ACIT, Circle-4(1), Kolkata, Kolkata V. M/s Karan Polymers(P) Ltd., Kolkata

ITA 1849/KOL/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9530 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 21-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: P K AGARWALA
• Keywords: Reopening of assessment; Tangible material; Accommodation entries; Reason to believe
• Section: 143(3); 133A; 143(1); 68; 148; 2

Judgement Text

1 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) BEFORE . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VA RKEY, JM] I.T.A. NOS. 1848 & 1849/KOL/2016 ASSESSMENT YEARS: 2009-10 & 2010-11 ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-4(1), KOLKATA. VS. M/S. KARAN POLYMERS PVT. LTD. (PAN: AABCK3114F)) APPELLANT RESPONDENT DATE OF HEARING 08.11.2018 DATE OF PRONOUNCEMENT 19.12.2018 FOR THE APPELLANT SHRI C. J. SINGH, SR. DR FOR THE RESPONDENT SHRI P. K. AGARWALA, FCA ORDER PER SHRI A.T.VARKEY, JM BOTH THESE APPEALS PREFERRED BY THE REVENUE ARE AGA INST THE SEPARATE ORDERS OF THE LD. CIT(A)-4, KOLKATA DATED 12.07.2016 FOR AYS 2009-10 AND 2010-11. SINCE FACTS ARE COMMON AND GROUNDS ARE IDENTICAL, EXCEPT VARIANCE I N AMOUNT, WE DISPOSE OF BOTH THESE APPEALS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE BY TAKING THE APPEAL FOR AY 2009-10 AS THE LEAD CASE. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST THE ACTION OF THE LD. CIT(A) IN CANCELLING THE REASSESSMENT ORDER BY FINDING THAT T HE INITIATION OF REASSESSMENT PROCEEDING MADE BY THE AO U/S. 147/148 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS BAD IN LAW. AGAINST THE SAID DECISION OF THE LD. CIT(A), THE REVENUE IS BEFORE US. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A MANUFACTURER OF UPVC PIPES AND FITTINGS. IT WAS INCORPORATED ON 25.04.1997. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 31.08.2009 DECLARING TOTAL INCOME OF RS.22,83,850/- . THE CASE WAS PROCESSED U/S. 143(1) OF 2 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 THE ACT ON 31.10.2010. LATER, THE AO ISSUED NOTICE U/S. 148 OF THE ACT DATED 28.03.2013 PROPOSING TO REOPEN THE ASSESSMENT FOR AY 2009-10. THE AO GAVE A COPY OF THE REASONS RECORDED VIDE LETTER DATED 24.02.2014 WHICH IS REPR ODUCED AS UNDER: A SEARCH/ SURVEY ACTION U/S 132/ 133A ON THE INCO ME TAX ACT 1961 WAS CONDUCTED AT THE RESIDENTIAL AND BUSINESS PREMISES OF SRI SURENDRA K UMAR JAIN AND HIS BROTHER VIRENDRA KUMAR JAIN. DURING THE COURSE OF POST SEARCH INVEST IGATION IT HAS BEEN ESTABLISHED THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES IN THE FORM OF SHARE CAPITAL THROUGH CHEQUE INSTEAD OF CASH. THE ASSESSEE CASH CIRCULATED THROU GH VARIOUS CHANNELS AND FINALLY COMES IN THE HANDS OF ASSESSEE IN THE FORM OF SHARE CAPITAL. THE ASSESSEE HAD INTRODUCED ITS UNDISCLOSED INCOME AMOUNTING TO RS. 90 LAKH IN THE FORM OF SHARE CAPITAL DURING THE FINANCIAL YEAR 2008-09. THUS THE UNDISCLOSED INCOME OF RS. 90 LAKH WAS REQU IRED TO BE ADDED IN THE RETURN OF INCOME FOR THE A.Y. 2009-10 BY THE ASSESSEE ON ITS OWN. SU