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

ITA 172/AGR/2014

• Counselvise Citation: 17220314 RSA 2014
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 24-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT SHUK LA
• Assessee Lawyers: ANURAG SINHA
• Keywords: Reopening of assessment; Gift; Wrong claim; Difference of opinion; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 148; 143(3)

Judgement Text

I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, SMC, AGRA [CORAM: PRAMOD KUMAR AM] ITA NO.172/AGRA/2014 ASSESSMENT YEAR: 2002-03 MANISH JAIN, .......................APPEL LANT 6/92, KACHORA BAZAR, BELANGANJ, AGRA. [PAN: ACUPJ 4027 J] VS. INCOME TAX OFFICER, ......RESPONDENT WARD 4(2), AGRA. APPEARANCES BY: ANURAG SINHA, FOR THE APPELLANT AMIT SHUKLA, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 18 TH JUNE, 2015 DATE OF PRONOUNCING THE ORDER : 24 TH JUNE, 2015 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE CIT(A)S ORDER DATED 12 TH FEBRUARY, 2014, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) , FOR THE ASSESSMENT YEAR 2002-03, ON THE FOLLOWING GROUN DS :- 1. BECAUSE OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW WERE HIGHLY UNJUSTIFIED IN MAKING THE ADDITION AND THEREBY CONFIRMING THE ADDITION MADE BY THE AO AND BECAUSE THE ASSESSEE IS BAD IN L AW AS THE LEANED A.O. HAS MADE IT FLAGRANTLY VIOLATING THE PRINCIPLES OF NATURAL J USTICE. THE REASONS RECORDED FOR TAKING ACTION U/S 148 IS NOT VALID AND CORRECT. 2. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION OF RS.8,00,000/- ALLEGEDLY AS I NCOME FROM UNDISCLOSED SOURCES I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 2 OF 12 IGNORING THE MATERIAL ON RECORD AND WITHOUT JUDICIO USLY CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. 3. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION OF RS.16,000/- ON ESTIMATE BASI S. 4. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN NOT ACCEPTING THE GIFT AS THE ASSESSEE HAS ESTABLISHED THE IDENTITY, CREDITWORTHI NESS AND GENUINENESS OF THE TRANSACTION AND HE HAS NOT PROPERLY AND LEGALLY APP RECIATED THE EVIDENCES ON RECORD IN SUPPORT OF THE GIFT. 5. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN NOT TAKING INTO CONSIDERATION THE EARLIER ORDER OF THE HONBLE INCOME TAX APPELLA TE TRIBUNAL, AGRA BENCH, AGRA WHICH WERE FILED DURING THE COURSE OF PROCEEDINGS. 6. BECAUSE THE AUTHORITIES BELOW HAVE ERRED IN LAW AS WELL AS ON FACTS IN MAKING THE ADDITION ALLEGEDLY AS INCOME FROM UNDISC LOSED SOURCES IGNORING THE MATERIAL ON RECORD AND WITHOUT JUDICIOUSLY CONSIDER ING THE OBJECTION IN RECORDING THE REASONS AND THE EXPLANATION MADE. THE ENTRIES I N SEIZED RECORDS ITSELF VERIFY THE TRANSACTION. 2. TO ADJUDICATE ON THIS APPEAL, CERTAIN MATERIAL F ACTS NEED TO BE TAKEN NOTE OF. IN THIS CASE ASSESSMENT PROCEEDINGS WERE REOPENED ON T HE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF DELHI THAT TWO PERSONS N AMELY SHRI SATISH CHAND JAIN AND SHRI NARENDRA KUMAR GUPTA ARE INDULGED IN PROVIDING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES WITHOUT ANY ACTUAL TRANSACTIONS OF SHARES HA VING BEEN MADE. THE TWO AMOUNTS OF RS.3,00,000/- AND RS.2,00,000/- RECEIVED BY THE ASS ESSEE ON 04.02.2002 AND 26.02.2002 RESPECTIVELY AS ACCOMMODATION ENTRIES WERE FOUND DE POSITED IN A BANK ACCOUNT MAINTAINED IN THE NAME OF THE ASSESSEE IN HDFC BANK , SANJAY PLACE AGRA. APART FROM I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 3 OF 12 THESE TWO ENTRIES, ANOTHER AMOUNT OF RS.3,00,000/- WAS