUE CARE AND CIRCUMSPECTION AND AFTER DUE APPLICATION OF MIND. IN THE COURSE OF HEARING THE LD. AR HAD BROUGHT TO OUR ATTENTION THAT THE PROFORMA IN WHICH THE AO HAD SOUGHT SANCTION OF THE PR.CIT HAD MENTIONED THAT THE REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT WERE AS PER ANNEXURE. THE APPROVAL OF THE PR.CIT WAS SOUGHT IN RESPECT OF THESE REASONS WHICH WERE PROVIDED TO THE PR.CIT BY WAY OF ANNEXURE. HE DREW OUR ATTENTION TO THE HAND WRITTEN REMARK WHERE IS THE ANNEXURE WHICH WAS RECORDED BY THE PR.CIT. WITH REFERENCE TO THIS REMARK, THE LD. AR SUBMITTED THAT IT WAS APPARENT THAT EVEN THE REASONS WHICH WERE GERMANE TO THE FORMATION OF BELIEF THAT INCOME HAD ESCAPED ASSESSMENT WAS NOT FURNISHED TO THE PR. CIT ALONG WITH THE PROFORMA AND THEREFORE IT WAS QUITE APPARENT THAT THE APPROVAL OF THE PR.CIT WAS OBTAINED MECHANICALLY EVEN WITHOUT THERE BEING RELEVANT REASONS MADE AVAILABLE TO THE SUPERVISING AUTHORITY. IN OUR CONSIDERED VIEW SUCH MECHANICAL MANNER OF GIVING SANCTION, LIKE IN THIS CASE, CANNOT BE APPROVED OF. IN THIS REGARD THE REFERENCE CAN BE MADE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE IN CHHUGAMAL RAJPAL VS. S.P. CHALIHA & ORS. 79 ITR 603 (SC) AND HONBLE HIGH COURT OF MADHYA PRADESH IN ARJUN SINGH VS ASSTT. DIRECTOR OF INCOME TAX (M.P.) REPORTED IN (2000) 246 ITR 363 (MP). 46. WE ALSO RELY ON THE JUDGMENT OF THE HONBLE MADHYA PRADESH HIGH COURT IN THE CASE OF CIT VS S. GOYANKA LIME & CHEMICALS LTD[2015] 231 TAXMAN 703. THE RELEVANT EXTRACTS OF THE JUDGMENT IS AS FOLLOWS: 3. A SEARCH WAS CONDUCTED AT THE RESIDENTIAL AND BUSINESS PREMISES OF THE ASSESSEE ON 12.12.2002. THEREAFTER, NOTICE FOR BLOCK ASSESSMENT UNDER SECTION 158-BC WAS ISSUED FOR THE BLOCK PERIOD 1.4.1998 TO 12.12.2002 AND FOR EACH OF THE ASSESSMENT YEARS, RETURNS WERE FILED 50 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 WHICH WERE PROCESSED UNDER SECTION 143(1). HOWEVER, NOTICE UNDER SECTION 148 WAS ISSUED BY THE ASSESSING OFFICER ON 31.12.2004, ON THE BASIS OF CERTAIN REASONS RECORDED. THE ASSESSEE OBJECTED TO THE SAME BEFORE THE ASSESSING OFFICER, THIS WAS REJECTED BY THE ASSESSING OFFICER AND HE COMPLETED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 147, OF THE ACT. APPEALS WERE FILED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE APPELLATE AUTHORITY FOUND THAT THE REASON RECORDED BY THE JOINT COMMISSIONER OF INCOME TAX, FOR ACCORDING SANCTION, IT ONLY STATED THAT 'I AM SATISFIED'. AS THIS ACTION FOR SANCTION WAS WITHOUT APPLICATION OF MIND AND AS THIS WAS DONE IN A MECHANICAL MANNER, FOLLOWING THE LAW LAID DOWN IN THE CASE OF ARJUN SINGH V. ASSTT. DIT [2000] 246 ITR 363 (MP) , THE COMMISSIONER QUASHED THE NOTICE UNDER SECTION 148, OF THE ACT, AND THE SAME HAVING BEEN UPHELD BY THE APPELLATE TRIBUNAL, THESE APPEALS HAVE BEEN FILED. 4. SHRI SANJAY LAL, LEARNED COUNSEL FOR THE APPELLANTS, INVITED OUT ATTENTION TO THE EXPLANATION ADDED TO SECTION 151, BY THE FINANCE ACT, 2008 RETROSPECTIVELY WITH EFFECT FROM 1.10.1998; AND, THE CIRCULAR ISSUED BY THE DEPARTMENT IN THIS REGARD ON 7.3.2009, TO SAY THAT THE JOINT COMMISSIONER IS ONLY REQUIRED TO BE SATISFIED ON THE REASONS RECORDED BY THE ASSESSING OFFICER AND THERE IS NO FURTHER REQUIREMENT FOR HIM TO ISSUE NOTICE HIMSELF. 5. PLACING RELIANCE ON THE AFORESAID AND CERTAIN JUDGMENT OF THE GUJARAT HIGH COURT, IN THE CASE OF LALITA ASHWIN JAIN V. ITO [2014] 88 CCH 273 (GUJ.); AND, THE SUPREME COURT IN THE CASE OF CIT (CENTRAL) V. VATIKA TOWNSHIP (P) LTD.2014 ITL 833 (SC), SHRI SANJAY LAL - LEARNED COUNSEL FOR THE APPELLANTS, PRAYS FOR INTERFERENCE INTO THE MATTER. 6. HOWEVER, SHRI L.L. SHARMA - LEARNED COUNSEL FOR THE RESPONDENTS, PLACED RELIANCE ON ANOTHER JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF CARGO CLEARING AGENCY V. JT. CIT [2008] 307 ITR 1 (GUJ.) , TO SAY THAT FOR BLOCK ASSESSMENT AND RE-ASSESSMENT, THERE IS NO JURISDICTION TO REOPEN THE BLOCK ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 AND, THEREFORE, ON THE BASIS OF THIS JUDGMENT LEARNED COUNSEL STATES THAT THE ENTIRE PROCEDURE INITIATED FOR ISSUING NOTICE UNDER SECTION 148 IS UNSUSTAINABLE. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE FIND THAT WHILE ACCORDING SANCTION, THE JOINT COMMISSIONER, INCOME TAX HAS ONLY RECORDED SO 'YES, I AM SATISFIED'. IN THE CASE OF ARJUN SINGH (SUPRA), THE SAME QUESTION HAS BEEN CONSIDERED BY A COORDINATE BENCH OF THIS COURT AND THE FOLLOWING PRINCIPLES ARE LAID DOWN: 'THE COMMISSIONER ACTED, OF COURSE, MECHANICALLY IN ORDER TO DISCHARGE HIS STATUTORY OBLIGATION PROPERLY IN THE MATTER OF RECORDING SANCTION AS HE MERELY WROTE ON THE FORMAT 'YES, I AM SATISFIED' WHICH INDICATES AS IF HE WAS TO SIGN ONLY ON THE DOTTED LINE. EVEN OTHERWISE ALSO, THE EXERCISE IS SHOWN TO HAVE BEEN PERFORMED IN LESS THAN 24 HOURS OF TIME WHICH ALSO GOES TO INDICATE THAT THE COMMISSIONER DID NOT APPLY HIS MIND AT ALL WHILE GRANTING SANCTION. THE SATISFACTION HAS TO BE WITH OBJECTIVITY ON OBJECTIVE MATERIAL.' 51 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 8. IF THE CASE IN HAND IS ANALYSED ON THE BASIS OF THE AFORESAID PRINCIPLE, THE MECHANICAL WAY OF RECORDING SATISFACTION BY THE JOINT COMMISSIONER, WHICH ACCORDS SANCTION FOR ISSUING NOTICE UNDER SECTION 148, IS CLEARLY UNSUSTAINABLE AND WE FIND THAT ON SUCH CONSIDERATION BOTH THE APPELLATE AUTHORITIES HAVE INTERFERED INTO THE MATTER. IN DOING SO, NO ERROR HAS BEEN COMMITTED WARRANTING RECONSIDERATION. 9. AS FAR AS EXPLANATION TO SECTION 151, BROUGHT INTO FORCE BY FINANCE ACT, 2008 IS CONCERNED, THE SAME ONLY PERTAINS TO ISSUANCE OF NOTICE AND NOT WITH REGARD TO THE MANNER OF RECORDING SATISFACTION. THAT BEING SO, THE SAID AMENDED PROVISION DOES NOT HELP THE REVENUE. 10. IN VIEW OF THE CONCURRENT FINDINGS RECORDED BY THE LEARNED APPELLATE AUTHORITIES AND THE LAW LAID DOWN IN THE CASE OF ARJUN SINGH (SUPRA), WE SEE NO QUESTION OF LAW INVOLVED IN THE MATTER, WARRANTING RECONSIDERATION. 11. THE APPEALS ARE, THEREFORE, DISMISSED. 47. IT IS NOTED THAT THE SLP PREFERRED BY THE REVENUE AGAINST THE ABOVE JUDGMENT HAS SINCE BEEN DISMISSED BY THE HONBLE SUPREME COURT WHICH IS REPORTED IN 237 TAXMAN 378. 48. WE MAY GAINFULLY ALSO REFER TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF MY CAR (PUNE) PVT LTD VS ITO (263 TAXMAN 626). IN THE INSTANT CASE THE ASSESSMENT OF THE ASSESSEE WAS REOPENED ON THE GROUND THAT INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE WAS THE BENEFICIARY OF ACCOMMODATION ENTRIES FROM ONE HV GROUP WHICH WAS SEARCHED BY THEM. THE ASSESSEE CHALLENGED THE REOPENING OF ASSESSMENT BEFORE THE HONBLE BOMBAY HIGH COURT ON THE GROUND THAT THE SANCTION FOR REOPENING WAS GRANTED BY THE COMMISSIONER MECHANICALLY AND ON NON-APPLICATION OF MIND. THE HONBLE COURT HELD THAT THE SANCTION WAS GRANTED IN AN IMPROPER MANNER AND THEREFORE QUASHED THE NOTICE ISSUED BY THE AO U/S 148 OF THE ACT. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT ARE REPRODUCED HEREUNDER: IT IS A SETTLED POSITION IN LAW THAT GRANT OF THE SANCTION BY THE COMMISSIONER OF INCOME TAX UNDER SECTION 151 OF THE ACT, IS NOT A MECHANICAL ACT ON HIS PART BUT IT REQUIRES DUE APPLICATION OF MIND TO THE REASONS RECORDED BEFORE GRANTING THE SANCTION. THIS HAS BEEN SO PROVIDED AS TO SAFEGUARD AGAINST ISSUE OF REOPENING NOTICE (WHICH SEEK TO DISTURB THE SETTLED POSITION) TO ENSURE THAT ASSESSEE IS NOT TROUBLED WITH REOPENING ISSUES WITHOUT SATISFACTORY 52 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 REASONS. THEREFORE, IT MUST PASS MUSTER OF THE SUPERIOR OFFICER IN THE CONTEXT OF SECTIONS 147 AND 148 OF THE ACT, BEFORE IT IS ISSUED TO THE PARTY. 9. IN THE ABOVE VIEW, AS THE SANCTION ORDER INDICATES NON-APPLICATION OF MIND TO THE REASONS RECORDED BY THE ASSESSING OFFICER, THE IMPUGNED NOTICE IS BAD IN LAW. THUS, QUASHED AND SET ASIDE. 49. WE NOTE THAT THE COORDINATE BENCH OF THIS TRIBUNAL ON SIMILAR FACTS & CIRCUMSTANCES IN THE CASE OF HIRACHAND KANUNGA VS DCIT (68 SOT 205) HELD THAT A MERE MENTION OF APPROVED IN THE REPORT BY THE COMMISSIONER AND THEREBY ACCORDING SANCTION FOR REOPENING OF ASSESSMENT U/S 147 DID NOT AMOUNT TO RECORDING OF PROPER SATISFACTION U/S 151(1) OF THE ACT AND HENCE HELD THE NOTICE ISSUED U/S 148 TO BE BAD IN LAW. THE RELEVANT FINDINGS OF THIS TRIBUNAL WERE AS FOLLOWS: 9. A SIMPLE READING OF THE PROVISIONS OF SEC. 151(1) WITH THE PROVISO CLEARLY SHOW THAT NO SUCH NOTICE SHALL BE ISSUED UNLESS THE ADDL. COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY THE AO THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE WHICH MEANS THAT THE SATISFACTION OF THE COMMISSIONER IS PARAMOUNT FOR WHICH THE LEAST THAT IS EXPECTED FROM THE COMMISSIONER IS APPLICATION OF MIND AND DUE DILIGENCE BEFORE ACCORDING SANCTION TO THE REASONS RECORDED BY THE AO. 10. IN THE PRESENT CASE THE LETTER WHICH IS PLACED ON RECORD SHOWS THAT THE ADDL. COMMISSIONER HAS SIMPLY SANCTIONED THE PROPOSAL FOR INITIATING PROCEEDINGS U/S. 147 IN GROUP CASES OF BENEFICIARIES OF MAHASAGAR SECURITIES P. LTD. NOWHERE THE ADDL. CIT HAS RECORDED HIS DISSATISFACTION. THE HON'BLE SUPREME COURT IN THE CASE OF CHHUGAMAL RAJPAL V. S.P. CHALIHA [1979] 79 ITR 603 OBSERVED THAT THE IMPORTANT SAFEGUARDS PROVIDED IN SEC. 147 AND 151 WERE LIGHTLY TREATED BY THE INCOME-TAX OFFICER AS WELL AS THE COMMISSIONER. 11. IN THE LIGHT OF THE ABOVE MENTIONED REASONS, IN OUR CONSIDERATE VIEW, SECTION 147 AND 148 ARE CHARTER TO THE REVENUE TO REOPEN EARLIER ASSESSMENTS AND ARE, THEREFORE PROTECTED BY SAFEGUARDS AGAINST UNNECESSARY HARASSMENT OF THE ASSESSEE. THEY ARE SWORD FOR THE REVENUE AND SHIELD FOR THE ASSESSEE. SECTION 151 GUARDS THAT THE SWORD OF SEC. 147 MAY NOT BE USED UNLESS A SUPERIOR OFFICER IS SATISFIED THAT THE AO HAS GOOD AND ADEQUATE REASONS TO INVOKE THE PROVISIONS OF SEC. 147. THE SUPERIOR AUTHORITY HAS TO EXAMINE THE REASONS, MATERIAL OR GROUNDS AND TO JUDGE WHETHER THEY ARE SUFFICIENT AND ADEQUATE TO THE FORMATION OF THE NECESSARY BELIEF ON THE PART OF THE ASSESSING OFFICER. IF, AFTER APPLYING HIS MIND AND ALSO RECORDING HIS REASONS, HOWSOEVER BRIEFLY, THE COMMISSIONER IS OF THE OPINION THAT THE AO'S BELIEF IS WELL REASONED AND BONAFIDE, HE IS TO ACCORD HIS SANCTION TO THE ISSUE OF NOTICE U/S. 148 OF THE ACT. IN THE INSTANT CASE, WE FIND FROM THE PERUSAL OF THE ORDER SHEET WHICH IS ON 53 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 RECORD, THE COMMISSIONER HAS SIMPLY PUT 'APPROVED' AND SIGNED THE REPORT THEREBY GIVING SANCTION TO THE AO. NOWHERE THE COMMISSIONER HAS RECORDED A SATISFACTION NOTE NOT EVEN IN BRIEF. THEREFORE, IT CANNOT BE SAID THAT THE COMMISSIONER HAS ACCORDED SANCTION AFTER APPLYING HIS MIND AND AFTER RECORDING HIS SATISFACTION. 12. HON'BLE DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. (P.) LTD. V. CIT [2002] 258 ITR 317/125 TAXMAN 775 HAS HELD THAT 'THE PROVISO TO SUB-SECTION (1) OF SECTION151OF THE ACT PROVIDES THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NOTICE UNDER SECTION 148 SHALL NOT BE ISSUED UNLESS THE CHIEF COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY BE, IS SATISFIED, ON THE REASONS RECORDED BY THE ASSESSING OFFICER CONCERNED, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. THESE ARE SOME IN-BUILTS SAFEGUARDS TO PREVENT ARBITRARY EXERCISE OF POWER BY AN ASSESSING OFFICER TO FIDDLE WITH THE COMPLETED ASSESSMENT'. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT 'WHAT DISTURBS US MORE IS THAT EVEN THE ADDITIONAL COMMISSIONER HAS ACCORDED HIS APPROVAL FOR ACTION UNDER SECTION 147 MECHANICALLY. WE FEEL THAT IF THE ADDITIONAL COMMISSIONER HAD CARED TO GO THROUGH THE STATEMENT OF THE SAID PARTIES, PERHAPS HE WOULD NOT HAVE GRANTED HIS APPROVAL, WHICH WAS MANDATORY IN TERMS OF THE PROVISO TO SUB-SECTION (1) OF SECTION 151 OF THE ACT AS THE ACTION UNDER SECTION 147 WAS BEING INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE POWER VESTED IN THE COMMISSIONER TO GRANT OR NOT TO GRANT APPROVAL IS COUPLED WITH A DUTY. THE COMMISSIONER IS REQUIRED TO APPLY HIS MIND TO THE PROPOSAL PUT UP TO HIM FOR APPROVAL IN THE LIGHT OF THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER. THE SAID POWER CANNOT BE EXERCISED CASUALLY AND IN A ROUTINE MANNER. WE ARE CONSTRAINED TO OBSERVE THAT IN THE PRESENT CASE THERE HAS BEEN NO APPLICATION OF MIND BY THE ADDITIONAL COMMISSIONER BEFORE GRANTING THE APPROVAL'. 13. THE OBSERVATIONS OF THE HON'BLE HIGH COURT ARE VERY MUCH RELEVANT IN THE INSTANT CASE AS IN THE PRESENT CASE ALSO THE COMMISSIONER HAS SIMPLY MENTIONED 'APPROVED' TO THE REPORT SUBMITTED BY THE CONCERNED AO. IN THE LIGHT OF THE RATIOS/OBSERVATIONS OF THE HON'BLE HIGH COURT MENTIONED HEREINABOVE, WE HAVE NO HESITATION TO HOLD THAT THE REOPENING PROCEEDINGS VIS--VIS PROVISIONS OF SEC. 151 ARE BAD IN LAW AND THE ASSESSMENT HAS TO BE DECLARED AS VOID AB INITIO. 50. WE ARE THEREFORE OF THE OPINION THAT THE COMMISSIONER HAD MECHANICALLY ACCORDED PERMISSION. THUS, WE HOLD THAT THE SANCTION GRANTED BY THE COMMISSIONER U/S 151 IS INVALID AND SO, THE NOTICE OF THE AO DATED 22.03.2016 IS BAD IN LAW AND HAS TO BE NECESSARILY STRUCK DOWN. 51. FOR THE REASONS DISCUSSED IN THE FOREGOING THEREFORE, WE ARE IN AGREEMENT WITH THE ORDER OF THE LD. CIT(A) WHEREIN HE HAS CANCELLED THE ASSESSMENT ORDER PASSED AFTER 54 ITA NO. 1646/KOL/2017 M/S. YADUKA FINANCIAL SERVICES LTD., AY 2009-10 REOPENING U/S 147 OF THE ACT FOR THE REASON THAT THE CONDITIONS PRESCRIBED BY LAW WERE NOT COMPLIED WITH RESULTING IN THE ORDER PASSED BY THE AO BEING WITHOUT JURISDICTION AND THEREFORE A NULLITY. ACCORDINGLY WE UPHOLD THE ORDER OF THE LD. CIT(A). 52. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 JULY, 2019 SD/- SD/- (DR. A. L. SAINI) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19 JULY, 2019 BISWAJIT (SR. PS) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT DCIT, CC-2(1), E.M. BYE PASS, 110, SHANTI PALLY, KOLKATA 700 107. 2 RESPONDENT M/S. YADUKA FINANCIAL SERVICES LTD., 3, GANESH CHANDRA AVENUE, KOLKATA 700 013. 3 4 5 CIT(A) - 20, KOLKATA. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O. ITAT, KOLKATA BENCHES