CH ESCAPEMENT OF INCOME IS NOT DISCERNIBLE ON THE FACE OF THE RETURN OF INCOME. THIS ESCAPEMEN T HAS BEEN DISCOVERED AFTER SEARCH AND SURVEY OPERATION CONDUCTED BY DIT (INV), DELHI AT T HE RESIDENTIAL AND BUSINESS PREMISES OF SRI SURENDRA KUMAR JAIN AND HIS BROTHER SRI VIRENDRA KU MAR JAIN. THE ASSESSEE INCOME HAS ESCAPED ASSESSMENT DUE TO F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS. TH EREFORE THIS IS A FIT CASE TO ISSUE NOTICE U/S 148 OF THE INCOME TAX ACT. PURSUANT TO THE AFORESAID REASON TO REOPEN THE ASSE SSMENT, THE ASSESSEE OBJECTED TO THE REOPENING WHICH WAS DISPOSED OF BY THE AO VIDE LETT ER DATED 27.02.2014 AND THEREAFTER REASSESSMENT WAS FRAMED BY THE AO BY MAKING AN ADDI TION OF RS. 90 LACS. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO HOLD THE REOPENING ITSELF BAD IN LAW AND, THEREFORE, HE WAS PLEASED TO CANCEL THE REASSESSMENT ORDER. AGGRIEVED BY THE ACTION OF THE LD. CIT(A), THE REVENUE IS BEF ORE US. 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A UPVC PIPES MA NUFACTURING COMPANY AND FILED ITS RETURN OF INCOME ON 31.08.2009 DECLARING TOTAL INCO ME OF RS.22,83,850/-. THE CASE WAS PROCESSED U/S. 143(1) OF THE ACT ON 31.10.2010. THE REAFTER AO ISSUED NOTICE U/S. 148 OF THE ACT DATED 28.03.2013 PROPOSING TO REOPEN THE ASSESS MENT FOR AY 2009-10. THE MAIN GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) HAS NOT DECIDED THE MERIT OF THE ADDITION MADE BY THE AO, INSTEAD HAS CANCELLED THE SAME ON L EGAL ISSUE. ACCORDING TO THE LD. DR, THE LD. CIT(A) AFTER HAVING FOUND FAULT WITH THE AO S VERY INITIATION OF REOPENING OF THE 3 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 ASSESSMENT ITSELF, HELD IT AS BAD IN LAW WHICH ACTI ON, ACCORDING TO THE LD. DR, IS ERRONEOUS. THE LD. DR RELIED ON THE DECISION OF THE HONBLE GU JARAT HIGH COURT IN THE CASE OF AMIT POLYPRINTS (P) LTD. VS. DCIT (2018) 94 TAXMANN.COM 393 (GUJ.), THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVER Y STOCK BROKERS PVT. LTD. (2007) 161 TAXMAN 316 (SC) AND THE COORDINATE BENCH DECISION O F DELHI IN ITO, WD-11(6) VS. SMT. GURINDER KAUR (2006) 102 ITD 189 (DEL). ON THE OTH ER HAND, THE LD. AR SUPPORTED THE ACTION OF LD. CIT(A) AND RELIED ON THE FOLLOWING DE CISIONS TO SUPPORT THE IMPUGNED ORDER: I) DCIT VS. GREAT WALL MARKETING PVT. LTD. IN ITA N O. 660/KOL/2011 DATED 03.02.2016, II) ITO VS. LAKHMANI MEWAL DAS REPORTED IN 103 ITR 437, III) S. P. AGARWALLA VS. ITO REPORTED IN 140 ITR 10 10, IV) CIT VS. VINIYAS FINANCE & INVESTMENT PVT. LTD. REPORTED IN 357 ITR 646, V) PCIT VS. G AND G PHARMA INDIA LTD. 384 ITR 147 A ND VI) BASESAR PROPERTIES PVT. LTD. VS. ITO 59 ITR (TR IB) 84 (DEL). 5. BEFORE US THE LD. AR SUBMITTED THAT THE ASSESSEE IS RUNNING ITS FACTORY AT KOLKATA AND HAS NO CONNECTION OR RELATIONSHIP WITH SHRI SURENDR A KUMAR JAIN AND HIS BROTHER VIRENDRA KUMAR JAIN AT DELHI. ACCORDING TO LD. AR, THE AO S TATES IN HIS REASONS RECORDED TO REOPEN THAT HE WAS IN RECEIPT OF AN INFORMATION FROM DIT(I NV.), DELHI THAT WHILE THEY WERE CONDUCTING SEARCH/SURVEY OPERATION AT THE RESIDENTI AL AND BUSINESS PREMISES OF SRI SURENDRA KUMAR JAIN AND HIS BROTHER VIRENDRA KUMAR JAIN, THE Y CAME TO KNOW THAT THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES IN THE FORM OF SHARE CAPITAL THROUGH CHEQUE IN LIEU OF CASH AND BY THIS PROCESS THE ASSESSEE HAS INTRODUCED ITS UNDISCLOSED INCOME AMOUNTING TO RS. 90 LACS IN THE FORM OF SHARE CAPITAL. SINCE THIS FACT (LAUNDERING MONEY) WAS NOT DISCERNIBLE FROM THE RETURN OF INCOME, ACCORDING TO AO, THE ESC APEMENT OF INCOME HAPPENED DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL THE MATERIAL FACTS, WHEN THE RETURN OF INCOME WAS FILED AND FOR THE SAID REASON HE REOPENED THE ASSESSMENT. THE LD. AR CONTENDED THAT THE REASON RECORDED WAS VAGUE. THE LD. AR POINTED OUT THAT REASONS RECORDED DOES NOT EVEN SPECIFY THE DATE ON WHICH SE ARCH/SURVEY WAS CONDUCTED AT THE PREMISES OF THE JAIN BROTHERS; AND EVEN THOUGH THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE AO THAT IT HAD NO CONNECTION DIRECT OR INDIRECT WIT H THIS JAIN BROTHERS, THE AO WITHOUT BOTHERING TO ENQUIRE ABOUT THE VERACITY OF ASSESSEE S CONTENTIONS AND WITHOUT ANY OTHER 4 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 TANGIBLE MATERIAL TO SHOW THAT THE ASSESSEE HAD IND ULGED IN OBTAINING ACCOMMODATION ENTRIES IN THE FORM OF SHARE CAPITAL THROUGH CHEQUE IN LIEU OF CASH HAS GONE AHEAD TO MAKE THE ADDITION WITHOUT ANY ENQUIRY. THE LD. AR DREW OUR ATTENTION TO THE ASSESSMENT ORDER WHEREIN THE AO HAS MADE THE ADDITION AS UNDER: UNDISCLOSED INCOME OF RS.90,00,000/-: DURING THE COURSE OF SURVEY AT THE RESIDENTIAL AND BUSINESS PREMISES OF SHRI SURENDRA KUMAR JAIN AND H IS BROTHER VIRENDRA KUMAR JAIN IT WAS ESTABLISHED THAT THE ASSESSEE HAD OBTAINED ACCOMMOD ATION ENTRIES IN THE FORM OF SHARE CAPITAL THROUGH CHEQUE IN LIEU OF CASH. THE ASSESS EE CASH CIRCULATED THROUGH VARIOUS CHANNELS AND FINALLY COMES IN THE HANDS OF ASSESSEE IN THE FORM OF SHARE CAPITAL. IT ALSO APPEARS FROM THE BALANCE SHEET AS AT 31.03.2009 THA T THE ASSESSEE RECEIVED SHARE CAPITAL RS.1,00,00,000, THE ASSESSEE COULD NOT ABLE TO ESTA BLISH THE MONEY RECEIPT OTHER THAN THE ACCOMMODATION ENTRIES, RS.90,00,000/- IS ADDED WITH THE TOTAL INCOME AS UNDISCLOSED INCOME. 6. THE LD. CIT(A) HAS CANCELLED THE REOPENING BY OB SERVING AS UNDER: 4.2. I HAVE CONSIDERED THE SUBMISSION OF THE AR OF THE APPELLANT IN THE BACKDROP OF THE ASSESSMENT ORDER. IN THE FIRST GROUND THE APPELLANT HAS RAISED CHALLENGE TO THE LEGAL VALIDITY OF THE PROCEEDINGS INITIATED BY THE AO U/S 148 OF T HE ACT. FROM THE DOCUMENTS ON RECORD, IT IS NOTED THAT THE AO WAS IN RECEIPT OF INFORMATION FRO M THE INVESTIGATION WING, DELHI THAT UPON SEARCH OPERATIONS CONDUCTED ON SRI SURENDRA KR. JAI N & SRI VIRENDRA KR. JAIN, IT WAS GATHERED THAT THESE PERSONS WERE ENTRY OPERATORS WH O HAD GIVEN ACCOMMODATION ENTRIES TO THE ASSESSEE COMPANY IN THE GUISE OF SHARE CAPITAL. BASED ON THE INFORMATION SO RECEIVED FROM INVESTIGATION WING, THE AO CONSIDERED IT FIT T O ISSUE NOTICE U/S 148 OF THE ACT. ON GOING THROUGH THE REASONS RECORDED BEFORE ISSUANCE OF NOT ICE U/S 148, IT IS OBSERVED THAT AO'S REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T WAS SOLELY FORMED ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING AT DEL HI. IT IS NOTED THAT THE AO FAILED TO RECORD HIS OWN INDEPENDENT OBJECTIVE SATISFACTION A S TO WHY AND HOW HE CONSIDERED IT TO BE A FIT CASE OF REOPENING OF ASSESSMENT. I THEREFORE FI ND MERIT IN THE AR'S SUBMISSIONS THAT CITING ONLY INFORMATION RECEIVED FROM DIRECTORATE OF INVES TIGATION CANNOT BE SUFFICIENT GROUND TO INITIATE PROCEEDINGS U/S 148 OF THE ACT. THE AO IS REQUIRED TO INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION SO RECEIVED FROM THE DIRECTORATE OF INVESTIGATION AND ARRIVE AT HIS OWN OBJECTIVE SATISFACTION. IN THE PRESENT CASE HOWEVER IT IS OBSERVED THAT NO SUCH INDEPENDENT APPLICATION OF MIND WAS DONE BY THE AO NOR ANY OBJE CTIVE SATISFACTION WAS RECORDED PRIOR TO ISSUE OF NOTICE U/S 148 OF THE ACT. FOR THE REASONS SET OUT IN THE FOREGOING, I HOLD THAT THE PROCEEDINGS INITIATED U/S 148 WAS BAD IN LAW. THIS LEGAL PROPOSITION HAS ALSO BEEN LAID DOWN BY THE JURISDICTIONAL LTAT, KOLKATA IN THE CASE OF DCIT VS GREAT WALL MARKETING (P) LTD (ITA NO. 660/KOL/2011) DATED 03.02.2016 WHEREIN ON IDENTICAL SET OF FACTS & CIRCUMSTANCES, THE ITAT HAD SET ASIDE THE ORDER PASSED U/S 148 BY THE ASSESSING OFFICER. THE IT AT FOUND THAT THE NOTICE FOR REASSESSMENT U/S 148 WAS ISSUED BY THE AO SOLELY BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING, DELHI THAT THE ASSESSEE WAS A BENEFICIARY OF ACCOMMODATION ENTRIES FOR RECEIPT OF SHARE APPLICAT ION MONEY FROM FOUR COMPANIES. IT WAS OBSERVED THAT THE AO DID NOT RECORD HIS OWN & INDEP ENDENT SATISFACTION AND THAT THE 'REASON TO BELIEVE' THAT INCOME HAD ESCAPED ASSESSMENT WAS SOLELY BASED ON INFORMATION RECEIVED FROM INVESTIGATION WING, WHICH WAS NOT INDEPENDENTL Y EXAMINED OR VERIFIED BY THE AO. THE ITAT THEREFORE HELD THE NOTICE OF REASSESSMENT TO B E INVALID AND QUASHED THE REASSESSMENT ORDER. THE RELEVANT FINDINGS OF THE JURISDICTIONAL ITAT, KOLKATA IS AS FOLLOWS: 5 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 'WE HAVE GIVEN A CAREFUL CONSIDERATION OF THE SUBMI SSIONS MADE BY THE LEARNED COUNSEL FOR THE ASSESSEE. IT IS CLEAR FROM THE REAS ONS RECORDED BY THE AO THAT THE AO ACTED ONLY ON THE BASIS OF A LETTER RECEIVED FROM I NVESTIGATION 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 MENTIO N AS TO ON WHICH DATES AND THROUGH WHICH MODE THE BOGUS ENTRIES WERE MADE BY T HE ASSESSEE. THE REASONS RECORDED WHICH ARE EXTRACTED IN THE EARLIER PART OF THE ORDER DOES NOT SHOW, WHAT WAS THE INFORMATION GIVEN BY DIT(LNV.),NEW DELHI. T HE DATE OF THE INFORMATION RECEIVED BY THE AO WERE NOT SPELT OUT IN THE REASON S RECORDED. THE INVOLVEMENT OF THE ASSESSEE IS ALSO NOT SPELT OUT, EXCEPT MENTIONI NG THE CORPORATE BODIES WHO HAD SUBSCRIBED TO THE SHARE CAPITAL OF THE ASSESSEE WER E 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 T HAT THE REASONS RECORDED WERE VAGUE AND UNCERTAIN AND CANNOT BE CONSTRUED AS SATI SFACTION ON THE BASIS OF THE RELEVANT MATERIAL ON THE BASIS OF WHICH A REASONABL E PERSON CAN FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THE HON'BLE DELHI HI GH COURT HAS ALSO COME TO THE CONCLUSION THAT THE REASONS RECORDED DID NOT DISCLO SE 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 IDE NTICAL TO THE CASE DECIDED BY THE HON'BLE DELHI HIGH COURT. FOLLOWING THE SAID DECISI ON WE HOLD THAT INITIATION OF RE- ASSESSMENT PROCEEDINGS IS NOT VALID. ON THIS GROUND , THE ASSESSMENT IS LIABLE TO BE ANNULLED.' 4.3 FOLLOWING THE ABOVE JUDGMENT THE ITAT, KOLKATA, I THEREFORE HOLD THAT THE MANNER OF INITIATION OF RE-ASSESSMENT PROCEEDINGS U/S 148 BY THE AO WAS BAD IN LAW, THEREFORE, THE IMPUGNED ORDER SO PASSED U/S 148 IS HEREBY CANCELLE D. GROUND NO.1 OF THE APPEAL IS THEREFORE ALLOWED. AGGRIEVED BY THE AFORESAID ACTION OF THE LD. CIT(A) THE ASSESSEE IS BEFORE US. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE LD. CIT(A) AFTER GOING THROUGH THE REASONS RECORDED TO REOPEN THE ASSESSME NT HAS FOUND THAT THE JURISDICTIONAL REQUIREMENT TO REOPEN WHICH IS A CONDITION-PRECEDENT IS NOT EM ERGING FROM THE REASONS RECORDED TO REOPEN, SO IT WAS HELD IT TO BE BAD IN LAW AND HAS CANCELLED THE SAME WITHOUT GOING INTO THE MERITS OF THE CASE. THIS ACTION OF LD. CIT(A) IS CHALLENGED BEFORE US. BEFORE WE ADJUDICATE THE VALIDITY OF THE IMPUGNED ACTION L ET US REFRESH THE SCHEME OF THE ACT. IT SHOULD BE KEPT IN MIND THAT THE CONCEPT OF ASSESSME NT IS GOVERNED BY THE TIME BARRING RULE AND ASSESSEE ACQUIRES A RIGHT TO THE FINALITY OF TH E PROCEEDINGS. QUIETUS OF THE COMPLETED ASSESSMENT CAN BE DISTURBED ONLY WHEN THERE IS INFO RMATION OR EVIDENCE OR MATERIAL OF UNDISCLOSED INCOME WHICH COMES TO THE POSSESSION OF AO, THEN THE AO WILL HAVE REASON TO SUSPECT . THAT WILL BE THE TRIGGERING POINT FOR THE AO TO MAKE REASONABLE ENQUIRY AND 6 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 COLLECT MATERIAL WHICH WOULD MAKE HIM BELIEVE THAT THERE IS INFACT AN ESCAPEMENT OF INCOME. THE HONBLE SUPREME COURT IN M/S. GANGA SARAN & SON S (P) LTD. VS. ITO 130 ITR 1 (SC) HELD THAT THE EXPRESSION REASON TO BELIEVE AS OCCURRING IN SEC. 147 IS STRONGER THAN THE EXPRESSION IS SATISFIED AND THE REQUIREMENT OF LAW TO REOPEN IS THAT AO SHOULD HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPE D ASSESSMENT . THIS CONDITION PRECEDENT WHICH IS THE REQUIREMENT OF LAW HAS TO BE MET BY THE AO IN THE REASONS RECORDED BEFORE USURPING THE JURISDICTION TO REOPEN THE ASSE SSMENT BE IT AN INTIMATION UNDER SECTION 143(1) OR 143(3) [WITHIN 4 YEARS]. THE REASON TO BELIEVE POSTULATES A FOUNDATION BASED ON INFORMATION AND A BELIEF BASED ON REASON. AFTER A FOUNDATION BASED ON INFORMATION IS MADE, THERE STILL MUST BE SOME REASON WHICH SHOULD WARRAN T THE HOLDING OF A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE BASI C CONDITION PRECEDENT TO REOPEN AN ASSESSMENT IS THAT THE AO SHOULD HAVE REASON TO BEL IEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. NOW IT HAS TO BE EXAMINED AS T O WHETHER FROM A READING OF THE REASONS RECORDED BY AO IT CAN BE DISCERNED THAT AO HAD REAS ON TO BELIEVE ESCAPEMENT OF INCOME. IN THE PRESENT CASE BEFORE US, WE NOTE THAT ONLY ON THE BASIS OF INFORMATION OF DIT (INV.) THAT THEY SEARCHED/SURVEYED THE PREMISES OF SHRI SURENDR A KUMAR JAIN AND VIRENDRA KUMAR JAIN. (DATE OF SEARCH IS NOT MENTIONED EITHER IN THE REAS ON OR IN THE REASSESSMENT ORDER). AND DURING THE POST-SEARCH INVESTIGATION OF JAIN BROTHE RS THEY FOUND THAT THESE TWO PERSONS WERE PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF SHAR E CAPITAL TO ASSESSEE BY CHEQUE IN LIEU OF CASH. (THIS PURPORTED STATEMENT OF JAIN BROTHERS RECORDED DURING POST-SEARCH INVESTIGATION MEANS DURING SEARCH AT THEIR PREMISES NO INCRIMINAT ING MATERIALS AGAINST THE ASSESSEE WAS UNEARTHED AND ONLY DURING THE POST-SEARCH INVESTIGA TION IT WAS FOUND THAT THEY ISSUED CHEQUE FOR SHARE CAPITAL IN LIEU OF CASH). AND SINCE THE ASSESSEE HAD RS. 90 LAKH INTRODUCED AS SHARE CAPITAL THIS YEAR, IT WAS ADDED U/S. 68 OF THE ACT. WE NOTE THAT NOWHERE IN THE REASON RECORDED TO RE-OPEN, THE DATE OF SEARCH OR SURVEY, THE DATE OF RECORDING THE STATEMENT OF JAIN BROTHERS, DETAILS OF THE SHARE SUBSCRIBERS, DATE O F CHEQUE DEPOSITED IN ASSESSEES ACCOUNT, WHAT WAS THE STATUS OF THE SHARE SUBSCRIBERS ARE TH EY INDIVIDUAL, HUF, PVT. LTD. COMPANY, WHETHER THEY ARE PRESENTLY FUNCTIONING OR DEFUNCT C OMPANIES; NOTHING IS STATED IN THE REASON OR EVEN IN THE REASSESSMENT ORDER. ONLY ON THE STRE NGTH OF THE POST-SEARCH INVESTIGATION REPORT THAT THE JAIN BROTHERS ARE ACCOMMODATION PRO VIDER, THE AO VENTURED TO REOPEN THE 7 ITA NOS. 1848 & 1849/KOL/2016 KARAN POLYMERS PVT. LTD., AYS 2009-10 & 2010-11 ASSESSMENT WHICH CANNOT BE SUSTAINED. THE REASON I S VAGUE AND THE REASON FOR THE BELIEF MUST BE HELD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE. THE AO HAS NOT APPLIED HIS MIND TO THE INFORMATION GIVEN TO HIM AND HAS TAKEN THE INVESTIGATION REPORT AS GOSPEL OF TRUTH TO REOPEN AND THEREAFTER REASSESS THE ASSESSE E. THE REASONS TO REOPEN DOES NOT SATISFY THE REQUIREMENT OF LAW AS HELD IN PLETHORA OF JUDGM ENTS AND THE REASONS SHOULD BE ADJUDICATED ON A STANDALONE BASIS AND WE FIND THAT THE INFORMATION BEFORE THE AO AS EMERGING FROM HIS REASONS ITSELF WAS SCANTY AND THE REASON WARRANT HOLDING A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS TOTALLY ABSENT, SO THE JURISDICTIONAL REQUIREMENT OF LAW TO REOPEN IS NOT SATISFIED. SO, WE UPHOLD THE ORDER OF LD. CIT(A) CANCELLING THE INITIATION OF REOPENING THE ASSESSME NT. SO, WE ARE NOT INCLINED TO GO INTO THE MERIT OF THE CASE BEING ACADEMIC. 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 19/12/201 8 SD/- SD/- (J. SUDHAKAR REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT ACIT, CIRCLE-4(1), KOLKATA 2 RESPONDENT M/S. KARAN POLYMERS (P) LTD., 56E, HEM ANTA BASU SARANI, DALHOUSIE, STEPHEN HOUSE, 4 TH FLOOR, R. NO. 47ABC, KOLKATA-700 001.. 3 4 5 CIT(A)-4, KOLKATA. (SENT THROUGH E-MAIL) CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR