M/s. National Finance Co., Jammu & Kashmir V. The Income-tax Officer, Jammu

ITA 181/ASR/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2248 (ITAT-AMRITSAR)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: P N ARORA
• Keywords: Depreciation; Validity of assessment; Reason to believe; Borrowed satisfaction
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.181(ASR)/2013 ASSESSMENT YEAR:2005-06 PAN :AABFN1262G M/S. NATIONAL FINANCE COMPANY, VS. INCOME TAX OFFIC ER, JAMMU. WARD-2(2), JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.P.N.ARORA, ADVOCATE RESPONDENT BY:SH.R.L.CHHANALIA, DR DATE OF HEARING:13/06/2013 DATE OF PRONOUNCEMENT:26/06/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), JAMMU, DATED 15.01.2013 FOR THE ASSESSMENT YEAR 200 5-06. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE LD. CIT(A) ARE BOTH AGAINST THE FACTS OF THE CASE AND UNTENABLE IN LAW. 2. THAT THE AUTHORITIES BELOW DID NOT APPRECIATE THAT THE PROVISIONS OF SECTION 147/148 OF THE INCOME-TAX ACT, 1961 ARE NOT AT ALL APPLICABLE IN THIS CASE ON THE FACTS & CIRCUMSTANCE OF THE CASE. ITA NO.181(ASR)/2013 2 3. THAT THE AUTHORITIES BELOW DID NOT APPRECIATE THAT THE PROVISIONS OF SECTION 147/148 OF THE I.T.ACT, 1961 ARE NOT AT ALL APPLICABLE AS THE CASE WAS REOPENED ON BORROWED SATISFACTION OF OTHER ASSESSING OFFICER WHICH IS NOT PERMISSIBLE UNDER TH E LAW. AS SUCH THE ORDER IS BAD IN LAW AND ACCORDINGLY THE AS SESSMENT COMPLETED IS LIABLE TO BE CANCELLED. 4. THAT THE CASE WAS REOPENED WITH THE PERMISSION OF T HE ADDL. COMMISSIONER OF INCOME TAX, RANGE-II, JAMMU AND THI S REOPENING IS ILLEGAL, INVALID AND VOID AB-INITIO, I NASMUCH AS, THE RE-OPENING OF THE CASE IS BAD AND ACCORDINGLY THE A SSESSMENT COMPLETED MAY BE CANCELLED. 5. THAT THE REASONS RECORDED FOR REOPENING THE CASE AR E NOT PROPER AS THERE WAS NO MATERIAL EVIDENCE ON THE RECORD AVA ILABLE WITH THE INCOME TAX OFFICER, WHO INITIATED THE PROCEEDIN GS U/S 147/148 OF THE INCOME TAX ACT, 1961. 6. THAT THE ISSUE OF NOTICE U/S 147/148 OF THE INCOME- TAX ACT, 1961 IS ILLEGAL, INVALID AND VOID AB-INITIO, AND T HE SAME IS LIABLE TO BE CANCELLED. 7. THAT THE LD. AO HAS GROSSLY ERRED IN ADDING A SUM O F RS.16,00,000/- ON ACCOUNT OF SHORT-TERM CAPITA GAIN . THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE SAME WIT HOUT APPLYING HIS MIND. THAT THERE WAS NO SHORT-TERM CAP ITAL GAIN AS THERE WAS NO SALE OF ASSETS. THE ADDITION HAS BEEN CONFIRMED BY THE LD. CIT(A) WITHOUT APPLYING HIS MIND AND WITHOU T APPRECIATING THE FACTS OF THE CASE. AS THERE WAS NO SALE OF ASSETS, THE QUESTION OF MAKING THE ADDITION OF RS.16,00,000 /- ON ACCOUNT OF SHORT-TERM CAPITAL GAIN DOES NOT ARISE A ND THIS ADDITION CONFIRMED BY THE LD. CIT(A) MAY BE DELETED . 8. THAT THE AO HAS GROSSLY ERRED IN ADDING A SUM OF RS.2,53,00,000 TO THE RETURNED INCOME ON ACCOUNT OF SO-CALLED INTEREST ON CAPITAL CREDITED IN THE BOOKS OF M/S. T RIKUTA COMMUNICATIONS. AGAIN THE LD. CIT(A) HAS ERRED IN CONFIRMING THE SAID ADDITION ON ACCOUNT OF INTEREST ON CAPITAL AT RS.2,53,000/-. THAT THIS ADDITION ON ACCOUNT OF INT EREST ON CAPITAL IS NOT AT ALL CALLED FOR AND THE SAME MAY B E DELETED. 9. ANY OTHER GROUND OF APPEAL THAT MAY BE URGED AT TH E TIME OF HEARING OF THE APPEAL. ITA NO.181(ASR)/2013 3 2. GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 3. AS REGARDS GROUNDS NO.2, 3 , 4, 5 & 6 WITH REGAR D TO APPLICABILITY OF SECTION 147/148 OF THE ACT, THE BRIEF FACTS ARE THA T THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31.08.2005 DECLARING AN INCOME OF RS.2,44,630/-, WHICH WAS ASSESSED U/S 143(3) OF THE ACT VIDE ORDER DATED 04.12.2009 AT AN INCOME OF RS.2,72,754/-. SUBSEQUENTLY, THE CASE WAS REOPE NED BY ISSUING NOTICE UNDER SECTION 148 DATED 30.01.2009 FOR THE REASONS MENTIONED AT PAGE 2 OF AOS ORDER THAT THE ASSESSEE HAS EARNED CAPITAL GA INS OF RS.16,00,000/- UNDER SECTION 45(3) OF THE ACT, SINCE THE FIRM M/S. TRIKUTA COMMUNCATIONS, BAHU PLAZA, JAMMU HAS DECLARED CAPITAL CONTRIBUTION OF RS.23,00,000/- IN THE FORM OF SHOP OF THE ASSESSEE, WHICH WAS ACQUIRE D BY THE ASSESSEE-FIRM AT RS.7,00,000/-. THUS, THE ASSESSEE HAS EARNED CAPIT AL GAINS OF RS.16,00,000/- AND ALSO THE SAID CONCERN M/S. TRIKUTA COMMUNICATIO NS HAD CREDITED AN AMOUNT OF RS.2,53,000/- AS INTEREST ON THE CAPITAL, WHICH HAS ALSO NOT BEEN DECLARED BY THE ASSESSEE-FIRM. THEREFORE, THE INCOM E OF RS.18,53,000/- HAS ESCAPED ASSESSMENT AND ACCORDINGLY PROCEEDINGS UNDE R SECTION 148 OF THE ACT WERE INITIATED. 4. BEFORE THE LD. CIT(A), THE ASSESSEE MADE THE SUB MISSIONS CHALLENGING THE VALIDITY OF ASSESSMENT MADE U/S 147 OF THE ACT AND ISSUE OF ITA NO.181(ASR)/2013 4 NOTICE U/S 148 OF THE ACT AND THE MADE THE SUBMISSI ONS BEFORE THE LD. CIT(A). THE SAID SUBMISSIONS WERE SENT TO THE AO FO R REMAND REPORT WHICH WERE SUBMITTED AND AFTER CONSIDERING THE REPLY OF T HE ASSESSEE ON THE REMAND REPORT CONFIRMED THE ACTION OF THE A.O. VIDE PARA 6 .1 OF HIS ORDER FOR ISSUING OF NOTICE U/S 148 AND MAKING ASSESSMENT U/S 147 OF THE ACT. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE ARGUED ON THE SIMILAR LINES, AS ARGUED BEFORE THE LD. CIT(A). IT WILL BE RELEVANT TO REPRODUCE THE ARGUMENTS AS ARE AVAILABLE IN CIT(A) S ORDER AT PAGES 2 TO 5 IN PARA 3.2 TO 3.14 AS UNDER: 3.2. THAT THE NOTICE U/S 148 WAS ISSUED ON THE BA SIS OF THE LETTER DATED 30.04.2008 WRITTEN BY ITO WARD-1(1), JAMMU, DIRECTING ITO WARD 2(2) JAMMU TO ISSUE NOTICE U/S 148 TO NATIONA L FINANCE CO. FOR THE ASSESSMENT YEAR 2005-06. THE LETTER STATES TH E SHOP WAS PURCHASED BY M/S. NATIONAL FINANCE CO. IN THE NAME OF ONE OF THE PARTNERS FOR RS. 7 LACS FROM JDA HOWEVER, THE SAME HAS BEEN VALUED AT RS.23,00,000/- IN TRIKUTA COMMUNICATIONS HENCE THERE IS CAPITAL GAIN OF RS.16,00,000/- TO THE ASSESSEE. THERE IS NO SUCH ENTRY OR ANY PROOF IN THE BOOKS OF NATIONAL FINANCE CO. WITH RE GARD TO THE VALUE OF RS.23,00,000/- AND HAS NEVER BEEN CONFIRMED BY NAT IONAL FINANCE CO. ITO WARD 2(2) HAS NOT EVEN RECORDED REASONS FOR IS SUING NOTICE U/S 148 ON THE ORDER SHEET WHICH IS PRE-REQUISITE OF T HE ACT. WE HAD DEMANDED THE REASONS ON THE BASIS OF WHICH NOTICE U/S 148 WAS ISSUED VIDE OUR LETTER DATED 31.09.2009. COPY OF THE REAS ONS GIVEN TO US ARE ANNEXED. OBJECTION TO THE SAME WERE FILED VIDE OUR LETTER DATED 3.12.2009. THIS ITSELF ESTABLISHES BEYOND DOUBT TH AT ITO WARD 2(2) DID NEITHER APPLY HIS OWN MIND NOR HAD ANY OTHER M ATERIAL EVIDENCE ON RECORD WARRANTING INVOKING OF PROVISIONS OF SEC TION147/148 OF THE IT.ACT AND IS THUS BAD IN LAW. HE HAS SIMPLY ACTE D ON THE DIRECTIONS OF HIS COLLEAGUE ITO STATIONED IN THE SAME PREMISE S. EVEN THE ITO WARD 1(1) HAD FAILED TO GET THE SAID CREDIT OF RS. 23 LAC APPEARING IN ITA NO.181(ASR)/2013 5 THE BOOKS OF TRIKUTA COMMUNICATIONS CONFIRMED OR S UPPORTED BY ANY OTHER EVIDENCE. 3.3. THE NOTICE U/S 148 HAS VIRTUALLY BEEN ISSUED BY THE ITO WARD 1(1) . IT IS ALSO SURPRISING TO NOTE AS TO HOW ITO WARD 1(1) CONCLUDED THAT THE ASSESSEE HAD CONCEALED ANY INCOME WHEN IT HAD NO JURISDICTION OVER THE CASE. THE ITO WARD 1(1) EVEN FAILED IN HIS DUTY TO VERIFY THE GENUINENESS OF THE CREDIT OF RS. 23 LAC IN THE CAPITAL ACCOUNT OF ONE OF THE PARTNERS WHILE MAKING THE AS SESSMENT U/S 143(3) OF THAT FIRM OVER WHICH HE HAD THE JURISDICTION AN D HAS ATTEMPTED TO PASS THE BUCK TO THE OTHER ITO DIRECTING HIM TO TA KE RECOURSE TO THE PROVISIONS OF SECTION 147/148. ALL THIS ITSELF SP EAKS VOLUMES THAT CAN LEAD TO OPENING A PANDORAS BOX. 3.4. CAN AN UNCONFIRMED AND BOGUS CREDIT APPEARING IN ANY PERSONS BOOKS, FORM THE BASIS OF NOT ONLY REOPENING THE OT HER PERSONS CASE U/S 147/148 BUT EVEN CONSIDERING THE CONCEALMENT IN TH AT OTHER PERSON HAND WHO DENIES THE SAME? 3.5. THERE IS NO EVIDENCE ON RECORD TO PROVE OR ES TABLISH THAT THE SHOP WAS SOLD FOR RS.23 LAC BY NATIONAL FINANCE CO . BUT FOR THE CREDIT RAISED BY TRIKUTA COMMUNICATIONS IN THEIR BOOKS. 3.6. WE HAVE OFFICIALLY INSPECTED THE FILE OF TRIK UKTA COMMUNICATIONS FOR THE A.Y. 2005-06 AND HAVE OBSER VED THAT INSPITE OF THE ITO DEMANDING PROOF OF CAPITAL INTRODUCED A ND EVEN THE VALUATION OF SHOP VIDE ORDER SHEET ENTRY DATED 29. 08.2006, NO CONFIRMATION OR VALUATION WAS FOUND TO BE FURNISHE D IN SUPPORT OF THE CREDIT OF RS. 23 LACS OR THE VALUATION OF SHOP IN THE ASSESSMENT OF TRIKUTA COMMUNICATION. STILL THE ITO DID NOT ACT A S PER LAW. THIS ITSELF PROVES THAT THE CREDIT OF RS. 23 LACS WAS F ALSE AND UNCONFIRMED. 3.7. THAT IT IS AN ESTABLISHED PRINCIPLE OF I.T. L AW THAT THE GENUINENESS OR CONFIRMATION OF ANY CREDIT, INVESTM ENT OR CASH CREDIT MUST BE ESTABLISHED AND CONFIRMED IN THE ASSESSMEN T OF THE PERSON IN WHOSE BOOKS THE CREDIT IS APPEARING. 3.8. THAT ITO WARD 1(1) DID NOT TAKE ANY STEP TO GET IT CONFIRMED OR EVEN INFORM ITO WARD 2(2) DURING THE COURSE OF REG ULAR ASSESSMENT PROCEEDINGS OF TRIKUTA COMMUNICATIONS. THE INFORMA TION WAS SENT TO ITA NO.181(ASR)/2013 6 ITO WARD 2(2) ONLY AFTER THE REGULAR ASSESSMENT OF TRIKUTA COMMUNICATIONS WAS FINALIZED U/S 143(3). 3.9. HAD ITO WARD 1(1) SOUGHT THE CONFIRMATION DU RING THE COURSE OF REGULAR ASSESSMENT PROCEEDINGS, IT WOULD NOT HA VE BEEN CONFIRMED BY NATIONAL FINANCE COMPANY THEREBY RESULTING IN D ISALLOWANCE OF SUM OF RS.253000/- PAID AS INTEREST IN THE HANDS O F TRIKUTA COMMUNICATIONS. ALSO DEPRECIATION ON SHOP WOULD HA VE TO BE DISALLOWED. THIS PROBABLY WOULD NOT HAVE SERVED TH E INTERESTS OF TRIKUTA COMMUNICATIONS. THUS, THE ITO WARD 1(1) P ROBABLY TOOK THIS ILLEGAL ROUTE TO BENEFIT TRIKUTA COMMUNICATIO NS. BY INFORMING ITO WARD-2 (2) ONLY AFTER THE ASSESSMENTS WERE FIN ALIZED AND BECAME TIME BARRED. 3.10. THAT IF THIS PRACTICE IS SOUGHT TO BE ACCEPT ED, THE DEPARTMENT WOULD NEVER BE ABLE TO DETECT CONCEALMENT BY WAY O F BOGUS CREDITS. SECTION 147 READS IF THE ASSESSING OFFICER HAS RE ASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSM ENT REQUIRES THE ITO TO FORM AN INDEPENDENT OPINION APPLYING HIS OWN MIND. THE ITO MUST HAVE REASON TO BELIEVE THAT THE INCOME H AS ESCAPED ASSESSMENT AND THE ITO MUST HAVE REASON TO BELIEVE SUCH INCOME HAS ESCAPED ASSESSMENT BY REASON OF THE OMISSION O R FAILURE ON THE PART OF THE ASSESSEE. BOTH THESE CONDITIONS ARE NO T SATISFACTION. IN THIS CASE THE ITO WARD-2(2) HAD NOT EVEN CARED TO VERI FY THE CORRECTNESS AND NATURE OF THE CREDIT BUT RELIED O NLY ON THE LETTER OR UNCONFIRMED INFORMATION, AS IT HAS AT NO POINT BEE N CONFIRMED BY NATIONAL FINANCE CO. 3.11. THAT M/S. NATIONAL FINANCE CO. HAD JOINED M /S. TRIKUTA COMMUNICATIONS JAMMU AS PARTNER VIDE PARTNERSHIP DEED DATED 09.09.2004 WITH THE LIMITED PURPOSE OF LETTING TH E SHOP WHICH OTHERWISE COULD NOT RENTED OUT AS PER THE TERMS A ND CONDITIONS OF THE JAMMU DEVELOPMENT AUTHORITY, THE LESSOR OF THE SHOP. NATIONAL FINANCE CO. WAS TO BE PAID A FIXED AMOUNT OF RS.23,000/- P.M. FOR USE OF SHOP AND HAD NO RIGHT TO THE PROF ITS OF THE FIRM. THIS IS ALSO SUPPORTED BY AN ADDITIONAL REGISTERE D AGREEMENT ENTERED BETWEEN TRIKUTA COMMUNICATION & NATIONAL FINANCE CO. ON 09.09.2004. ITA NO.181(ASR)/2013 7 3.12. THAT THE NATIONAL FINANCE CO. HAD CONTRIBUTE D SHOP AT BAHU PLAZA AS ITS CONTRIBUTION IN MIND WITHOUT ANY VA LUE. THE SAID SHOP WAS TO BE RETURNED BACK TO NATIONAL FINANCE CO. IN KIND ON DISSOLUTION OF TRIKUTA COMMUNICATION AND WAS DUL Y RETURNED ON DISSOLUTION OF TRIKUTA COMMUNICATIONS . NO VALUE O F THE SHOP WAS MENTIONED OR AGREED EITHER IN THE PARTNERSHIP DEE D OR IN THE DISSOLUTION DEED OR IN THE ADDITIONAL AGREEMENT. THUS NATIONAL FINANCE CO. WAS NOT AWARE OF THE AMOUNT OF RS. 23 LAC ALLEGED TO HAVE BEEN CREDITED IN THE BOOKS OF M/S. TRIKUTA COMMUNICATIONS AS COST OF SHOP. THIS FACT CAME TO THEIR KNOWLEDG E ONLY AFTER THE RECEIPT OF NOTICE U/S 148 ISSUED BY THE ITO WARD 2 (2). WHY AND HOW THIS AMOUNT WAS CREDITED IS KNOWN ONLY TO THE OTHE R PARTNERS OF TRIKUTA COMMUNICATIONS, WHO FOR ALL PRACTICAL PURP OSE WERE THE REAL PARTNERS LOOKING AFTER DAY TO DAY BUSINESS AND MAI NTAINING THE BOOKS OF ACCOUNTS. NATIONAL FINANCE CO. WAS MERELY A SLE EPING PARTNER. THIS SHOULD HAVE BEEN VERIFIED AND CONFIRMED DURING THE COURSE OF ASSESSMENT MADE U/S 143(3) OF THE ACT NOTHING WAS CONCEALED. NO NEW FACT HAS COME TO HIS KNOWLEDGE SUBSEQUENTLY. 3.13. THE LETTER DATED 30.04.2008 WRITTEN BY ITO W ARD 1(1) TO ITO WARD 2(2) ON THE BASIS OF WHICH THIS NOTICE U/S 14 8 HAS BEEN ISSUED CAN NOT BE TREATED AS MATERIAL EVIDENCE ON RECORD AND THE CREDIT OF RS.23,00,000/- IS FALSE, FICTITIOUS, UNCONFIRMED A ND WITHOUT ANY PROOF OR CONFIRMATION TO WARRANT THE ISSUE OF NOTICE U/S 148 ON ONE HAND AND ALSO RAISES SEVERAL OTHER QUESTIONS, LIKE (I) WHY THIS INFORMATION WAS NOT PASSED BEFORE THE FINALIZATION OF ASSESSMENT U /S 143(3) IN THE CASE OF TRIKUTA COMMUNICATIONS, (II) WHY DID ITO WARD 1 (1) DID NOT SUMMON PARTNER IN WHOSE ACCOUNT THIS CREDIT OF 23 LAC WAS STANDING TO GET THE SAME CONFIRMED. (III) WHY THE OTHER PARTNE RS DID NOT PRODUCE ANY PROOF OR VALUATION AS DEMANDED BY THE ITO WAD 1(1), (IV) WHY THE ITO WARD 1(1) DID NOT MAKE ASSESSMENT AS PER L AW AND OVERLOOKED TO VERIFY THE GENUINENESS OF THE CREDIT, (V) WHY WAS THE ADDITION NOT MADE IN THE ASSESSMENT OF TRIKUTA COMMUNICATIONS IN WHOSE BOOKS THE CREDIT APPEARED THAT WAS NOT CONFIRMED (VI) D OEST THE IT ACT AND RULES PERMIT ONE A.O. TO DIRECT ANOTHER ITO TO REO PEN SOME CASE NOT FALLING UNDER HIS JURISDICTION MAY BE TO COVER UP HIS OWN LAPSES OR OMISSIONS FOR REASONS KNOW TO HIM ETC. ITO WARD 1 (1) HAS CLEARLY DIRECTED ITO WARD (2) TO ISSUE NOTICE U/S 148 . T HIS ITSELF CONFIRMS THAT ITO WARD 2(2) DID NOT APPLY HIS OWN MIND BUT ACTED ON THE DIRECTIONS OF ITO WARD 1(1). THIS IS AGAINST THE L ETTER OF THE I.T.ACT. ITA NO.181(ASR)/2013 8 YOU ARE THEREFORE REQUESTED TO QUASH THE NOTICE IS SUED U/S 147/148 OF THE I.T. ACT AS THE SAME IS BAD IN LAW. EVEN OTHER WISE THE ASSESSEE HAS MADE NO CONCEALMENT AS IT HAD NEVER SOLD THE SHOP FOR ANY VALUE BUT HAD MERELY LENT IT FOR USE FOR A FIXED MONTHLY RET URN OF RS.23,000/- WHICH AMOUNT HAS BEEN DULY DECLARED AS INCOME IN T HE INDIVIDUAL RETURNS OF SHIV PRATAP GUPTA, ONE OF THE PARTNERS OF NATIONAL FINANCE CO. AS THE SHOP STANDS REGISTERED IN HIS NAME. THU S, THERE IS NO CONCEALMENT EVEN ON THIS COUNT. 6. THE REMAND REPORT AND REPLY OF THE REMAND REPORT IS AT PAGES 5 TO 8 OF CIT)S ORDER. ACCORDINGLY, THE LD. COUNSEL FOR THE ASSESSEE, MR. P.N.ARORA, ADVOCATE PRAYED TO QUASH THE ASSESSMENT MADE UNDER SECTION 147 SINCE THE ISSUE OF NOTICE ITSELF IS BAD IN LAW. HE RELIED UPO N THE DECISIONS OF VARIOUS COURTS OF LAW AVAILABLE IN THE PAPER BOOK AT PAGES 77 TO 120 AS UNDER: I) MOHD. YOUSUF WANI VS. ITO WARD 2 IN ITA NO.372( ASR)/2008 ORDER DATED 06.06.2011 FOR THE A.Y. 2004-05 ( IT AT AMRITSAR) II) SH. SANJEEV AGGARWAL PROPP. M/S. SHREE SATYA G URU RUBBER MILLS VS. DCIT CIRCLE IV, AMRITSAR IN ITA NO.547( ASR)/2011 ORDER DATED 01.11.2012 (ITAT, ASR). III) CIT VS. SFIL STOCK BROKING LTD. REPORTED IN 3 25 ITR 285 (DELHI) IV) CIT VS. SHREE RAJASTHAN SYNTEX LTD. 313 ITR 231 (RA J.) V) CIT VS. SMT. PARAMJIT KAUR 311 ITR 38 (P&H) VI) M.B.TRADERS VS. ACIT REPORTED IN 132 TTJ 490 ( ITAT NAGPUR). 7. THE LD. DR, MR. R.L.CHHANALIA, ON THE OTHER HAND , RELIED UPON THE ORDERS OF BOTH THE AUTHORITIES BELOW. ITA NO.181(ASR)/2013 9 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT SHOP WAS PURCH ASED BY THE ASSESSEE-FIRM IN THE NAME OF ONE OF THE PARTNERS FOR RS.7.00 LACS FROM JDA, WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS THE CREDIT OF RS.23 ,00,000/- BY M/S. TRIKUTA COMMUNICATIONS AND ACCORDINGLY THE INTEREST AMOUNT OF RS.2,53,000/- IS ONLY AT THE INSTANCE OF M/S. TRIKUTA COMMUNICATIONS . IT IS ALSO NOT IN DISPUTE THAT ITO WARD 1(1) WHO IS ITO OF M/S. TRIKUTA COMMU NICATIONS HAS SENT THE INFORMATION WITH REGARD TO THE CREDIT OF RS.23, 00,000/- APPEARING IN THE BOOKS OF M/S. TRIKUTA COMMUNICATIONS. NOTHING HAS B EEN BROUGHT ON RECORD THAT THE ASSESSEE-FIRM HAS CONFIRMED THE SAID CREDI T OF M/S. TRIKUTA COMMUNICATIONS. THE FACT THAT SHOP WAS GIVEN TO M/S . TRIKUTA COMMUNICATIONS AS A CONTRIBUTION TO M/S. TRIKUTA CO MMUNICATIONS AND THE SAID SHOP WAS RETURNED BACK TO THE ASSESSEE-FIRM ON DISSOLUTION OF M/S. TRIKUTA COMMUNICATIONS WHICH WAS DULY RETURNED ON THE DISSOLUTION OF SAID M/S. TRIKUTA COMMUNICATIONS. IT WAS ARGUED AND IS A MATTER OF RECORD IN THE SUBMISSIONS MADE BY THE ASSESSEE THAT THE ASSESSEE FIRM WAS NOT AWARE OF THE AMOUNT OF RS.23 LACS ALLEGED TO HAVE BEEN CRED ITED IN THE BOOKS OF TRIKUTA COMMUNICATIONS AS COST OF SHOP, WHICH IN FA CT, WAS RS. 7 LACS ONLY. THERE WAS NO CONFIRMATION SOUGHT FROM ASSESSEE FIR M DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) IN CASE OF M/S. TRIKUTA COM MUNICATIONS WITH REGARD ITA NO.181(ASR)/2013 10 TO THE SAID CREDIT OF RS. 23 LACS. THUS, ITO WARD 1 (1) HAS NOT PASSED ON THIS INFORMATION DURING THE PROCEEDINGS PENDING BEFORE H IM. IT WAS ONLY WHEN THE ASSESSMENT U/S 143(3) WAS FINALIZED AND THE LET TER DATED 30.04.2008 WRITTEN BY ITO WARD 1(1) TO ITO WARD 2(2) OF THE A SSESSEE AND ON THE BASIS OF SAID LETTER NOTICE U/S 148 WAS ISSUED. NOW THE Q UESTION ARISES WHETHER SUCH CREDIT OF RS. 23 LACS MAKES A MATERIAL EVIDENC E WHICH CAN BE SAID TO BE A REASON TO BELIEVE BY THE AO OF THE PRESENT ASSESS EE THAT INCOME HAS ESCAPED ASSESSMENT WHILE MAKING ASSESSMENT U/S 143( 3) OF THE ACT VIDE ORDER DATED02.03.2007 WITH SPECIFIC REFERENCE TO TH E SUBMISSIONS OF THE ASSESSEE, WHICH HAS NOT BEEN REBUTTED BY THE LD. DR OR BY THE LD. CIT(A) THAT THE SAID SHOP WAS RETURNED TO THE ASSESSEE-FIR M ON THE DISSOLUTION OF M/S. TRIKUTA COMMUNICATIONS AND THE SHOP WAS GIVEN FOR USE BY M/S. TRIKUTA COMMUNICATIONS. IT WAS ARGUED BY THE LD. CO UNSEL FOR THE ASSESSEE THAT THE SAID SHOP HAS ALREADY BEEN RETURNED BACK T O THE ASSESSEE-FIRM. FOR COMING TO THE CONCLUSION THAT THE AO HAS MATERIAL I N HIS HANDS TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, HAS TO APPLY HIS MIND. IN THE PRESENT CASE, WE DO NOT FIND THAT THE AO OF THE PRE SENT ASSESSEE HAS APPLIED HIS MIND THAT INCOME OF THE ASSESSEE HAS ESCAPED AS SESSMENT. IN SUCH FACTS AND CIRCUMSTANCES, IN THE ABSENCE OF ANY APPLICATIO N OF MIND BY THE AO INDEPENDENTLY, THE INFORMATION PASSED ON BY THE AO WARD 1(1) AT THE BEST ITA NO.181(ASR)/2013 11 CAN BE SAID TO BE A MERE DIRECTION AND NOT APPLICAT ION OF MIND IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SFIL STOCK BROKING LTD. REPORTED IN 325 ITR 285 AND HONBLE S UPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN 291 ITR 500 AND OTHER DECISIONS RELIED UPON BY THE LD. COUN SEL FOR ASSESSEE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE P RESENT CASE, REASSESSMENT MADE UNDER SECTION 147 OF THE ACT IS BAD IN LAW. TH US, GROUNDS NO. 2 TO 6 OF THE ASSESSEE ARE ALLOWED. 9. SINCE THE ASSESSEE HAS SUCCEEDED ON THE LEGAL GR OUNDS, WE DO NOT CONSIDER IT NECESSARY TO DECIDE THE ISSUE ON MERITS RAISED BY THE ASSESSEE IN GROUND NOS. 7 & 8. THUS, APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.181(ASR)/2003 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH JUNE, 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26TH JUNE, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. NATIONAL FINANCE CO; JAMMU. 2. THE ITO WARD 2(2), JAMMU. 3. THE CIT(A), JAMMU 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR.