Shri Vipin Kumar Khanna, New Delhi V. ACIT, New Delhi

ITA 1734/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2823 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 12-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Unexplained investment; Gift; Salary income; Reason to believe; Reassessment proceedings
• Section: 234B; 147; 69; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO S . 173 3 & 173 4 /DEL/20 1 2 A.Y . : 200 3 - 0 4 & 2005 - 06 VIPIN KUMAR KHANNA, B-35, GREATER KAILASH-I, NEW DELHI 110 048 (PAN: AVDPK6630J) VS ACIT, CENTRAL CIRCLE - 5, NEW DELHI (APPELLANT) (APPELLANT) (APPELLANT) (APPELLANT) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) ASSESSEE BY : SH. SALIL AGGARWAL, SH. SHAILESH GUPTA, SH. MADHUR AGARWAL, ADV. DEPARTMENT BY : SH. AMIT JAIN, SR. DR ORDER ORDER ORDER ORDER PER H.S. SIDHU, JM PER H.S. SIDHU, JM PER H.S. SIDHU, JM PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THESE APPEALS AGAINST THE RESPECTIVE IMPUGNED ORDERS BOTH DATED 29.2.2012 PASSED BY THE LD. CIT(A )-XXXI, NEW DELHI, RELEVANT TO ASSESSMENT YEARS 2003-04 & 2005-06. SI NCE THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON AND IDENTICAL, HENCE, THE APPEALS ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF C ONVENIENCE, BY DEALING WITH THE FACTS INVOLVED IN ASSESSMENT YEAR 2003-04. THE GROUNDS RAISED IN BOTH THE APPEALS ARE SAME, EXCEPT THE CHANGE IN FIGURE, THER EFORE, FOR THE SAKE OF BREVITY, I AM REPRODUCING ONLY THE GROUNDS IN RESPECT OF ASS ESSMENT YEAR 2003-04 AS UNDER:- 1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XXXI, NEW DELHI HAS GROSSLY ERRED BOTH IN 2 LAW AND ON FACTS IN UPHOLDING THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AND FRAMIN G OF ASSESSMENT UNDER SECTION 147/143(3) OF THE ACT WHICH WERE WITHOUT JURISDICTION AND THEREFORE DESER VES TO BE QUASHED AS SUCH. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT THERE WAS N O MATERIAL MUCH LESS VALID MATERIAL TO HAVE REASON TO BELIEVE THAT INCOME OF THE APPELLANT HAS ESCAPED ASSESSMENT AND AS SUCH, PROCEEDINGS INITIATED MECHANICALLY AND WITHOUT INDEPENDENT APPLICATION OF MIND FOR THE PURPOSE OF INVESTIGATION WERE NOT IN ACCORDANCE WITH LAW AND THUS UNSUSTAINABLE. 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACT S IN UPHOLDING THE ADDITION OF RS. 38,33,506/- REPRESENT ING REMITTANCES RECEIVED BY THE APPELLANT AND HELD TO B E UNEXPLAINED INVESTMENT. 2.L THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT APPELLANT HAD TENDERED COMPLETE EVIDENCE IN SUPPORT OF THE REMITTANCES RECEIVED BY BANKING CHANNELS FROM REMITTING COMPANIES SUPPORTED BY CONFIRMATION AND THEREFORE THE SAME COULD NOT BE HELD TO BE UNEXPLAINED. 3 2.2 THAT THE FINDING RECORDED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THAT MERE FACT , DOCUMENTS ARE NOTARIZED/AUTHENTICATED BY HIGH COMMISSIONER DOES NOT IN ANY MANNER ESTABLISH CREDITWORTHINESS OF THE APPELLANT. MOREOVER, THE CONTENTS OF THE DOCUMENT ARE NOT TESTIFIED. THE BAS IC BURDEN WAS TO SHOW WITH TANGIBLE EVIDENCE THAT MONI ES RECEIVED REPRESENTED FUNDS HELD BY THE APPELLANT ABROAD AND WERE OUT OF INCOME EARNED BY HIM IN THE PRECEDING YEARS IS FACTUALLY INCORRECT, LEGALLY MISCONCEIVED AND THEREFORE UNSUSTAINABLE. 2.3 THAT BOTH THE AUTHORITIES BELOW HAVE CONFIRME D THE ADDITION BY RELYING ON EXTRANEOUS AND IRRELEVAN T CONSIDERATION AND OVERLOOKING THE SUBMISSION OF THE COMPANIES AND IN ABSENCE THEREOF, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE APPELLANT. 3. `THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT SUMS RAISED BY THE APPELLANT ABROAD BY MORTGAGING HIS PROPERTY COU LD NOT IN LAW OTHERWISE BE TREATED AS INCOME OF THE APPELLANT WITHOUT DISCHARGING THE BURDEN WHICH LAY UPON THE REVENUE THAT SUCH LOANS RAISED REPRESENTED INCOME OF THE APPELLANT. 3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE LEVY OF INTEREST ULS 234B AND ULS 234 C 4 WHICH IS NOT LEVIABLE AT ALL ON THE FACTS OF THE IN STANT CASE. IT IS THEREFORE, PRAYED THAT IT BE HELD THAT NOTICE ISSUED UNDER SECTION 147 OF THE ACT AND ASSESSMENT FRAMED UNDER SECTION 1471/43(3) OF THE ACT WERE WITHOUT JURISDICTION AND THEREFORE, BE QUASHED. IT BE FURTHER HELD THAT ADDITION SO MADE TOGETHER WITH IN TEREST LEVIED ARE NOT IN ACCORDANCE WITH LAW AND ARE THEREFORE, DELETED AND APPEAL OF THE APPELLANT MAY KINDLY BE ALLOWED. 2. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CAS E, A NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE A CT) WAS ISSUED ON 30.4.2007 ON THE GROUND THAT INFORMATION WAS RECEIVED FROM ED THAT ASSESSEE HAD RECEIVED FOLLOWING REMITTANCES IN HIS BANK ACCOUNT: S.NO. S.NO. S.NO. S.NO. DATE DATE DATE DATE OVERSEAS REMITTING OVERSEAS REMITTING OVERSEAS REMITTING OVERSEAS REMITTING REMITTANCE I REMITTANCE I REMITTANCE I REMITTANCE IN REMITTANCE N REMITTANCE N REMITTANCE N REMITTANCE US$ US$ US$ US$ IN RUPEES IN RUPEES IN RUPEES IN RUPEES 1 31.05.2002 BACCANO HOLDING INC 5000 3,55,5 53 2 05.06.2005 BACCANO HOLDING INC 21000 10,24,1 91 3 04.07.2002 BACCANO HOLDING INC 32800 15,93, 148.48 4 19.10.2002 HAZELDENE LIMITED 10000 4,81,104 5 20.01.2003 BACCANO HOLDING INC 5000 3,79 ,509.50 TOTAL 73800 38,33,505.98 2.1 IN RESPONSE TO SAID NOTICE, ASSESSEE FILED RE TURN OF INCOME DECLARING INCOME OF RS. 65,645/- IN THE STATUS OF RESIDENT BUT NOT O RDINARY RESIDENT. IN THE COURSE 5 OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS DIRECTE D TO EXPLAIN THE SOURCE OF REMITTANCES. IN RESPONSE, ASSESSEE FILED REPLY. HOW EVER, THE AO DID NOT ACCEPT THE CLAIM MADE BY THE ASSESSEE. HE HAS STATED THAT REMITTANCES WERE EXAMINED BY ADJUDICATING AUTHORITY IN THE CASE OF SHRI ARVIN D KHANNA, SON OF THE ASSESSEE SON .UNDER FEMA 1999 WHICH CLEARLY ESTABLISHES THAT MR. VIPIN KHANNA HAS NOT BROUGHT CREDIBLE EVIDENCE TO SUGGEST THAT HE HAD TH E CAPACITY TO MAKE REMITTANCES OF THE MAGNITUDE THAT HE HAS, OUT OF FU NDS LYING ABROAD OR THROUGH LOANS TAKEN/GRANTED. HE WAS THUS OF THE OPINION THA T EVIDENTIARY VALUE OF THE DOCUMENT FURNISHED BY ASSESSEE FROM C.I. LAW TRUST REMAINS DOUBTFUL. ACCORDINGLY HE HELD THAT THE RECEIPTS OF FOREIGN EX CHANGE BY SH. VIPIN KHANNA ARE HIS UNEXPLAINED INVESTMENT AS SH. VIPIN KHANNA HAS NOT OFFERED PROPER EVIDENCE REGARDING HIS CREDITWORTHINESS AND THEREFO RE HIS CAPACITY TO MAKE THE GIFTS HE CLAIMS TO HAVE MADE. THE AMOUNT OF RS. 38,33,506/- REPRESENTING THE INR EQUIVALENT TO THESE GIFTS WAS ADDED TO THE INC OME OF SH. VIPIN KUMAR U/S. 69 OF THE I.T. ACT, 1961 VIDE ORDER DATED 29.1.2008 AND ASSESSEES INCOME WAS ASSESSED AT RS. 38,21,890/- U/S. 143(3)/148 OF THE ACT. 3. AGGRIEVED WITH THE ASSESSMENT ORDER, THE ASSESSE E APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 29.2. 2012 HAS DISMISSED THE APPEAL OF THE ASSESSEE ON THE REOPENING AS WELL AS ON THE MERITS OF THE CASE. AGAINST THE IMPUGNED ORDER, THE ASSESSEE IS IN APP EAL BEFORE THE TRIBUNAL. 4. LD. COUNSEL OF THE ASSESSEE HAS REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND ALSO RELIED UPON THE SUBMISS IONS MADE BEFORE THE LD. CIT(A). HE STATED THAT THE ACTION OF THE LD. CIT (A) IN UPHOLDING THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT IS WITHOU T JURISDICTION AND THEREFORE DESERVES TO BE QUASHED AS SUCH. IT WAS FURTHER STA TED THAT LD. CIT(A) AS FAILED TO APPRECIATE THAT THERE WAS NO MATERIAL MUCH LESS VAL ID MATERIAL TO HAVE REASON TO 6 BELIEVE THAT INCOME OF THE APPELLANT HAS ESCAPED AS SESSMENT AND AS SUCH, PROCEEDINGS INITIATED MECHANICALLY AND WITHOUT INDE PENDENT APPLICATION OF MIND FOR THE PURPOSE OF INVESTIGATION WERE NOT IN ACCORD ANCE WITH LAW AND THUS UNSUSTAINABLE. IT WAS THE FURTHER CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE THAT LD. CIT(A) ALSO WRONGLY UPHELD THE ADDITION OF RS. 38,33,506/- REPRESENTING REMITTANCES RECEIVED BY THE ASSESSEE AND HELD TO BE UNEXPLAINED INVESTMENT. LD. CIT(A) FURTHER FAILED TO APPRECIATE THAT ASSESSEE H AD TENDERED COMPLETE EVIDENCE IN SUPPORT OF THE REMITTANCES RECEIVED BY BANKING CHANNELS FROM REMITTING COMPANIES SUPPORTED BY CONFIRMATION AND THEREFORE THE SAME COULD NOT BE HELD TO BE UNEXPLAINED. IT WAS FURTHER STATE D THAT THE OBSERVATION OF THE LD. CIT(A) THAT DOCUMENTS ARE NOTARIZED/AUTHENTICAT ED BY HIGH COMMISSIONER DOES NOT IN ANY MANNER ESTABLISH CREDITWORTHINESS O F THE ASSESSEE, ARE NOT CORRECT. MOREOVER, THE CONTENTS OF THE DOCUMENT AR E NOT TESTIFIED. THE BASIC BURDEN WAS TO SHOW WITH TANGIBLE EVIDENCE THAT MONI ES RECEIVED REPRESENTED FUNDS HELD BY THE ASSESSEE ABROAD AND WERE OUT OF I NCOME EARNED BY HIM IN THE PRECEDING YEARS IS FACTUALLY INCORRECT, LEGALLY MIS CONCEIVED AND THEREFORE UNSUSTAINABLE. IT WAS FURTHER STATED THAT LOWER AUT HORITIES HAVE CONFIRMED THE ADDITION BY RELYING ON EXTRANEOUS AND IRRELEVANT CO NSIDERATION AND OVERLOOKING THE SUBMISSION OF THE COMPANIES AND IN ABSENCE THER EOF, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESSEE. IT WAS ALSO NO T CONSIDERED BY THE AUTHORITIES BELOW THAT SUMS RAISED BY THE ASSESSEE ABROAD BY MORTGAGING HIS PROPERTY COULD NOT IN LAW OTHERWISE BE TREATED AS I NCOME OF THE APPELLANT WITHOUT DISCHARGING THE BURDEN WHICH LAY UPON THE R EVENUE THAT SUCH LOANS RAISED REPRESENTED INCOME OF THE ASSESSEE. IN VIEW OF ABOVE, LD. COUNSEL OF THE ASSESSEE STATED THAT NOTICE ISSUED UNDER SECTION 14 7 OF THE ACT AND ASSESSMENT FRAMED UNDER SECTION 147/143(3) OF THE ACT WERE WIT HOUT JURISDICTION AND THEREFORE, BE QUASHED AND ADDITION SO MADE TOGETHER WITH INTEREST LEVIED ARE NOT 7 IN ACCORDANCE WITH LAW AND MAY THEREFORE BE DELETE D. IN SUPPORT OF HIS AFORESAID CONTENTION ON THE LEGAL GROUND, HE RELIE D UPON THE FOLLOWING CASE LAWS BY FILING THE COPIES THEREOF AND STATED THAT T HE LEGAL ISSUE IN DISPUTE IS SQUARELY COVERED BY THE FOLLOWING CASE LAWS:- ITAT, DELHI A BENCH DECISION DATED 20.1.2015 IN T HE CASE OF BIR BAHADUR SINGH SIJWALI VS. ITO REPORTED IN (201 5) 68 SOT 197. ITAT, AMRITSAR BENCH SMC DATED 27.5.2016 IN THE C ASE OF GURPAL SINGH VS. ITO. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS O F THE AUTHORITIES BELOW AND OPPOSED THE REQUEST OF THE LD. COUNSEL OF THE A SSESSEE. ON THE ISSUE OF INITIATION OF PROCEEDINGS U/S. 147 IS CONCERNED, HE STATED THAT THERE WAS SUFFICIENT MATERIAL AS RECEIVED FROM DRI TO ENABLE THE AO TO HAVE A PRIMA FACIE OPINION THAT INCOME OF THE ASSESSEE HAD ESCAPED ASS ESSMENT AND AS SUCH, INITIATION OF PROCEEDINGS IS VALID. HE FURTHER ST ATED THAT NO DISPUTE HAS BEEN RAISED THAT REMITTANCE RECEIVED WERE DISCLOSED IN THE RETURN OF INCOME AND INFACT, THE ASSESSEE HAD NOT EVEN FILED RETURN OF I NCOME. HENCE, HE STATED THAT LD. CIT(A) HAS RIGHTLY UPHELD THE INITIATION OF PRO CEEDINGS U/S. 147. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOLLOWING CASE LAWS: - RAYMOND WOOLEN MILLS LTD. VS. ITO AND OTHERS (236 ITR 34) - CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD. (2012) 342 ITR 169 (DELHI). 8 5.1 ON THE MERIT OF THE CASE, LD. DR ALSO RELIED UP ON THE ORDERS OF THE AUTHORITIES BELOW. HE STATED THAT EVIDENCE TENDE RED IS NOT SUFFICIENT TO DISCHARGE THE BURDEN WHICH LAY UPON THE ASSESSEE. HE FURTHER STATED THAT DOCUMENTS NOTORISED /AUTHENTICATED BY HIGH DOES N OT IN ANY MANNER ESTABLISH CREDITWORTHINESS OF THE ASSESSEE. HE FURTHER STAT ED THAT A PERSON HAVING INCOME FROM SALARY OF 50,000 ANNUALLY CANNOT BE EXPECTED TO REMIT SUM TO THE ASSESSEE AND, HIS FAMILY MEMBERS IN EXCESS OF 2 MIL LION USD AND THE BURDEN WAS HEAVILY TILTED TOWARDS HIM TO PROVE THE SOURCE BEYO ND REASONABLE DOUBT PARTICULARLY WHEN IT IS LOCATED OUTSIDE THE COUNTR Y AND THE AO MAY NOT HAVE ALL THE POWERS TO REACH OUT. HE FURTHER STATED THAT THE REMITTANCES RECEIVED BY THE ASSESSEE OF RS. 38,33,506/- REPRESENT UNEXPLAINED I NVESTMENT U/S. 69 OF THE ACT AND WAS RIGHTLY UPHELD BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE ON MY PART. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS, ESPECIALLY THE IMPUGNED ORDER AND THE CASE LAWS REFERRED BY BOTH T HE PARTIES. WE ARE OF THE OPINION THAT FIRSTLY THE LEGAL ISSUE IS REQUIRED TO BE ADJUDICATED RELATING TO INITIATION OF PROCEEDINGS U/S. 147 OF THE ACT. WE NOTE THAT THE ASSESSEE IS AN INDIVIDUAL WHO HAD GONE ABROAD IN 1985 AND, BECAME A NON-RESIDENT INDIAN AND AS SUCH DID NOT FILE ANY RETURN OF INCOME FOR T HE YEAR UNDER CONSIDERATION. IN THIS CASE NOTICE U/S. 148 OF THE ACT WAS ISSUED AND , THE ASSESSEE IN RESPONSE TO SAID NOTICE, FILED RETURNS OF INCOME. HOWEVER, THE AO VIDE ORDER DATED 29.12.2008 HAS DETERMINED THE INCOME OF THE ASSESSE E BY MAKING ADDITION OF REMITTANCES RECEIVED BY THE ASSESSEE IN HIS BANK AC COUNT, AND HELD TO BE UNEXPLAINED INVESTMENT U/S. 69 OF THE ACT I.E. RS. 38,33,506/- FOR AY 2003-04 & RS. 24,98,719/- FOR AY 2005-06 AND LD. CIT(A) VID E HIS IMPUGNED ORDER HAS UPHELD THE ASSUMPTION OF JURISDICTION U/S. 147 OF T HE ACT AND ADDITION IN DISPUTE. ON THE LEGAL, IT IS NOTED THAT IN THIS CASE NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 9 30.4.2007 AFTER OBTAINING PERMISSION OF CIT(C)-I BY RECORDING FOLLOWING REASONS:- INFORMATION RECEIVED FROM THE ENFORCEMENT DIRECTOR ATE REVEALS THAT SH. VIPIN KHANNA HAS RECEIVED FOLLOWIN G REMITTANCE DURING THE YEAR UNDER CONSIDERATION IN H IS BANK ACCOUNT NO. 52211184736 STANDARD CHARTERED BANK: S.NO. S.NO. S.NO. S.NO. DATE DATE DATE DATE OVERSEAS REMITTING OVERSEAS REMITTING OVERSEAS REMITTING OVERSEAS REMITTING REMITTANCE IN REMITTANCE IN REMITTANCE IN REMITTANCE IN REMITTANCE REMITTANCE REMITTANCE REMITTANCE US$ US$ US$ US$ /UK /UK /UK /UK IN RUPEES IN RUPEES IN RUPEES IN RUPEES 1 31.05.2002 BACCANO HOLDING INC UK 5000 3,55, 553 2 05.06.2005 BACCANO HOLDING INC 21000 10,24,191 3 04.07.2002 BACCANO HOLDING INC 32800 15,93,1 48.48 4 19.10.2002 HAZELDENE LIMITED 10000 4,81,104 5 20.01.2003 BACCANO HOLDING INC UK 5000 3, 79,509.50 TOTAL 73800 38,33,505.98.. AFTER PERUSING THE ABOVE REASONS AS MENTIONED IN TH E ASSESSMENT ORDER AND KEEPING IN VIEW THE FACTS OF THE CASE IN NO MAN NER IT CAN BE MADE A BASIS TO ASSUME THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSE SSMENT. IT IS NOTED THAT, EVEN AS PER THE REASONS RECORDED, THE BASIS IS THAT INFORMATION AS RECEIVED REVEALS THAT REMITTANCES HAS RECEIVED BY THE ASSESS EE AND IT HAS NOT BEEN STATED THAT ON WHAT BASIS, IT HAS BEEN ASSUMED THAT, SUCH REMITTANCES RECEIVED BY THE ASSESSEE REPRESENTED THE INCOME OF THE ASSESSEE. HO WEVER, THERE IS NO MATERIAL IN THE POSSESSION OF THE AO AS IS OTHERWISE EVIDENT FROM THE REASONS RECORDED WHICH COULD ENABLE THE AO TO HAVE REASON TO BELIEVE THAT SUM OF RS. 38,33,506/- REPRESENTED THE INCOME OF THE ASSESSEE. THE REASON RECORDED ARE 10 BASED ON N MATERIAL IN AS MUCH AS THERE IS NO MATER IAL TO ALLEGE, ASSUME OR EVEN CONCLUDE THAT, SUCH REMITTANCE RECEIVED REPRESENTED THE INCOME OF THE ASSESSEE AND THEREFORE, THE ASSUMPTION OF JURISDICTION AND U PHOLDING THEREOF IS NOT SUSTAINABLE IN THE EYES OF LAW. THEREFORE, THE CASE LAWS REFERRED BY THE LD. DR ARE DISTINGUISHED FACTS, HENCE, ARE NOT APPLICABL E IN THE PRESENT CASE. HOWEVER, THE CASE LAWS REFERRED BY THE LD. COUNSEL OF THE ASSESSEE ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, HENCE, OUR VIEW IS FORTIFIED BY THE ITAT, DELHI A BENCH DECISION DATED 20.1.2015 IN THE CASE OF BIR BAHADUR SINGH SIJWALI VS. ITO REPORTED IN (2015) 68 SOT 197 (DELHI TRIBUNAL ) WHEREIN THE TRIBUNAL HAS HELD AS UNDER:- 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 6. A PLAIN LOOK AT THE REASONS FOR REOPENING THE AS SESSMENT, AS PRODUCED BEFORE US, SHOW THAT THESE REASONS WERE RECORDED AFTER THE NOTICE WAS SERVED ON 14TH SEPTEM BER 2009 AS A MENTION ABOUT THE FACT OF SERVICE OF NOTI CE IS SET OUT IN THE RECORDED REASONS ITSELF IT IS ONLY ELEME NTARY THAT THE REASONS ARE TO BE RECORDED BEFORE ISSUANCE OF NOTIC E, AND IN THE ABSENCE OF ANY REASONS FOR REOPENING HAVING BEE N RECORDED PRIOR TO REOPENING OF ASSESSMENT, THE REAS SESSMENT PROCEEDINGS FAIL FOR THIS SHORT REASON ALONE. HON'B LE BOMBAY 11 HIGH COURT, IN THE CASE OF PRASHANT S. JOSHI V. ITO [2010] 3/4 ITR 154/189 TAXMANN 1 HAS OBSERVED: 'THE AO MUST HAVE REASONS TO BELIEVE THAT SUCH IS T HE CASE (I.E. ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR A PARTICULAR YEAR) BEFORE HE PROCEED S TO ISSUE NOTICE UNDER S. 147'. IN OTHER WORDS, WHEN NO REASONS ARE RECORDED FOR REOPENING THE ASSESSMENT PRIOR TO ISSUANCE OF NOTICE, THE REASSESSMENT PROCEEDINGS MUST MIL FOR THAT REASON ALONE. HOWEVER , FOR THE REASONS WE WILL SET OUT NOW, THE CONCLUSION S WILL BE NO DIFFERENT EVEN IF IT IS PRESUMED THAT THIS COMMUNICATION, EXTRACTS FROM WHICH ARE REPRODUCED BEFORE, ONLY CONVEYS THE REASONS ALREADY RECORDED PRIOR TO ISSUANCE OF NOTICE. 7. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECOR DED FOR REOPENING THE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASO NS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REAS ONS SO RECORDED. HON'BLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR [2004] 268 ITR 12 3321137 TAXMANN 479 , HAS, INTER ALIA, OBSERVED THA T ' IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED T O BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE R EASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASI S 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 SHO ULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PRO VIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE .... '. THEREFO RE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESC APEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SU CH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETEC TION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STA GE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF TH AT AN 13 INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NEC ESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT I S PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT TH ERE MUST BE SOMETHING 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 SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIE W THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEE N FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS A ND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSIS TS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HA VE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING TH E ASSESSMENT. THE LATTER CATEGORY CONSISTS OF THE FAC TS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS 14 ESCAPED ASSESSMENT. THERE HAS TO BE SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECORDED AN D THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE FOL LOWING OBSERVATIONS MADE BY HON'BLE SUPREME COURT IN THE C ASE OF ITO V. LAKHMANI MEWAL DAS [1976] L03ITR437, ' THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF RATIONAL CONNECTION POSTULA TES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETW EEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND TH E FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPE MENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN TH E PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE T HAT 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 TIM E WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVER Y 15 MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT , REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF T HE INCOME OF THE ASSESSEE FROM ASSESSMENT. ' 8. LET US, IN THE LIGHT OF THIS LEGAL POSITION, REV ERT TO THE FACTS OF THE CASE BEFORE US. ALL THAT THE REASONS RECORDED F OR REOPENING INDICATE IS THAT CASH DEPOSITS AGGREGATIN G TO RS 10,24,100 HAVE BEEN MADE IN THE BANK ACCOUNT OF THE ASSESSEE, BUT THE MERE FACT THAT THESE DEPOSITS HAV E BEEN MADE IN A BANK ACCOUNT DOES NOT INDICATE THAT THESE DEPOSITS CONSTITUTE AN INCOME WHICH HAS ESCAPED ASSESSMENT. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT DONOT MAKE OUT A CASE THAT THE ASSESSEE WAS ENGAGED IN SOME BU SINESS AND THE INCOME FROM SUCH A BUSINESS HAS NOT BEEN RE TURNED BY THE ASSESSEE. AS WE DO NOT HAVE THE LIBERTY TO E XAMINE THESE REASONS ON THE BASIS OF ANY OTHER MATERIAL OR FACT, OTHER THAN THE FACTS SET OUT IN THE REASONS SO RECORDED, IT IS NOT OPEN TO US TO DEAL WITH THE QUESTION AS TO WHETHER THE A SSESSEE COULD BE SAID TO BE ENGAGED IN ANY BUSINESS; ALL TH AT IS TO BE EXAMINED IS WHETHER THE FACT OF THE DEPOSITS, PER S E, IN THE BANK ACCOUNT OF THE ASSESSEE COULD BE BASIS OF HOLD ING THE VIEW THAT THE INCOME HAS ESCAPED ASSESSMENT. THE AN SWER, IN OUR HUMBLE UNDERSTANDING, IS IN NEGATIVE. THE AS SESSING OFFICER HAS OPINED THAT AN INCOME OF RS 10,24,100 H AS ESCAPED ASSESSMENT OF INCOME BECAUSE THE ASSESSEE H AS RS 16 10,24,100 IN HIS BANK ACCOUNT BUT THEN SUCH AN OPIN ION PROCEEDS ON THE FALLACIOUS ASSUMPTION THAT THE BANK DEPOSITS CONSTITUTE UNDISCLOSED INCOME, AND OVERLOOKS THE FA CT THAT THE SOURCES OF DEPOSIT NEED NOT NECESSARILY BE INCOME O F THE ASSESSEE. OF COURSE, IT MAY BE DESIRABLE, FROM THE POINT OF VIEW OF REVENUE AUTHORITIES, TO EXAMINE THE MATTER IN DETAIL, BUT THEN REASSESSMENT PROCEEDINGS CANNOT BE RESORTE D TO ONLY TO EXAMINE THE FACTS OF A CASE, NO MATTER HOW DESIRABLE THAT BE, UNLESS THERE IS A REASON TO BELIEVE, RATHE R THAN SUSPECT, THAT AN INCOME HAS ESCAPED ASSESSMENT. 9. LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRED TO A NUMBER OF JUDICIAL PRECEDENTS IN SUPPORT OF HER STA ND THAT EVEN DEPOSITS IN THE BANK ACCOUNT, AS HAVING COME T O THE NOTICE OF THE ASSESSING OFFICER THROUGH AIR, CAN BE REASON ENOUGH FOR HOLDING THE BELIEF THAT INCOME HAS ESCAP ED ASSESSMENT. SHE HAS RELIED UPON THE DECISIONS IN TH E CASES OF CIT V. NOVA PROMOTERS & FINLEASE (P) LTD [2012]342 ITR 169/206 TAXMANN 207/18 TAXMANN.COM 217 (DELHI) BUT THEN NONE OF THE QUESTIONS BEFORE HONBLE HIGH COURT HAD ANYTHING TO DO WITH REOPENING OF ASSESSMENT AND THI S DECISION CANNOT, THEREFORE, BE TAKEN AS AN AUTHORIT Y ON THE LEGAL ISSUE WHICH DID NOT EVEN COME UP FOR SPECIFIC ADJUDICATION BEFORE THEIR LORDSHIPS. AS FOR HER REL IANCE ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF PHOOL CHAND BAJRANG LAL V. ITO [1993] 203ITR 456/69 TAXMANN 627 , THAT WAS CASE IN WHICH THEIR LORDSHIPS CONCLUDED THAT TH E AO 'RIGHTLY INITIATED THE REASSESSMENT PROCEEDINGS ON THE BASIS OF 17 SUBSEQUENT INFORMATION, WHICH WAS SPECIFIC RELEVANT AND RELIABLE, AND AFTER RECORDING THE REASONS FOR FORMA TION OF HIS OWN BELIEF THAT IN THE ORIGINAL ASSESSMENT PROCEEDI NGS, THE ASSESSEE HAD NOT DISCLOSED THE MATERIAL FACTS TRULY AND FULLY AND, THEREFORE, INCOME CHARGEABLE TO TAX HAD ESCAPE D ASSESSMENT' AND WE ARE UNABLE TO SEE ANYTHING ON TH E FACTS OF THE PRESENT CASE WHICH ARE MATERIALLY SIMILAR TO THE FACTS OF THE SAID CASE. AS REGARDS HER RELIANCE ON THE DECIS ION OF A COORDINATE BENCH IN THE CASE OF MITHILA CREDIT SERV ICES LTD. V. ITO [IT APPEAL NO. 1078IDELHI OF2013; DATED 23.5.20 14], IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT IT WAS A CASE IN WHICH THE ASSESSING OFFICER HAD REOPENED THE ASSESS MENT ON THE BASIS OF RECEIPT OF INFORMATION FROM DIRECTORAT E OF INVESTIGATION, AND, AS NOTED BY THE ASSESSING OFFIC ER IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, 'THE NAME OF THE ASSESSEE FIGURES AS ONE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS' IN THE INFORMATION GIVE N BY THE DIRECTORATE. IF THE ASSESSEE WAS A BENEFICIARY OF S UCH A SCAM, THE INCOME WAS INDEED TO HAVE BEEN TAXED IN ITS HAN DS BUT THEN IN THE CASE BEFORE US THE ONLY REASON FOR REAS SESSMENT PROCEEDINGS WAS THE FACT OF DEPOSIT OF BANK ACCOUNT WHICH BY ITSELF DOES NOT LEAD TO INCOME BEING TAXED IN TH E HANDS OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE H AS REFERRED TO SEVERAL OTHER JUDICIAL PRECEDENTS IN SU PPORT OF THE PROPOSITION THAT AT THE STAGE OF INITIATION OF REAS SESSMENT PROCEEDINGS, ALL THAT IS TO BE SEEN AS EXISTENCE, R ATHER THAN ADEQUACY, OF THE MATERIAL TO COME TO THE CONCLUSION THAT 18 INCOME HAS ESCAPED ASSESSMENT. TO US, THERE CANNOT BE ANY, AND THERE IS NO, DOUBT ON THE CORRECTNESS OF THIS P ROPOSITION BUT THEN, AS WE HAVE ELABORATELY EXPLAINED EARLIER IN THIS ORDER, THE MATERIAL MUST INDICATE INCOME ESCAPING ASSESSMENT RATHER THAN DESIRABILITY OF FURTHER PROB E IN THE MATTER WHICH MAY OR MAY NOT LEAD TO INCOME ESCAPING THE ASSESSMENT. ON THE BASIS OF REASONS AS RECORDED IN THIS CASE, SUCH AN INFERENCE ABOUT INCOME ESCAPING ASSESSMENT, IN OUR HUMBLE UNDERSTANDING, CANNOT BE DRAWN. 10. IN VIEW OF THE REASONS SET OUT ABOVE, AS ALSO B EARING IN MIND ENTIRETY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE REASONS RECORDED BY THE ASSESSING OFFICER, AS S ET OUT EARLIER, WERE NOT SUFFICIENT REASONS FOR REOPENING THE ASSESSMENT PROCEEDINGS. WE, THEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. AS THE REASSESSMENT ITSEL F IS QUASHED, ALL OTHER ISSUES ON MERITS OF THE ADDITION S, IN THE IMPUGNED ASSESSMENT PROCEEDINGS, ARE RENDERED ACADE MIC AND INFRUCTUOUS. 11. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. 6.1 MOREOVER, THE ITAT, AMRITSAR BENCH SMC DATED 27.5.2016 IN THE CASE OF GURPAL SINGH VS. ITO REPORTED AS (2016) 159 ITD 797 (AMRTISAR TRIB) HAS FOLLOWED THE AFORESAID ITAT, DELHI A BENCH DECI SION DATED 20.1.2015 IN THE CASE OF BIR BAHADUR SINGH SIJWALI VS. ITO REPORTED IN (2015) 68 SOT 197. 19 7. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES AS EXPLAINED ABOVE AND RESPECTFULLY FOLLOWING THE PRECEDENTS AS REFERRED B Y THE LD. COUNSEL OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE REASONS SET OUT BY THE AO WERE NOT SUFFICIENT REASONS FOR REOPENING THE ASSESSMENT PRO CEEDINGS. WE THEREFORE, QUASH THE ASSESSMENT PROCEEDINGS. AS THE REASSESSM ENT ITSELF IS QUASHED, ALL OTHER ISSUES ON MERITS OF THE ADDITIONS, IN THE ASS ESSMENT PROCEEDINGS, ARE RENDERED ACADEMIC AND INFRUCTUOUS. 8. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED IN THE AFORESAID MANNER. ORDER PRONOUNCED ON 16/03/2018. S SS SD DD D/ // /- -- - S SS SD DD D/ // /- -- - [ [[ [O.P. KANT O.P. KANT O.P. KANT O.P. KANT] ]] ] [ [[ [H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU] ]] ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR DATE: 16/03/2018 COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT ASSISTANT REGISTRAR, ITAT, DELHI BENCHES