ALSO FOUND TO BE DEPOSITED IN THIS BANK ACCOUNT. IT WAS IN THIS BACKDROP, THE AS SESSING OFFICER INITIATED REASSESSMENT PROCEEDINGS U/S. 147 AND AFTER CONSIDERING THE EXPL ANATIONS OF ASSESSEE UNSATISFACTORY, MADE ADDITION OF RS.8,00,000/- AS AN INCOME WHICH E SCAPED ASSESSMENT. THE A.O. RECORDED THE REASONS AS FOLLOWS : INFORMATION HAS BEEN RECEIVED FROM THE ADDL. DIT(IN V.), DELHI THAT ONE SHRI SATISH CHAND JAIN AND NARENDER KUMAR GUPTA HAVE PROVIDED BOGUS ENTRIES OF SALE PROCEEDS OF SHARES TO THE ASSESSEE. ENQUIRIES HAVE BEEN CONDUCTED BY THE ADDL. DIT (INV.), DELHI AND IT HAS BEEN FOUND THAT NO GENUINE TRANSACTION IN SALE/PURCHASE OF SHARES HAS TAKEN PLACE THROUGH THIS BANK ACCOUNT. THE BENEFICIARIES HAVE TAKEN ENTRIES BY PAYING IN CASH AN AMOUNT EQUIVALENT TO THE DRAFT/CHEQUE AMOUNT AND CE RTAIN PREMIUM ON THAT. THE BROKER ON RECEIPT OF CASH FROM THE BENEFI CIARIES DEPOSITED THE SAME IN THE BANK ACCOUNT AND THEN ISSUED DRAFT/CHEQ UE TO THE BENEFICIARIES. ADDL. DIT(INV.), DELHI HAS PROVIDED A LIST OF SUCH BENEFICIARIES. IN THE SAME LIST, NAME OF THE ASSESSEE SHRI MANISH JAIN WHO FALLS UNDER THE JURISDICTION OF THE UNDERSIGNED. THE ASSESSEE HAS TAKEN BOGUS EN TRY IN F.Y. 2003-04 AND RECEIVED AN AMOUNT OF RS.5,00,900/- (3,00,600+2,00, 300) ON 31.01.2002 AND 20.02.2002 ISSUED BY SHRI SATISH CHAND JAIN AND NAR ENDER KUMAR GUPTA. SIMILAR CASES OF BOGUS CLAIM OF CAPITAL GAIN ARRAN GED THROUGH VARIOUS BROKERS HAVE ALREADY BEEN ASSESSED U/S. 148 /143(3) IN RANGE- 4/AGRA CHARGE. THE CIT(APPEALS)-II, AGRAS ORDER IN THE CASE OF SHRI ASHOK KUMAR LAVANIA, A.Y. 2001-02, M/S. BAIJ NATH AGRAWAL , A.Y. 2001-02 AND BRIJ MOHAN AGRAWAL, A.Y. 2001-02, TO NAME A FEW, DISCUSS ES THE MODUS OPERANDI OF SUCH TRANSACTIONS WHEREIN WITH THE CONNIVANCE OF SHARE BROKERS ASSESSEES UNACCOUNTED MONEY IS ROUTED AS SALE PROC EEDS OF SHARES. IN VIEW OF THE INFORMATION RECEIVED FROM THE INVES TIGATION WING AND THE ADVERSE MATERIAL IN POSSESSION OF THE DEPARTMEN T AS MENTIONED ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.5,00,900/- SHOWN AS BOGUS SALE PROCEEDS OF SHARES HAS ESCAPED ASSESSMEN T IN THE CASE OF SHRI MANISH JAIN, R/O-6/92, KACHORA BAZAR, BELANGANJ, AG RA FOR THE ASSESSMENT YEAR 2002-03. I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 4 OF 12 3. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A), WHERE HE ASSAILED THE VALIDITY OF REASSESSMENT ORDE R AS WELL AS THE ADDITIONS SO MADE, ON MERITS, BUT WITHOUT ANY SUCCESS. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 5. DURING THE COURSE OF HEARING, THE LEARNED AUTHOR IZED REPRESENTATIVE OF THE ASSESSEE VEHEMENTLY CONTENDED THAT THE ISSUE WITH R ESPECT TO VALIDITY OF REASSESSMENT PROCEEDINGS IN THIS CASE IS COVERED IN FAVOUR OF TH E ASSESSEE BY A DECISION OF CO-ORDINATE BENCH OF ITAT, AGRA (SMC) IN ITA NO. 428/AGR/2011 ( A.Y. 2003-04)- SHRI NITIN GOYAL VS. ITO WITH ITA NO. 433/AGR/2011(A.Y. 2002-03)- SMT. S ONIYA AGARWAL VS. ITO, WHEREIN THE REASONS RECORDED ARE VERBATIM TO THE REASONS RE CORDED IN THE INSTANT CASE. IN THAT CASE, THE TRIBUNAL, INTER ALIA, OBSERVED AS FOLLOWS : 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIA L ON RECORD. THE AO RECORDED FOLLOWING REASONS FOR REOPENING OF ASSESSM ENT (PB-14) : 'INFORMATION HAS BEEN RECEIVED FROM THE ADDL. DIT(I NV), AGRA THAT ONE M/S. SARASWATI DEVI GOYAL, NEW DELHI (A/C. NO.1 6051) HAS PROVIDED BOGUS ENTRIES OF SALE PROCEED OF SHARES TO THE ASSE SSEE THROUGH JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI. ENQUI RIES HAVE BEEN CONDUCTED BY THE ADDL. DIT(INV.), AGRA AND IT HAS BE EN FOUND THAT NO GENUINE TRANSACTION IN SALE/PURCHASE OF SHARES HAS TAKEN PLACE THROUGH THIS BANK ACCOUNT. THE BENEFICIARIES HAVE BEEN TAKEN ENT RIES BY PAYING IN CASH AN AMOUNT EQUIVALENT TO THE DRAFT/CHEQUE AMOUNT AND CERTAIN PREMIUM ON THAT. THE BROKER ON RECEIPT OF CASH FROM THE BEN EFICIARIES DEPOSITED THE SAME IN THE BANK ACCOUNT AND THEN ISSUED DRAFT/CHEQ UUE TO THE BENEFICIARIES. THE ADDL. DIT(INV.), AGRA HAS PROVIDED A LIST OF SU CH BENEFICIARIES. IN THE SAME LIST, NAME OF THE ASSESSEE SH. NITIN GOYAL, G- 679, KAMLA NAGAR, AGRA WHO FALLS UNDER THE JURISDICTION OF THE UNDERSIGNED APPEARS AT SL. NO. 61. THE ASSESSEE HAS TAKEN BOGUS ENTRY ON 14.10.2002 AN D RECEIVED AMOUNT OF I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 5 OF 12 RS.50,125/- THROUGH INSTRUMENT/DD NO.149814 OF JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI ISSUED BY M/ S. SARASWATI DEVI GOYAL, NEW DELHI AND DEPOSITED THE SAME TO THE ACCO UNT NO.837, ALLAHABAD BANK, NEW AGRA. SIMILAR SUCH CASES OF BOGUS CLAIM OF CAPITAL GAIN A RRANGED THROUGH VARIOUS BROKERS HAVE ALREADY BEEN ASSESSED UNDER SECTION 148/143(3) IN RANGE-4, AGRA CHARGE. THE CIT(A)-II, AGRA'S ORDER IN THE CASE OF SH. ASHOK KUMAR LAWANIA, AY 2001-2002, M/S. BAIJNATH AGARWAL, AY 2001-02 AND BRIJ MOHAN AGARWAL, AY 2001-02 TO NAME A FEW ASSESSEES, THE MODUS OPERANDI OF SUCH TRANSACTIONS WHEREIN WIT H THE CONVENIENCE OF SHARE BROKERS ASSESSEE'S UNACCOUNTED MONEY IS ROUTE D AS SALE PROCEEDS OF SHARE. IN VIEW OF THE INFORMATION RECEIVED FROM THE INVEST IGATION WING, AGRA AND THE ADVERSE MATERIAL IN POSSESSION OF THE DEPARTMENT AS MENTIONED ABOVE, I HAVE REASONS TO BELIEVE THAT INC OME TO THE TUNE OF RS.50,125/- SHOWN AS BOGUS SALE PROCEEDS OF SHARES HAS ESCAPED ASSESSMENT IN THE CASE OF SH. NITIN GOYAL, G-679, KAMLA NAGAR, AGRA FOR THE AY 2003- 04.' 8. THE ASSESSEE RAISED OBJECTIONS BEFORE THE ASSESS ING OFFICER FOR REOPENING OF THE ASSESSMENT. REPLY OF ASSESSEE IS FILED AT PA GE 16 OF THE PAPER BOOK, IN WHICH THE ASSESSEE MORE OR LESS RAISED THE SAME OBJECTION , AS HAS BEEN ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. THE ASSESSEE EXPLAINED IN THE REPLY BEFORE THE ASSESSING OFFICER THAT THERE WAS NO MATERIAL TO FORM THE BELI EF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THAT THE INITIATI ON OF THE PROCEEDINGS U/S. 147 IS NOT BASED ON AN INDEPENDENT APPLICATION OF MIND, BUT BY MECHANICALLY FOLLOWING THE INFORMATION RECEIVED FROM ADDL. DIT(I NV.), AGRA. THE ASSESSEE ALSO EXPLAINED THAT THERE WAS NO INFORMATION WITH THE AS SESSING OFFICER THAT THE GIFT RECEIVED BY THE ASSESSEE WAS BOGUS. RATHER, THE ASS ESSING OFFICER RECORDED THE REASONS FOR REOPENING OF ASSESSMENT ON ACCOUNT OF TAKING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. THE REASO NS REPRODUCED ABOVE CLEARLY SUPPORT THE CASE OF THE ASSESSEE TO PROVE THAT THE ASSESSING OFFICER WAS HAVING NO REASON TO BELIEF THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER FOLLOWED THE REPO RT OF ADDL. DIT(INV.), AGRA FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT, IN WHICH IT WAS PROVIDED THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES WHO RECEIV ED BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. NOTHING IS MENTIONED IF THE ASS ESSEE RECEIVED ANY BOGUS GIFT FROM SMT. SARASWATI DEVI, FOR WHICH THE ASSESS ING OFFICER ULTIMATELY MADE ADDITION IN THE ASSESSMENT ORDER. THUS, THE REASONS ON WHICH THE NOTICE FOR RE-ASSESSMENT WAS ISSUED, WERE NOT EXISTING. THE AS SESSING OFFICER RELIED I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 6 OF 12 ON THE INFORMATION WHICH WAS NON-EXISTING. IT IS, T HEREFORE, CLEAR THAT THE REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT, WHICH NEVER EXISTED. THE ASSESSING OFFICER HAS NOT VERIFIED THE INFORMATION BEFORE RECORDING REASONS F OR RE-ASSESSMENT IN THE MATTER. SINCE NOTHING WAS FOUND AGAINST THE ASSESSE E ON ACCOUNT OF TAKING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES, THEREFORE , REASONS RECORDED QUA ASSESSEE, WERE INCORRECT REASONS HAVING NO NEXUS WI TH THE CASE OF THE ASSESSEE. THUS, NO SUCH INCOME HAS ESCAPED ASSESSME NT AS MENTIONED IN THE INFORMATION AND REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING OF THE ASSESSMENT WERE MERE PRETENCE, AN EXCUSE TO ENQUIRE INTO TAKING OF BOGUS ENTRY OF SALE PROCEEDS OF SHARES WITHOUT ANY MATERIAL OR EVIDENCE IN POSSESSION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE , DID NOT HAVE REASONS TO BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT. THE ASSESSING OFFICER DID NOT VERIFY TH E CORRECTNESS OF THE INFORMATION RECEIVED BY HIM, BUT MERELY ACCEPTED TH E TRUTH OF VAGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING O FFICER HAS NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING NOTICE U/S. 148 OF THE INCOME-TAX ACT. I AM FORTIFIED IN MY VIEW BY THE JUDGMENT OF HON'BLE DELHI HIGH COURT IN THE CAS E OF CIT VS. ATUL JAIN, 299 ITR 383(DELHI), IN WHICH IT WAS HELD AS UNDER : 'THERE MUST BE 'REASON TO BELIEVE' WARRANTING THE I SSUANCE OF A NOTICE OF REASSESSMENT BY THE ASSESSING OFFICER. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING THE PROCE EDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE QUASHED. MERE SATISFACTION OF THE ASSESSING OFFICER FOR THE ISSUANCE OF A NOTICE NOT ENOUGH, THERE MUST BE REASONS ON RECORD WHICH LED HIM TO BELIEVE THAT A N OTICE SHOULD BE ISSUED. AFTER A FOUNDATION BASED ON INFORMATION IS SET UP, THERE MUST STILL BE SOME REASONS WHICH WARRANT THE HOLDING OF A BELIEF SO AS TO NECESSITATE THE ISSUANCE OF A NOTICE UNDER SECTION 148 OF THE INCOM E-TAX ACT, 1961. THE ASSESSEES PURCHASED SHARES AND SUBSEQUENTLY SOL D THESE SHARES AT A MUCH HIGHER VALUE. FOR THE ASSESSMENT YEAR 199 7-98, THE ASSESSEE'S DISCLOSED LONG-TERM CAPITAL GAINS ARISING FROM THE TRANSACTION. ON THE BASIS OF THE INFORMATION RECEIVED BY THE DEPUTY DIR ECTOR (INVESTIGATION), THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148. THE FILES WERE THEN PUT UP BEFORE THE COMMISSIONER AND IN RESPONSE TO THE Q UESTION WHETHER THE COMMISSIONER WAS SATISFIED THAT INCOME HAD ESCAPED ASSESSMENT, HE WROTE 'YES'. THEREAFTER, THE ASSESSING OFFICER RE-ASSESSE D THE INCOME AND CHARGED INTEREST AND LEVIED PENALTY. THE COMMISSIONER (APPEA LS) ALLOWED RELIEF I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 7 OF 12 PARTLY BUT THE TRIBUNAL CONCLUDED THE ISSUE IN FAVO UR OF THE ASSESSES. ON APPEAL HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMA TION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS B Y PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. T HE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THEE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANS FERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE INFORMATION IN A ME CHANICAL MANNER. THE ASSESSING OFFICER HAD NOT EVEN RECORDED HIS SAT ISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISS UING A NOTICE UNDER SECTION 148. WHAT HAD BEEN RECORDED BY THE ASSESSING OFFICE R AS HIS 'REASONS TO BELIEVE' WAS NOTHING MORE THAN A REPORT GIVEN BY HI M TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RE CORDING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE ASSESSING OFFICER HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE. 9. HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ATLAS CYCLE INDUSTRIES, 180 ITR 319 (P&H) HAS HELD AS UNDER : HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELING THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASS ESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND, THEREFORE, THE INCOME-TAX OFFICER DID NOT GET JURISDICTION TO MAKE A REASSESSMENT.' 10. IN THE CASE OF ACIT VS. O.P. CHAWLA, 306 ITR (A T) 328, THE THIRD MEMBER, ITAT DELHI BENCH, ON DIFFERENCE OF OPINION, HELD 'THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT WERE A MERE PRETENCE, AN E XCUSE TO ENQUIRE INTO THE GIFTS RECEIVED BY THE ASSESSEE WITHOUT ANY MATE RIAL OR EVIDENCE COMING INTO HIS POSSESSION AFTER HE PROCESSED THE R ETURN UNDER SECTION 143(1)(A). THE ASSESSING OFFICER DID NOT HAVE 'REAS ON TO BELIEVE' THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPE D ASSESSMENT. THE COMMISSIONER (APPEALS) WAS JUSTIFIED IN HOLDING THA T THE REOPENING OF THE ASSESSMENT WAS NOT VALID AND THEREFORE, THE REASSES SMENT MADE WAS VOID AB INITIO.' 11. THE DIVISION BENCH OF ITAT, AGRA BENCH IN THE C ASE OF KISHAN CHAND VS. ITO (SUPRA) IN PARA 15 TO 17, HELD AS UNDER : '15. WE HAVE CAREFULLY EXAMINED THE RECORDS, INCLUDI NG THE 'REASONS RECORDED' FOR TAKING ACTION UNDER SECTION 148 OF THE ACT. WE HAVE FOUND THAT APART FROM RELYING ON THE REPORT OF ADIT , THE LD 'AO' HAS DONE NO I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 8 OF 12 OTHER EXERCISE TO VERIFY THE FACTUAL FACTS OF THIS C ASE BY WAY OF COLLECTING SUBJECTIVE MATERIALS ON THE BASIS OF WHICH HE COULD FROM HIS OPINION. ANY INVESTIGATION DONE OR EVIDENCES COLLECTED AFTER THE ISSUANCE OF NOTICE UNDER SECTION 148 ARE NOT RELEVANT FOR FORMING OF HIS OPI NION, FOR WRITING HIS REASONS OR FOR RE-OPENING OF ASSESSMENT ORDER. THE OBSERVATION MADE BY LD CIT(A) THAT THE LD. AO CAN ACT ON THE INFORMATION O F ADIT, FOR WHICH HE HAS REFERRED TO CERTAIN DECISION ALSO IS NOT AT ALL COR RECT. NO COURT OF LAW HAS TAKEN SUCH A LEGAL VIEW. WE ARE AWARE THAT THE AO I S NOT REQUIRED TO PROVE THE ALLEGATION OF ESCAPEMENT OF INCOME AT THAT STAG E IT IS ENOUGH IF HE FORMS HIS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT EVEN ON HIS SUBJECTIVE SATISFACTION BUT SUCH A BELIEF HAS TO BE FORMED ON THE BASIS OF OBJECTIVE MATERIALS. THE INFORMATION OF AD IT IS NOT THAT OBJECTIVE MATERIAL'. THEREFORE, WE ARE NOT IN AGREEMENT WITH LD. CIT(A) IN THAT REGARD. THE REASONS FOR OUR ABOVE CONCLUSION ARE BEING NARR ATED IN THE FOLLOWING PARAGRAPHS. 16. THE ASSESSEE ORIGINALLY FILED HIS RETURN OF INC OME ON 23.07.2001 DECLARING TOTAL INCOME OF RS. 1,10,840/- AS HAS BEE N DISCUSSED ABOVE. SUBSEQUENTLY ON THE INFORMATION RECEIVED FORM ADI ( INV.), DELHI, THAT THIS ASSESSEE HAS RECEIVED D.D. NO. 268194 FOR RS. 2,50, 000/- ON 08.02.2001 MADE FROM VIJAYA BANK, BHAKAJI KAMA PALACE, NEW DEL HI, BY WAY OF LONG TERM CAPITAL GAIN/PROFIT IN SHARE DEALING/GIFT S/CONTRIBUTION TO SHARE CAPITAL FROM M/S YADAV & CO./ RAAKESH NAGA R & CO./ SHRI S.S. MEHTA, NEW DELHI AND ON INVESTIGATION DONE BY T HE INVESTIGATION WING IT WAS NOTICED THAT THIS WAS A PLOY TO GIVE AND TAKE ACCOMMODATION ENTRIES TO BENEFICIARIES WHO HAD THEMSELVES PAID CA SH AMOUNT ALONGWITH SETTLED AMOUNT OF COMMISSION, FOR GETTING D.. OF TH E AMOUNT. ON THE BASIS OF THE ABOVE REASONS THE ASSESSMENT IN QUESTION WAS RE OPENED. IT IS A AN UNDENIABLE FACT THAT THE LEARNED AO HAS FRAMED H IS OPINION FOR TAKING ACTION UNDER SECTION 148 OF THE ACT, ON THE BASIS O F INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DDIT, DELHI. THE ASS ESSEE HAS ENCLOSED CAPITAL ACCOUNT WITH ORIGINAL RETURN FILED BY HIM. EXCEPT FOR THE AMOUNT OF D.D. AND BANK ALL THE FACTS MENTIONED IN THE REASON S ARE FOUND TO BE NOT CORRECT. THIS FACT IS ALSO EVIDENT FROM THE FIRST P AGE OF ASSESSMENT ORDER ITSELF IT IS OBVIOUS THAT THE LEARNED AO HAS ACTED IN A MECHANICAL MANNER AND HAS NOT APPLIED HIS MIND AT ALL TO THE INFORMAT ION RECEIVED FROM THE DDIT, INVESTIGATION WING. THE ASSESSEE HAS DECLARED RECEIPT OF TWO GIFTS, TOTALING TO RS. 4,50,000/- IN HIS CAPITAL ACCOUNT A ND THE LEARNED AO HAS ALSO MADE ADDITION OF THE SAME AMOUNT, BUT IN REASONS, H E HAS MENTIONED ONLY THE ESCAPEMENT OF RS. 2,50,000/- ON ACCOUNT OF CAPI TAL GAIN. HE HAS STATED THAT THE ASSESSEE HAS TAKEN BOGUS ENTRIES RESULTING INTO CAPITAL GAIN, FROM STOCK BROKER YADAV & CO. RAKESH NAGAR & CO. AN D SHRI S.S. MEHTA OF NEW DELHI. BUT IT WAS FOUND THAT THE ASSESSEE HAD N O CONCERN WITH THE ABOVE PERSONS/ENTITIES AND THAT HE NEITHER PURCHASE D NOR SOLD ANY SHARE OF THESE COMPANIES DURING THE YEAR. ONLY BECAUSE THE NU MBER OF D.D. AND THE NAME OF THE BANK TALLIED, CANNOT RESULT INTO BELIEF BUT ONLY TO SUSPICION DDIT' REPORT MAY BE USED AS A BASIS FOR MAKING THE PRELIM INARY ENQUIRIES. THE LD I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 9 OF 12 AO HAS TO APPLY HIS OWN MIND FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME, WITHOUT WHICH THE LD. AO CANNOT ACQUIRE A V ALID JURISDICTION. THE FACTS OF THE GIVEN CASE CLEARLY ESTABLISH THE AO HAS NOT AT ALL APPLIED HIS MIND AND HAS ONLY BASED HIS OPINION ON THE BORROWED INFORMATI ON. THERE IS NO DOUBT THAT A BORROWED INFORMATION CAN BE UTILISED A S A BASIS FOR REOPENING BUT THAT TOO ONLY WHEN THE FACTS MENTIONED THEREIN ARE SPECIFIC AND RELEVANT. IN THIS CASE NEITHER THE INFORMATION IS SPECIFIC NO R RELEVANT TO THE FACTS OF ASSESSEE'S CASE. THE ASSESSEE NEVER DEALT IN SHARES AND HAD ONLY RECEIVED TOW GIFTS WHICH WERE DULY DISCLOSED IN THE RETURN O F INCOME FILED WITHIN DUE TIME. THE ASSESSEE HAS NEVER DEALT IN SHARES AS HAS BEEN MENTIONED IN THE REASONS OR FOR THAT MATTER IN THE INFORMATION OF DD IT, DELHI, THIS CLEARLY ESTABLISHED THE NON-APPLICATION MIND BY THE LEARNED AO HAD HE APPLIED HIS MIND HE WOULD HAVE VERIFIED THE DOCUMENT ATTACHED W ITH THE RETURN OF INCOME AND COULD EASILY COME TO THE CORRECT REASONI NG IF HE WANTED TO. THEREFORE, ANY ASSUMPTION OF JURISDICTION ON THE BA SIS OF INVALID REASON RENDERS THE ENTIRE PROCEEDINGS UNDERTAKEN TH EREAFTER AS INVALID AND VITIATE THE ENTIRE PROCESS OF REASSESSMENT. THE OBJECTION S RAISED BY THE ASSESSEE ABOUT REOPENING OF THE ASSESSMENT WERE NOT DISPOSED OF PRIOR TO TAKING RECOURSE TO REASSESSMENT. THE AO IS REQUIRED TO DISPOSE OF SUCH OBJECTION BEFORE PROCEEDINGS FURTHER. THE LEGISLATO RS IN THEIR WISDOM HAVE ENACTED THE PROVISION IN THE REGARD SO THAT IF IS F OUND IN THE VERY BEGINNING THAT THE REASONS ARE NOT CORRECT, TIME AND MONEY OF THE PARTIES MAY NOT BE WASTED IN SUBSEQUENT FUTILE EXERCISE WHEN AT THE END THE SAME CONCLUSION WAS TO BE REACHED. 17. WHILE DECIDING THE CASE OF DASS FRIENDS BUILDER S PVT. LIMITED REPORTED IN (2006) 280 ITR 77 (ALL) AHS CATEGORICALLY HELD T HAT UNDER SECTION 147 OF THE ACT, THE WORDS ARE HAS REASONS TO BELIEVE' AND NOT 'REASONS TO SUSPECT'. THE BELIEF ENTERTAINED BY THE AO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE AND BASED ON REASONS WHICH ARE RELEVANT. IT MUST BE IN GOOD FAITH AND NOT A MERE PRETENCE, SHOULD HAVE A RATIONAL CON NECTION AND RELEVANT BEARING ON THE FORMATION OF THE BELIEF AND SHOULD NOT BE EXTRANEOUS OR IRRELEVANT. THE MATERIAL SHOULD BE RE LATION TO THE PARTICULAR YEAR FOR WHICH THE ASSESSMENT IS SOUGHT TO BE REOPE NED. IT IS NOT ANY AND EVERY MATERIAL, HOWEVER VAGUE AND INDEFINITE OR DIS TANT, REMOTE AND FOR- FETCHED, WHICH WOULD WARRANT THE FORMATION OF THE B ELIEF RELATING TO ESCAPEMENT OF INCOME. IN THIS CASE EXACTLY SAME SITUATION HAS HAPPENED. THE REASONS RECORDED BY THE A.O. ARE SIMP LY REPRODUCTION OF THE REPORT RECEIVED BY HIM FROM DDIT, DELHI. THEREFORE HE HAS NOT APPLIED HIS MIND TO THE FACTS AND THE AVERMENT CONTAINED IN THA T REPORT. FOR FORMING HIS BELIEF THAT INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT HE IS BOUND TO APPLY HIS MIND AND HAS TO REDUCE HIS THIS BELIEF IN WRITING ALONGWITH THE REASONS FOR DOING SO. WE DO NOT DISPU TE THAT AN INFORMATION OF THE DDIT CAN BE USED FOR MAKING REASSESSMENT ONL Y WHEN THE REPORT IS COMPLETE. SPECIFIC AND RELEVANT TO THE CASE OF THE ASSESSEE TO THAT PARTICULAR A.Y. AND THE BASE READING OF WHICH, TO THE NORMAL P RUDENT MIND, GIVES AN I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 10 OF 12 INFERENCE OF THE FACT THAT INCOME HAS ESCAPED ASSES SMENT. IN THAT CASE THAT REPORT ITSELF CAN BE USED FOR FORMING HIS OPINION A S IS REQUIRED UNDER SECTION 147 READ WITH SECTION 148 OF THE ACT. BUT WHEN THE INFORMATION IS NOT SPECIFIC, CONCRETE AND RELEVANT AND IS ONLY VAGUE A ND REMOTE THAT CANNOT BE, PER SE, MADE A BASIS FOR FORMING HIS OPINION BY LEARNED A.O. IN SUCH CASES HE HAS TO FURTHER EXAMINE THE FACTS AND FIGURES SO FOUND RECORDED IN SUCH REPORT OF DDIT AND ONLY THEREAFTER, BY APPLYIN G HIS MIND, HE HAS TO MAKE OUT HIS OPINION WHICH HAS TO BE TRANSLATED INT O THE REASONS IN WRITING. IN THIS CASE EXCEPT A SUM SAY RS. 2.5 LAKHS STATED TO BE AS CAPITAL GAINS RECEIVED THROUGH A PARTICULAR NUMBER OF D.D. DRAWN ON A PARTICULAR BANK IS FOUND TO BE CORRECT BUT THE ENTIRE OTHER IN FORMATIONS ARE FOUND TO BE INCORRECT. THE ASSESSEE HAS NOT AT ALL DEALT WITH P ERSONS NAMED IN THAT REPORT. THE ASSESSEE HAS NOT RECEIVED ANY CAPITAL GA IN ON THE TRANSACTIONS OF SHARES DURING THE RELEVANT YEAR. THE ASSESSEE HA D ALREADY DISCLOSED TWO GIFTS OF RS. 2.50 LAKHS AND RS. 2.00 LAKHS IN HIS O RIGINAL RETURN AND HAS SUBMITTED THE ENTIRE REQUISITE INFORMATIONS REGARDI NG THE GIFTS. THERE ARE PLETHORA OF DECISIONS IN THIS DIRECTION WHICH CLEAR LY EXHORT THAT ONLY ON BASIS OF VAGUE INFORMATION OF THE DEPARTMENT WHICH IS NOT SPECIFIC AND RELEVANT, ACTION UNDER SECTION 147 READ WITH SECTIO N 148 CANNOT BE TAKEN. THE EXISTENCE OF ESCAPED ASSESSMENT WITH REGARD TO A PARTICULAR INCOME IS A PRECONDITION FOR TAKING SUCH AN ACTION. IF THE REASONS ARE NOT FOUND TO BE CORRECT, IT HAS TO BE PRESUMED THAT THE VERY REASON RECORDED BY THE LEARNED A.O. FOR MAKING REASSESSMENT WAS NON -EXISTENT AND THUS IT WAS INVALID. THERE IS A SUBTLE AND TENUOUS DIFFEREN CE BETWEEN THE VALIDITY AND INVALIDITY OF REASONS IN A GIVEN SET OF FACTS. IF A REASONS IS FOUND TO BE CORRECT AND VALID ANT TO EXIST ON THE DATE OF RECOR DING OF REASONS ON THE BASIS OF INCOMPLETE OR INCORRECT FACTS AND SUBS EQUENTLY AFTER EXAMINING THE ENTIRE RECORDS IT IS FOUND THAT THE F ACTS CONCEIVED BY THE LEARNED A.0 AT THAT TIME WERE NOT CORRECT, IN THAT EVENTUALITY, THE REASONS RECORDED BECOME RETROSPECTIVELY INVALID. MEANING TH EREBY SUBSEQUENT FINDING OF FACT STILL INVALIDATE VALID REASONS WHIC H WERE SUPPORTED TO BE SO AT THE TIME OF RECORDING OF REASONS. MANY A TIMES T HIS LEGAL POSITION IS CONFUSED WITH THE CASES WHERE THE REASONS ARE VALID AS PER THE RECORDS BUT DURING RE-ASSESSMENT PROCEEDINGS THE ASSESSEE S UCCEEDS IN EXPLAINING AND THAT IS WHY ADDITION QUA THAT GROUND IN REASONS IS NOT MADE, STILL THE 'AO CANNOT BE SAID TO HAVE NOT VALID REASONS. THE E XISTENCE OF FACTS HELPS THE AO TO FORM HIS SUBSTANTIVE SATISFACTION BASED O N MATERIAL FACTS AVAILABLE BEFORE HIM AS EXPLAINED BUT THOSE FACTS A RE NEVER FOUND TO BE NON- EXISTENT. NATURALLY IN THAT SITUATION IT CANNOT BE SAID THAT THE REASONS WAS NOT VALID AND MOREOVER SUBSEQUENT EXPLAINED POSITIO N OF THOSE FACTS WOULD NOT RENDER THE REASON AS INVALID. THEREFORE, IN EACH AND EVERY CASE A FINE DISTINCTION HAS TO BE DRAWN BETWEEN THESE TW O SETS OF SATISFACTION. IN THE GIVEN CASE THE LEARNED AO HAS NO VALID REASONS FOR RESORTING TO SECTION 147/148 OF THE ACT AND THEREFORE, IT CAN BE SAFELY SAID THAT HE HAD ONLY VAGUE AND IRRELEVANT REASONS FOR MAKING ROVING AND FISHIN G ENQUIRIES IN ORDER O FIND CERTAIN FACTS BASED AS A SEQUEL OF PUBLICITY G IVEN IN PRINT AND I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 11 OF 12 ELECTRONIC MEDIA REGARDING A SCAM OF GIVING ACCOMMO DATION ENTRIES. HENCE A VAGUE INFORMATION RECEIVE BY THE O EVEN FROM THE INVESTIGATION WING OF THE DEPARTMENT COULD NOT JUSTIFY THE REASON S. IN THE RESULT WE HOLD THAT THE ASSUMPTION OF JURISDICTION FOR REASSE SSMENT ON THE BASIS OF VAGUE AND INVALID REASONS HAS TO BE QUASHE D BEING NULL AND VOID. THE NOTICE UNDER SECTION 148 IS THEREFORE, QU ASHED AND AS A RESULT THE CONSEQUENTIAL RE-ASSESSMENT ORDER IS ALS O QUASHED.' 12. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REO PENING OF THE ASSESSMENT IN THE MATTER. I, THEREFORE, HOLD THAT ASSUMPTION OF JURIS DICTION FOR RE-ASSESSMENT ON THE BASIS OF VAGUE, INCORRECT AND NON-EXISTING REASONS QUA THE ASSESSEE, HAVE TO BE QUASHED. IN VIEW OF THE PECULIAR FACTS OF THE CASE, THE ORDER IN THE CASE OF SMT. KAMALJEET KALRA (SUPRA) OF ITAT (SMC) BENCH, AGRA C ANNOT BE GIVEN PREFERENCE IN THE MATTER. I, ACCORDINGLY, QUASH THE INITIATION AND RESULTANT PROCEEDINGS U/S. 148 OF THE INCOME-TAX ACT IN THE MATTER AGAINST THE ASSESSEE. IN VIEW OF THE ABOVE FINDING, THERE IS NO NEED TO DECIDE THE ISSUE OF GE NUINENESS OF GIFT, AS THE SAME HAS BECOME ACADEMIC IN NATURE. RESULTANTLY, ALL ADD ITIONS MADE IN THE RE- ASSESSMENT PROCEEDINGS WOULD STAND DELETED. AS A RE SULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. I SEE NO REASON TO TAKE A VIEW DIFFERENT FROM T HAT TAKEN BY CO-ORDINATE BENCH IN THE ABOVE ORDER UNDER IDENTICAL FACTS AND CIRCUMSTA NCES. I, THEREFORE, FOLLOWING THE ABOVE DECISION, UPHOLD THE GRIEVANCE OF ASSESSEE ON VALIDITY OF REASSESSMENT PROCEEDINGS, REVERSE THE IMPUGNED ORDER AND QUASH T HE RE-ASSESSMENT ORDER. 7. IN VIEW OF THE FACT THAT ONCE THE REASSESSMENT O RDER ITSELF STANDS QUASHED, I SEE NO NEED TO DEAL WITH OTHER ARGUMENTS SO STRENUOUSLY ADVANCED BY THE LEARNED COUNSEL ON MERITS OF THE CASE. THE SAME IS RENDERED WHOLLY ACADEMIC. 8. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON 24 TH JUNE, 2015. SD/- PRAMOD KUMAR (ACCOUNTAN T MEMBER) AGRA, THE 24 TH JUNE, 2015 PBN/* I.T.A. NO.172/AGRA/2014 ASSESSMENT YEAR 2002-03 PAGE 12 OF 12 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA