M/s VSR Enterprises, New Delhi V. ITO, New Delhi

ITA 1855/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5359 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 07-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRAKASH DUBEY
• Keywords: Reopening of assessment; Unexplained cash credit; Salary income; Tangible material; Accommodation entries; Reassessment proceedings; TDS; Set aside
• Section: 142(1); 133(6); 191; 13; 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, G: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.1855/DEL/2016 ASSESSMENT YE AR : 2007-08 M/S VSR ENTERPRISES, HOUSE NO. G-146-A, KHASRA NO.1/24, SHIV RAM PARK, NILOTHI NANGLOI, NEW DELHI-110041, PAN-AAFFV5459F VS. ITO, WARD-27(4), NEW DELHI (APPELLANT) (RESPONDENT) A PPELLANT BY : SH. P.C. YADAV, ADV. RESPONDENT BY : SH. PRAKASH DUBEY, SR. DR DATE OF HEARING : 23.03.2021 DATE OF PRONOUNCEMENT : 18.05.2021 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 29.01.2016 OF THE LEARNED CIT(A)-17, NEW DELHI, RELATING TO AS SESSMENT YEAR 2007-08. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF AUTO PARTS. IT FILED ITS ORIGINAL RETURN OF INCOME ON 30.10.2007 DECLARING TOTAL INCOME OF RS.7,05,890/-. SUBSEQUENTLY, THE ASSESSING OFFICER REOPENED THE CASE U/S 147 OF THE ACT BY RECORDING THE FOLLOWING REASONS:- ITA NO.1855/DEL/2016 2 INFORMATION HAS BEEN RECEIVED FROM REIC THROUGH I TO WARD 43(4) NEW DELHI THAT M/S VST ENTERPRISES BANK A/C NO.4 3750 WITH PUNJAB & SIND BANK, FATEHPURI, DELHI, REVEALS AN IN FLOW OF RS.72 LAKHS IN CASH AND RS.1.82 CRORES FROM FOREIGN SO URCES IN 2007. ACCORDING TO THE INFORMATION, M/S VSR ENTERPRIS ES IS PART OF A SYNDICATE INVOLVED IN SMUGGLING OF RED SANDERS WOOD RUN BY ONE SHRI SHEKHAR. THE SYNDICATE INVOLVED IN TRADING O F BANNED ITEMS ACROSS THE BORDERS SUCH AS EXOTIC HERBS, SUCH A S ASHWAGANDHA, PEACOCK FEATHER AND A HOST OF ITEMS WID E NAME :PYAAZ, AALU, ADRAK AND SEB. AFTER CONSIDERING CAREFULLY THE CONTENTS AND NATURE O F THE INFORMATION AVAILABLE BEFORE ME, I HAVE REASON TO BE LIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN TH E CASE OF M/S VSR ENTERPRISES FOR ASSTT. YEAR 2007-08. HENCE, PROC EEDING U/S 147 OF THE I.T. ACT, 1961 INITIATED. ISSUE NOTICE U/S 148 FOR THE ASSTT. YEAR 2007-08 3. THE ASSESSING OFFICER ACCORDINGLY ISSUED NOTICE U/S 148 OF THE ACT ON 13.04.2011. IN RESPONSE TO THE SAME, THE ASSESSEE VID E LETTER DATED 28.10.212 STATED THAT THE RETURN FILED ORIGINALLY ON 30.10.2 007 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE VARIOUS CREDIT E NTRIES APPEARING IN THE BANK ACCOUNT AND ALSO EXPLAIN THE REASONS FOR CASH WITHDRAWAL FROM THE BANK ACCOUNT. VARIOUS OPPORTUNITIES WERE GRANTED BY THE ASSESSING OFFICER TO THE ASSESSEE TO WHICH THE ASSESSEE FILED A CASH FLOW SUMM ARY FOR THE PERIOD OF 01.04.2006 TO 31.03.2007 WHICH ARE REPRODUCED AT PAGE 4 AND 5 OF THE ASSESSMENT ORDER. SINCE, THE ASSESSEE, ACCORDING TO TH E ASSESSING OFFICER, COULD NOT EXPLAIN THE SOURCE OF CASH DEPOSITS ALONGWITH D OCUMENTARY EVIDENCE, OF RS.27,29,000/-, THE ASSESSING OFFICER, INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT MADE ADDITION OF THE SAME TO THE T OTAL INCOME OF THE ITA NO.1855/DEL/2016 3 ASSESSEE. SIMILARLY, SINCE, THE ASSESSEE COULD NOT EXPLAIN TO HIS SATISFACTION REGARDING THE CREDIT OF RS.74,12,226/- IN THE BANK ACCOUN T OF THE ASSESSEE, THE ASSESSING OFFICER, INVOKING THE PROVISIONS OF SECTION 68 O F THE ACT, MADE ADDITION OF RS.74,12,226/- TO THE TOTAL INCOME OF THE ASSESS EE ON ACCOUNT OF UNEXPLAINED CREDITS. SIMILARLY, IN ABSENCE OF PRODUCTION OF BOO KS OF ACCOUNTS BY THE ASSESSEE, THE ASSESSING OFFICER REJECTED THE BOOK RESULTS AND ADOPTED PROFIT RATE OF 15% OF THE TOTAL TURNOVER OF RS.2,41,87,078/- AND DETERMINED THE NET PROFIT OF RS.38,28,061/-. THE ASSESSING OFFICER ACCO RDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.1,37,69,290/-. 5. IN APPEAL, THE LEARNED CIT(A), AFTER CONSIDERING THE REM AND REPORT OF THE ASSESSING OFFICER AND THE REJOINDER OF THE A SSESSEE TO SUCH REMAND REPORT, DELETED THE ADDITION OF RS.74,12,226/- MADE BY THE ASSESSING OFFICER U/S 68 ON ACCOUNT OF UNEXPLAINED CREDIT. HE, HOWEV ER, SUSTAINED THE ADDITION OF RS.27,29,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF VARIOUS CASH DEPOSITS. HE ALSO RESTRICTED THE NET PRO FIT ADOPTED BY THE ASSESSING OFFICER @15% OF THE TOTAL TURNOVER TO 10%. 6. AGGRIEVED WITH SUCH PART RELIEF GRANTED BY THE LEARNE D CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS OF APPEAL:- GROUND NO.1 IN ITS IMPUGNED ORDER, THE CIT (APPEALS) HAS RELIED ON TH E INFORMATION AVAILABLE WITH ASSESSING OFFICER AND HAS PASSED THE ORDER DELETING SOME ADDITIONS WHILE UPHOLDING THE ADDITION MADE UNDER SECTION 68 OF THE ACT. THE LEARNED AO MADE AN ADDITION OF RS. 27,29,000 SECTI ON 68 OF THE INCOME TAX ACT, 1961. THE DETAILS ARE AS BELOW. ITA NO.1855/DEL/2016 4 CIT (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT DELETING THE ADDITION ON ACCOUNT OF AMOUNT TAKEN FROM PARTNER. GROUND NO.2 IN ITS IMPUGNED ORDER, THE CIT (APPEALS) HAS RELIED ON THE INFORMATION AVAILABLE WITH ASSESSING OFFICER AND HAS PASSED THE ORDER DISMISSING THE APPEAL FILED BY THE AGGRIEVED ASSESSEE IN THE C IT (APPEALS) AS PER SECTION 250(6) OF THE INCOME TAX ACT, 1961, THE CIT (APPEALS) SHOULD DISPOSE THE APPEAL IN WRITING AND SHALL STAT E THE POINTS FOR DETERMINATION OF THE DECISION THEREON AND THE REASO N FOR SUCH DETERMINATION. CIT (APPEALS) HAVE NOT DECIDED THE APPEALS ON MERIT S. HE HAS NOT GONE THROUGH THE FACTS OF APPEALS FILED AND HAS GIVEN NO FINDINGS ON THE GROUNDS OF APPEAL. THEREFORE, THE MANDATE OF THE STATUTE IS THAT THE C IT (APPEALS) HAS TO GIVE HIS FINDINGS ON MERITS ON THE BASIS OF MATERIA L INFORMATION AVAILABLE WITH THE ASSESSING OFFICER AND PRESENTED BY THE ASSESSEE TO BE CONSIDERED. THERE IS NO EXCEPTION PROVIDED FOR O RDER .A REASONED ORDER BASED ON THE MERITS OF THE CASE IS PRE REQUIS ITE FOR DISPOSING APPEAL .THEREFORE ,THE CIT (APPEALS) HAS ERRED IN P ASSING THE ORDER EX PARTE GIVING THE ASSESSE A REASONABLE OPPORTUNITY T O ARRANGE AND PRESENT THE DOCUMENTS. RELIEF CLAIMED IN THE APPEAL: AS EXPLAINED ABOVE, THE ASSESSEE IS A PARTNERSHIP F IRM HAVING NET PROFIT MARGIN OF ABOUT 3%.THE METHOD OF INCOME COMP UTATION AND INCOME COMPUTED BY THE ASSESSING OFFICER IN ORDER U /S- 1443(3)/ 147 IS AT THE FANCY DESIRE OF THE ASSESSING OFFICER AND IS ERRONEOUS AT LAW. FURTHER, THE UPHOLDING OF ADDITION UNDER SECTION 68 BY THE LD. CIT (APPEALS) IS NOT VALID AND WITHOUT CONSIDERING THE GROUNDS/ MERITS OF APPEAL FILED BEFORE THE LD, CIT (APPEALS). 7. THE ASSESSEE HAS ALSO FILED ADDITIONAL GROUNDS OF APP EAL WHICH READ AS UNDER:- DATE SOURCE EXPLAIN ED AMOUNT 10/04/2006 CASH WITHDRAWN DEC 5 94,000.00 10/04/2006 CASH WITHDRAWN DEC 5 40,000.00 30/05/2006 CASH WITHDRAWN DEC 5 300,000.00 1/06/2006 CASH WITHDRAWN DEC 5 120,000.00 8/6/2006 TAKEN FROM PARTNER 1,270,000.00 8/6/2006 TAKEN FROM PARTNER 23 0,000.00 10/06/2006 TAKEN FROM PARTNER 575,000.00 12/06/2006 TAKEN FROM PARTNER 100,000.00 TOTAL 27,29,000.00 ITA NO.1855/DEL/2016 5 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE JURI SDICTION OF THE AO UNDER SECTION 147 IS BAD / IN LAW, AS THE RE IS NO INDEPENDENT APPLICATION OF MIND TO THE VAGUE MATERI AL FOR REOPENING OF A MATTER AND CLEARLY A CASE OF BORROWE D SATISFACTION, WHICH IS BAD IN LAW. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CAS E THE ASSUMPTION OF JURISDICTION IS BAD IN LAW AS THERE I S NO LIVE NEXUS BETWEEN THE REASONS RECORDED AND BELIEF ENTER TAINED VIS-A-VIS ESCAPEMENT OF INCOME, AS IS EVIDENT THAT FINALLY THE AO HAS ASSESSED OTHER INCOME WHICH DOES NOT FORM PA RT OF THE REASONS RECORDED. ON THE FACTS AND UNDER THE CIRCUMSTANCES OF THE CAS E THE JURISDICTION ASSUMED BY THE AO U/S 147 IS BAD IN LA W AS THE MATERIAL ON THE BASIS OF WHICH JURISDICTION HAS BEE N ASSUMED WAS TOTALLY VAGUE AND HAS NO BEARING ON THE INCOME FINALLY ASSESSED BY THE AO 8. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO TH E ABOVE ADDITIONAL GROUNDS, SUBMITTED THAT THESE GROUNDS ARE PU RELY LEGAL IN NATURE AND GO TO THE ROOTS OF THE CASE AND ALL THE FACTS NECES SARY FOR ADJUDICATION OF THE ABOVE GROUNDS ARE ON RECORD. 9. RELYING ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CIT VS VARAS INTERNATIONAL REPORTED IN 284 ITR 80(SC), AN D NTPC LTD. VS CIT REPORTED IN 229 ITR 383(SC) AND THE DECISION OF THE SPECIA L BENCH OF THE TRIBUNAL IN THE CASE OF DHL OPERATORS REPORTED IN 108 T TJ 152(SB) HE SUBMITTED THAT THE ADDITIONAL GROUNDS RAISED BY THE ASS ESSEE SHOULD BE ADMITTED. 10. REFERRING TO THE DECISION OF THE TRIBUNAL IN ASSESSE ES OWN CASE FOR THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR VIDE ITA NO.1856/DEL/2016, ORDER DATED 17.02.2021, HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES, ITA NO.1855/DEL/2016 6 THE TRIBUNAL HAS ADMITTED THE ADDITIONAL GROUND RAISED BY THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT ADDITIONAL GROUNDS RAISED BY T HE ASSESSEE SHOULD BE ADMITTED. 11. AFTER HEARING THE ARGUMENTS ADVANCED BY THE LEARN ED COUNSEL FOR THE ASSESSEE AND THE COUNTER ARGUMENT ADVANCED BY T HE LEARNED DR AND CONSIDERING THE FACT THAT IDENTICAL ADDITIONAL GROUNDS HAVE BEEN ADMITTED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2008-09, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ADMITTED FOR ADJUDICATION. 12. THE LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY SUCCEEDIN G YEAR, DREW THE ATTENTION OF THE BENCH TO THE ORDER OF THE TRIBUNAL AND SUBMITTED THAT IDENTICAL REASONS WERE RECORDED BY THE ASSESSING OFFICER FO R REOPENING OF THE ASSESSMENT FOR AY 2008-09. THE TRIBUNAL, AFTER CONSIDERING THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES HAS ALLOWED THE ADDITIO NAL GROUNDS AND QUASHED THE REASSESSMENT PROCEEDINGS. SINCE, FACTS OF T HE IMPUGNED APPEAL ARE IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIB UNAL IN ASSESSEES OWN CASE FOR AY 2008-09, THEREFORE, REOPENING OF THE ASSE SSMENT BY THE ASSESSING OFFICER BEING NOT IN ACCORDANCE WITH LAW SHOULD BE QUASHED. 13. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BASIS OF INFORM ATION AVAILABLE AT HIS DISPOSAL AND THEREFORE THE BASIS OF REOPENING OF THE AS SESSMENT IS FULLY JUSTIFIED UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.1855/DEL/2016 7 14. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH T HE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARN ED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO C ONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER HAS REOPE NED THE ASSESSMENT IN THE INSTANT CASE ON THE BASIS OF INFORM ATION RECEIVED FROM REIC THROUGH INCOME TAX OFFICER, WARD 43(4), NEW DELHI, THE REASONS OF WHICH HAVE ALREADY BEEN REPRODUCED IN THE PRECEDING PAR AGRAPHS. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, WE FIND THAT A PART OF THE AMOUNT MENTIONED IN THE REASONS HAS BEEN ADDED IN AY 2008-09 AND THE BALANCE PART HAS BEEN ADDED IN THE HANDS OF THE ASSESSEE FOR A Y 2007-08. WE FIND THAT THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT FOR AY 2008-09 IN SHAPE OF ADDITIONAL GROUND BEFORE THE TRIBU NAL AND THE TRIBUNAL VIDE ITA NO.1856/DEL/2016, ORDER DATED 17.02.202 1 HAS QUASHED THE REASSESSMENT PROCEEDING BY OBSERVING AS UNDER:- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S WELL SETTLED LAW THAT VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS IS TO BE DETERMINED WITH REFERENCE TO THE REASONS RECORDED FOR REOPENIN G OF THE ASSESSMENT. THE REASONS RECORDED FOR REOPENING OF THE ASSESSMEN T ARE REPRODUCED ABOVE IN WHICH A.O. HAS MENTIONED THAT AS PER INFOR MATION RECEIVED FROM REIC THROUGH INCOME TAX OFFICER, WARD-43(4), NEW DE LHI, ASSESSEE HAS INVOLVED IN SMUGGLING OF VARIOUS BANNED ITEMS. THE A.O. HAS MENTIONED THAT AS PER INFORMATION ASSESSEE HAS INFLOW OF RS.7 2 LAKHS IN CASH AND RS.1.82 CRORES FROM FOREIGN SOURCE. THE ASSESSEE HA S EXPLAINED THAT ASSESSEE-FIRM IS ENGAGED IN BUSINESS OF TRADING AND EXPORTING VARIOUS PRODUCTS. THE A.O. DID NOT DISPUTE THE EXPLANATION OF ASSESSEE THAT ASSESSEE IS AN EXPORTER. THEREFORE, WHATEVER SALE P ROCEEDS WERE RECEIVED BY ASSESSEE IN ASSESSMENT YEAR UNDER APPEAL FROM FO REIGN BUYER, HAVE BEEN DEPOSITED INTO THE IMPUGNED BANK ACCOUNTS OF T HE ASSESSEE. THE DETAILS OF THE SAME ARE NOTED IN THE ASSESSMENT ORD ER. THE A.O. ULTIMATELY DID NOT MAKE ANY ADDITION AGAINST THE ASS ESSEE OF THE IMPUGNED AMOUNTS AS HAVE BEEN MENTIONED IN THE REAS ONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE A.O. HAS ALSO NOT MADE ANY ADDITION AGAINST THE ASSESSEE ON ACCOUNT OF ANY INCOME EARNE D BY ASSESSEE THROUGH SMUGGLING ACTIVITIES. THE A.O, THUS, RECORD ED WRONG, INCORRECT AND NON-EXISTING REASONS IN THE REASONS RECORDED FO R REOPENING OF THE ASSESSMENT. IT WOULD ALSO SHOW THAT A.O. DID NOT AP PLY HIS MIND TO THE ITA NO.1855/DEL/2016 8 INFORMATION RECEIVED FROM REIC THROUGH ITO, WARD-43 (4), NEW DELHI. THE A.O. WITHOUT ANY BASIS HAS RECORDED WRONG, INCORREC T AND NON-EXISTING REASONS FOR REOPENING OF THE ASSESSMENT. THE A.O. A LSO DID NOT MENTION IN THE REASONS THAT AS TO HOW MUCH AMOUNT, THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN THE CASE FOR ASSESSEE FOR ASSESSMENT YEAR UNDER APPEAL. ALL THESE FACTS CLEARLY SUPPORT THE E XPLANATION OF ASSESSEE THAT A.O. WITHOUT ANY CAUSE OR JUSTIFICATION RECORD ED WRONG, INCORRECT AND NON-EXISTING REASONS FOR REOPENING OF THE ASSESSMEN T. THE ITAT, DELHI E- BENCH, DELHI IN THE CASE OF SHRI NATRAJAN MONIE, GU RGAON VS., ITO, WARD- 2(5), GURGAON VIDE ORDER DATED 07.12.2020 IN ITA.NO .1817/DEL./2017, RELYING UPON SEVERAL DECISIONS OF JURISDICTIONAL AN D OTHER HIGH COURTS HAS HELD THAT IN CASE INCORRECT, WRONG AND NON-EXISTIN G REASONS ARE RECORDED BY THE A.O. FOR REOPENING OF THE ASSESSMENT AND A.O . FAILED TO VERIFY THE INFORMATION RECEIVED DUE TO NON APPLICATION OF MIND TO INFORMATION, REOPENING OF THE ASSESSMENT WOULD BE UNJUSTIFIED AN D IS LIABLE TO BE QUASHED. THE ORDER OF THE TRIBUNAL IS REPRODUCED AS UNDER : IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.NO.1817/DEL./2017 ASSESSMENT YEAR 2011-2012 SHRI NATRAJAN MONIE, S-19/001, THE CLOSE SOUTH, NIRWANA COUNTRY, SECTOR-50, GURGAON. PAN AAFPN2890N VS. THE INCOME TAX OFFICER, WARD 2 (5), GURGAON. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI KAPIL GOEL, ADVOCATE FOR REVENUE : MS. RINKU SINGH, SR.DR DATE OF HEARING : 03.12.2020 DATE OF PRONOUNCEMENT : 07.12.2020 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, GURGAON, DATED 30.01.2017, FOR TH E A.Y. 2011-2012, CHALLENGING THE REOPENING OF THE ASSESSMENT UNDER S ECTION 147/148 OF THE I.T. ACT, 1961, ADDITION OF RS.59,50,000/- ON A CCOUNT OF CASH DEPOSIT, CONFIRMING ADDITION OF RS.1,50,000/- OUT O F RS.9,85,000/- AND ADDITION OF INCOME OF RS.7,72,461/- FROM MCX BUSINE SS. ITA NO.1855/DEL/2016 9 2. WE HAVE HEARD THE LEARNED REPRESENTATIVE OF BOT H THE PARTIES THROUGH VIDEO CONFERENCING AND PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT THIS IS A NMS CASE. NOTICE UNDER SECTION 148 OF THE I T ACT, 1961 WAS I SSUED TO THE ASSESSEE ON 11.02.2015, AFTER DULY RECORDING THE REASONS. TH E ASSESSEE DID NOT FILE HIS RETURN OF INCOME. THE A.O. ISSUED STATUTOR Y NOTICE FOR COMPLETION OF THE ASSESSMENT. THE ASSESSEE FILED INFORMATION B EFORE A.O. WHICH WERE DISCUSSED BY THE A.O. WITH THE COUNSEL FOR ASS ESSEE. THE A.O. NOTED THAT AS PER INFORMATION AVAILABLE WITH HIM, A SSESSEE HAD RECEIVED SALARY ON WHICH TDS HAD BEEN DEDUCTED BY THE EMPLOY ER. THE ASSESSEE HAS ALSO MADE INVESTMENT OF RS.10 LAKHS IN THE PURC HASE OF MUTUAL FUNDS AND DEPOSITED CASH OF RS.52 LAKHS IN HIS ICIC I BANK ACCOUNT IN ASSESSMENT YEAR UNDER APPEAL. FURTHER THE ASSESSEE HAD ALSO MADE CONTRACT IN COMMODITY EXCHANGE EXCEEDING RS.10 LAKH S. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE FURNI SHED COPY OF FORM NO.16, FORM NO 26AS, STATEMENT OF HIS BANK ACCOUNTS MAINTAINED WITH DIFFERENT BANKS, COPY OF THE COMPUTATION OF INCOME AND DOCUMENTS RELATING TO MCX BUSINESS MADE WITH ADITYA BIRLA COM MODITIES BROKING LTD. THE ASSESSEE ALSO FILED COPY OF THE SALE DEED OF PROPERTY AT GURGAON DATED 21.03.2011 SOLD BY ASSESSEE FOR A CON SIDERATION OF RS.1.20 CRORES. THE A.O. ISSUED DETAILED SHOW CAUSE NOTICE TO THE ASSESSEE AND AFTER CONSIDERING THE REPLY OF THE ASS ESSEE, MADE CERTAIN ADDITIONS AND COMPUTED THE TOTAL INCOME AT RS.84,37 ,210/-. THE NET INCOME OF THE ASSESSEE IS COMPUTED AS UNDER : 1. INCOME FROM SALARY AS DISCUSSED IN PARA 3.1. RS. 4,34,338/- 2. INCOME FROM INTEREST AS DISCUSSED IN PARA 3.2. RS. 1,59,237/- 3. INCOME FROM MCX BUSINESS AS DISCUSSED IN PARA 3.3. RS. 7,72,461/- 4. INCOME FROM UNEXPLAINED CASH DEPOSITS AS DISCUSSED IN PARA 3.4 RS. 59,50,000/- 5. INCOME FROM UNEXPLAINED CASH CREDITS AS DISCUSSED IN PARA 3.5(I). RS. 9,85,000/- 6. INCOME FROM PROFIT ON REDEMPTION OF MF/FD AS DISCUSSED IN PARA 3.5(II) RS. 1,32,174/- TOTAL RS.84,37,210/- 3.1. THE ASSESSEE CHALLENGED THE REOPENING OF THE ASSESSMENT AS WELL AS ADDITIONS ON MERIT BEFORE THE LD. CIT(A) . HOWEVER, THE APPEAL OF ASSESSEE HAS BEEN PARTLY ALLOWED. 4. LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO TH E REASONS RECORDED FOR REOPENING OF THE ASSESSMENT WHICH HAVE BEEN PROVIDED TO THE ASSESSEE UNDER RTI ACT, COPY OF WHICH IS PLACED ON RECORD. HE HAS SUBMITTED THAT A.O. IN THE REASONS MENTIONED THAT A SSESSEE HAS MADE INVESTMENT OF RS.2 LAKHS FOR PURCHASE OF MUTUAL FUN D AND TRANSACTION OF COMMODITIES EXCHANGE CONTRACT OF RS.10 LAKHS IN ASS ESSMENT YEAR UNDER APPEAL. HE HAS SUBMITTED THAT A.O. HAS RECORDED WRO NG, INCORRECT AND NON-EXISTING REASONS AND DID NOT APPLY HIS MIND TO T HE MATERIAL ON RECORD ITA NO.1855/DEL/2016 10 BEFORE RECORDING REASONS FOR REOPENING OF THE ASSES SMENT. HE HAS SUBMITTED THAT ASSESSEE DID NOT MAKE ANY FRESH INVE STMENT DURING SUBJECT PERIOD IN MUTUAL FUND AND EVEN THE A.O. DID NOT MAKE ANY ADDITION ON ACCOUNT OF INVESTMENT OF RS.2 LAKHS FOR PURCHASE OF MUTUAL FUNDS. HE HAS SUBMITTED THAT AS REGARDS TRANSACTION OF COMMODITY EXCHANGE CONTRACT OF RS.10 LAKHS, A.O. HAS MADE ADD ITION OF RS.7,72,461/- ON ACCOUNT OF PROFIT ON THE MCX BUSIN ESS INSTEAD OF RS.11,80,571/- AS MENTIONED IN THE SHOW CAUSE NOTIC E. THE A.O. THUS, RECORDED WRONG, INCORRECT, NON-EXISTING FACTS / REA SONS AND DID NOT APPLY HIS MIND TO THE INFORMATION, WHICH ITSELF IS ALSO I NCORRECT. HE HAS REFERRED TO PAGE-14 OF THE PB WHICH IS THE DETAILS SUPPLIED TO THE ASSESSEE WHICH MAY BE THE BASIS FOR REOPENING OF THE ASSESSMENT AN D REFERRED TO ITEM NOS.5, 6 AND 9 WHICH ARE INFORMATION RECEIVED FROM CIB CODE FOR DEPOSIT OF CASH OF RS.2 LAKHS WITH THE BANK, CONTRACT OF RS .10 LAKHS OR MORE IN COMMODITY EXCHANGE AND PAYMENT OF RS.2 LAKHS OR MOR E FOR PURCHASE OF UNITS OF MUTUAL FUNDS. HE HAS SUBMITTED THAT THESE ARE INCORRECT INFORMATION AND DID NOT RELATES TO THE ASSESSEE. HE HAS, THEREFORE, SUBMITTED THAT REOPENING OF THE ASSESSMENT IS ILLEG AL AND BAD IN LAW AND AS SUCH REOPENING OF THE ASSESSMENT IS LIABLE TO BE QUASHED. HE HAS SUBMITTED THAT NO NOTICE UNDER SECTION 142(1) OR AN Y QUERY UNDER SECTION 133(6) HAVE BEEN ISSUED. NO LETTER HAVE BEEN DELIVE RED TO THE ASSESSEE. 5. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW AS REGARDS REOPENING OF THE ASSES SMENT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IT IS WELL SETTLED LAW THAT VAL IDITY OF THE RE- ASSESSMENT PROCEEDINGS IS TO BE JUDGED WITH REFEREN CE TO THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE COPY OF THE REASONS FOR REOPENING OF THE ASSESSMENT ARE PLACED ON RECORD WH ICH READS AS UNDER : 1. NAME AND ADDRESS OF THE ASSESSEE MONIE NATRAJAN 1408, BEVERLEY PART- II, DLF-II, GURGAON. 2. PAN AAFPN2890N 3. STATUS INDL 4. WARD/CIRCLE/RANGE WARD-2(5), GURGAON 5. ASSESSMENT YEAR 2011-12 6. DATE 11.02.2015 REASONS FOR INITIATING PROCEEDINGS U/S. 147/148 OF THE INCOME TAX ACT, 1961. INFORMATION HAS BEEN RECEIVED THROUGH NMS (P-1 CATE GORY THAT DURING THE PERIOD UNDER CONSIDERATION, THE ASSESSEE HAD MADE I NVESTMENT OF RS.200000/- FOR PURCHASE OF MUTUAL FUND AND TRANSAC TION IN COMMODITY EXCHANGE CONTRACT OF RS.10,00,000/- DURING THE ASSE SSMENT YEAR 2011- 12. AS PER RECORD ASSESSEE DO NOT HAVE FILE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2011-12. THE INCOME CHARGEABLE TO T AX AMOUNTING TO RS.1200000/- WHICH IS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND ANY OTHER INCOME FOUND DURING THE COURSE OF ASSESSM ENT PROCEEDINGS WHICH IS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. I HAVE REASONS TO BELIEVE THAT THE ABOVE SAID INCOME/TRANSACTION OF R S.1200000/- AND ANY OTHER INCOME FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH IS ITA NO.1855/DEL/2016 11 CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH NEED S EXAMINATION IN THE LIGHT OF THE INFORMATION IN MY POSSESSION. NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 196 1 IS BEING ISSUED. SD/- SHAMSHER SINGH INCOME TAX OFFICER WARD 2(5), GURGAON. 6.1. IN VIEW OF THE ABOVE REASONS, THE A.O. HAS ME NTIONED THAT HE HAS INFORMATION RECEIVED THROUGH NMS THAT ASSESS EE HAS MADE INVESTMENT OF RS.2 LAKHS FOR PURCHASE OF MUTUAL FUN DS AND TRANSACTION OF COMMODITY EXCHANGE CONTRACT OF RS.10 LAKHS IN ASSES SMENT YEAR UNDER APPEAL AND THUS, THERE IS AN ESCAPEMENT OF INCOME O F RS.12 LAKHS. THE A.O. ALSO NOTED IN THE REASON THAT THIS INFORMATION NEEDS EXAMINATION. HOWEVER, NO MATERIAL IS PRODUCED BEFORE US IF THE A .O. MADE ANY INVESTIGATION ON THE INFORMATION SUPPLIED TO HIM TH ROUGH NMS IF THERE IS ANY ESCAPEMENT OF INCOME IN THE CASE OF ASSESSEE. L EARNED COUNSEL FOR THE ASSESSEE CATEGORICALLY STATED AT BAR THAT ASSES SEE HAS NOT MADE ANY FRESH INVESTMENT IN ASSESSMENT YEAR UNDER APPEAL IN MUTUAL FUND. THE WRITTEN SUBMISSIONS TO THAT EFFECT IS ALSO PLACED O N RECORD. LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO CATEGORICALLY STA TED THAT A.O. HAS NOT MADE ANY ADDITION OF RS.2 LAKHS IN ASSESSMENT YEAR UNDER APPEAL WHICH FACT IS CORROBORATED BY THE NET INCOME COMPUTED BY A.O. AS REPRODUCED ABOVE. IT IS, THEREFORE, CLEAR THAT NEITHER ASSESSE E HAS MADE ANY INVESTMENT OF RS. 2 LAKHS FOR PURCHASE OF MUTUAL FU ND IN ASSESSMENT YEAR UNDER APPEAL NOR THE A.O. HAS MADE ANY SUCH AD DITION IN THE ASSESSMENT YEAR. THEREFORE, SUCH INFORMATION RECEIV ED BY A.O. WAS TOTALLY WRONG, INCORRECT AND NON-EXISTING AND THUS THE FACT MENTIONED IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMEN T AS REGARDS INVESTMENT MADE IN PURCHASE OF MUTUAL FUND IS WRONG , NON-EXISTING AND INCORRECT. THE A.O. HAS RECORDED WRONG, INCORRECT A ND NON-EXISTING REASONS FOR REOPENING OF THE ASSESSMENT WHICH IS NO T PERMISSIBLE UNDER LAW. AS REGARDS THE TRANSACTION IN COMMODITY EXCHAN GE CONTRACT OF RS.10 LAKHS, LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PARA-3.3 OF THE ASSESSMENT ORDER IN WHICH THE A.O. HAS MADE ADDITIO N OF RS.7,72,461/- ON ACCOUNT OF PROFIT ON THE MCX BUSINESS. THE A.O. HAS ALSO MENTIONED IN THE SAME PARA THAT IN THE SHOW CAUSE NOTICE HE HAS MENTIONED SUCH INCOME AT RS.11,80,571/- WHICH IS APPEARING AT PAGE -3 OF THE ASSESSMENT ORDER, BUT, AFTER EXAMINATION THIS FIGUR E WAS ALSO FOUND INCORRECT AND A.O. HAS ULTIMATELY RESTRICTED THE AD DITION TO RS.7,72,469/- I.E., FOR INCOME ONLY BUT NO ADDITION IS MADE OF TR ANSACTION OF MCX INVESTMENT. THEREFORE, A.O. HAS RECORDED WRONG, INC ORRECT AND NON- EXISTING FACTS IN THE REASONS RECORDED FOR REOPENIN G OF THE ASSESSMENT THAT ASSESSEE HAS MADE TRANSACTION IN COMMODITY EXC HANGE CONTRACT OF RS.10 LAKHS. IT MAY ALSO BE NOTED HERE THAT A.O. IN THE ASSESSMENT ORDER IN PARA-2 HAS MENTIONED THAT ASSESSEE HAS MADE INVE STMENT OF RS.10 LAKHS IN PURCHASE OF MUTUAL FUNDS WHICH FACT IS ALS O INCORRECT AND IS CONTRADICTORILY RECORDED IN THE REASONS FOR REOPENI NG OF THE ASSESSMENT FOR RS.2 LAKHS ONLY. THE A.O. IN THE ASSESSMENT ORD ER HAS ALSO RECORDED SAME STATEMENT THAT ASSESSEE HAS MADE CONTRACT IN C OMMODITY EXCHANGE EXCEEDING RS.10 LAKHS WHICH FACT WAS ULTIMATELY FOUN D INCORRECT BY THE A.O. HIMSELF AND HE HAS MADE PART ADDITION AS AGAIN ST THE INCOME MENTIONED IN THE SHOW CAUSE NOTICE. THESE FACTS CLE ARLY SHOW THAT A.O. DID NOT APPLY HIS MIND TO THE INFORMATION RECEIVED THROUGH NMS AND ALSO ITA NO.1855/DEL/2016 12 RECORDED WRONG, INCORRECT AND NON-EXISTING FACTS IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. LEARNED COUNSEL FO R THE ASSESSEE HAS ALSO REFERRED TO PAGE-14 WHICH IS SUPPLIED TO THE A SSESSEE UNDER RTI WHICH ACCORDING TO ASSESSEE WAS ASKED UNDER THE RTI ACT. THE FIRST PAGE OF THE RTI REPLY PB-10 SHOWS THAT ASSESSEE HAS ASKE D FOR THE COPY OF THE REASONS FOR REOPENING OF THE ASSESSMENT AS WELL AS DETAILS WHICH ARE BASIS OF REOPENING OF THE CASE UNDER SECTION 148 OF THE I.T. ACT, 1961. PAGE-14 IS THE MATERIAL SUPPLIED BY THE A.O. WHICH IS THE INFORMATION SUMMARY IN WHICH INFORMATION IS SUPPLIED TO ASSESSE E THROUGH CIB CODE THAT THERE IS A DEPOSIT IN CASH AGGREGATING TO RS.2 LAKHS OR MORE WITH THE BANKING COMPANY, CONTRACT OF RS.10 LAKHS OR MORE IN COMMODITIES EXCHANGE ,RS. 2 LAKHS OR MORE PAID FOR PURCHASE OF UNITS OF MUTUAL FUND. RULE 114E OF THE I.T. RULES PROVIDES THE STATEMENT OF FINANCIAL TRANSACTIONS REQUIRED TO BE FURNISHED UNDER SUB-SEC TION (1) OF SECTION 285BA OF THE ACT IN FORM 61-A. THIS RULE PROVIDES T HAT RETURN OR THE STATEMENT SHALL BE PROVIDED IN RESPECT OF RECEIPT F ROM ANY PERSON OF AN AMOUNT OF RS.2 LAKHS RUPEES OR MORE FOR ACQUIRING U NITS OF MUTUAL FUND AND OTHER STATEMENTS IN DIFFERENT CASES OF THE AMOU NT MORE THAN RS.10 LAKHS IN DIFFERENT CATEGORIES. IT, THEREFORE, APPEA RS THAT THE INFORMATION WHICH A.O. HAS RECEIVED AS PER PAGE-14 OF THE PB WA S THE DETAILS TO BE SUBMITTED UNDER RULE 114E OF THE I.T. RULES. IT MAY NOT BE ACTUAL FIGURE RECEIVED BY THE A.O. AS PER NMS INFORMATION. THE AC TUAL FIGURE MIGHT BE DIFFERENT AS IS NOTED ABOVE. THEREFORE, SUCH INFORM ATION RECEIVED BY THE A.O. IS NOT IN ACCORDANCE WITH LAW AND WOULD NOT PR OVIDE ANY INFORMATION TO THE A.O. TO RECORD REASONS FOR REOPE NING OF THE ASSESSMENT AS REGARDS ESCAPEMENT OF INCOME FOR MAKING THE INVE STMENT IN PURCHASE OF MUTUAL FUNDS OR TRANSACTION OF DIFFERENT COMMODI TY EXCHANGE CONTRACT. THUS THE ENTIRETY OF FACTS CLEARLY SHOW THAT A.O. R ECORDED WRONG, INCORRECT AND NON-EXISTING REASONS FOR REOPENING OF THE ASSES SMENT WITHOUT APPLICATION OF MIND. IT MAY ALSO BE NOTED THAT A.O. HIMSELF HAS MENTIONED IN THE REASONS THAT WHATEVER INFORMATION HE HAS REC EIVED THROUGH NMS NEEDS EXAMINATION IN THE LIGHT OF INFORMATION IN HI S POSSESSION, BUT, HE DID NOT MAKE ANY EXAMINATION PRIOR TO RECORDING REA SONS FOR REOPENING OF THE ASSESSMENT AND TOTALLY VAGUE, NON-EXISTING, WRO NG AND INCORRECT FACTS HAVE BEEN MENTIONED IN THE REASONS RECORDED FOR REO PENING OF THE ASSESSMENT. FURTHER, THE REOPENING OF THE ASSESSMEN T WOULD BE INVALID IF THE A.O. WANTED TO MAKE INVESTIGATION OUT OF INFORM ATION. SUCH EXERCISE SHOULD HAVE BEEN PRIOR TO RECORDING OF THE REASONS. IN SUPPORT OF OUR FINDINGS, WE RELY UPON THE FOLLOWING DECISIONS. 6.2. THE HONBLE PUNJAB & HARYANA HIGH COURT IN TH E CASE OF CIT VS., ATLAS CYCLE INDUSTRIES [1989] 180 ITR 319 (P&H) HELD AS UNDER : HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELLIN G THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASSESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EX IST, AND, THEREFORE, THE INCOME-TAX OFFICER DID NOT GET JURIS DICTION TO MAKE THE REASSESSMENT. 6.3. THE HONBLE DELHI HIGH COURT IN THE CASE OF P R. CIT VS., SNG DEVELOPERS LTD., [2018] 404 ITR 312 (DEL.) IN WHICH IT WAS HELD AS UNDER : HELD, DISMISSING THE APPEAL, THAT THE REASONS RECO RDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT UNDE R SECTION ITA NO.1855/DEL/2016 13 147, ISSUING A NOTICE UNDER SECTION 148 DID NOT MEE T THE STATUTORY CONDITIONS. AS ALREADY HELD BY THE APPELL ATE TRIBUNAL, THERE WAS A REPETITION OF AT LEAST FIVE A CCOMMODATION ENTRIES AND THE TOTAL AMOUNT CONSTITUTING THE SO-CA LLED ACCOMMODATION ENTRIES WOULD THEREFORE, NOT WORK OUT TO RS.95,65,510. IT WAS UNACCEPTABLE THAT THE ASSESSIN G OFFICER PERSISTED WITH HIS 'BELIEF' THAT THE AMOUNT HAD ESC APED ASSESSMENT NOT ONLY AT THE STAGE OF REJECTING THE A SSESSEES OBJECTIONS BUT ALSO IN THE REASSESSMENT PROCEEDINGS , WHERE HE PROCEEDED TO ADD THE ENTIRE AMOUNT TO THE INCOME OF THE ASSESSEE. THEREFORE THERE WAS NON-APPLICATION OF MI ND ON THE PART OF THE ASSESSING OFFICER. THE APPELLATE TRIBUN AL WAS JUSTIFIED IN CONFIRMING THE ORDER OF THE COMMISSION ER (APPEALS) AND HOLDING THAT THE REOPENING OF THE ASSESSMENT WA S BAD IN LAW. 6.4. THE HONBLE DELHI HIGH COURT IN THE CASE OF S HAMSHAD KHAN VS., ACIT [2017] 395 ITR 265 (DEL.) IN WHICH I T WAS HELD AS UNDER : HELD, ALLOWING THE PETITION, THAT THE FORM FOR REC ORDING THE REASONS FOR INITIATING THE PROCEEDINGS UNDER SECTIO N 148 OF THE ACT FOR OBTAINING APPROVAL OF THE COMMISSIONER ITSEL F PROCEEDED ON THE ERRONEOUS BASIS THAT THE QUANTUM OF INCOME W HICH HAD ESCAPED ASSESSMENT WAS RS.28,75,000 WHEREAS THE ASS ESSEE HAD FILED RETURNS SHOWING INCOME OF MERELY RS.20,56 ,145 AND IT WAS ON THIS BASIS THAT THE ADDITIONAL COMMISSIONE R AND THE COMMISSIONER GRANTED THEIR APPROVAL FOR REOPENING TH E ASSESSMENT. EVEN THOUGH THE ASSESSEE HIGHLIGHTED TH IS FUNDAMENTAL ERROR AT THE INITIATION OF THE CASE BY STATING THAT HIS INCOME WAS MENTIONED AS RS.20,56,145 INSTEAD OF RS.69,71,191, THIS WAS SUMMARILY REJECTED STATING T HAT IT WAS A CLERICAL MISTAKE AND THAT THE LATTER FIGURE WOULD BE TREATED AS HIS INCOME. IF THE CORRECT INCOME I.E. RS.69,71, 191 WAS PUT BEFORE THE COMMISSIONER AT THE TIME OF SEEKING HIS APPROVAL, HE MIGHT HAVE TAKEN A DIFFERENT VIEW. THERE WAS NOT HING ON RECORD TO SHOW THAT THE CLERICAL MISTAKE OF SUBSTIT UTING RS.20,56,145 FOR RS.69,71,191 WAS EVER BROUGHT TO T HE NOTICE OF THE COMMISSIONER EITHER BEFORE OR AFTER APPROVAL OR SANCTION UNDER SECTION 151(1) OF THE ACT. THE INITIATION OF THE CASE FOR REOPENING OF THE ASSESSMENT WAS ERRONEOUS AND WITHO UT APPLICATION OF MIND ESPECIALLY SINCE THE ASSESSING OFFICER HAD NOT EXAMINED THE RETURN FILED, WHICH WOULD HAVE REV EALED THAT THE ASSESSEE HAD FILED REGULAR RETURNS, HAD SUFFICI ENT OPENING BALANCE IN HIS ACCOUNT AND THE WITHDRAWALS THEREFRO M SUBSTANTIATED THE DONATION MADE. THEREFORE, THE REO PENING OF THE ASSESSMENT WAS UNSUSTAINABLE IN LAW AND THE NOT ICE ISSUED UNDER SECTION 147 OF THE ACT WAS TO BE QUASH ED. 6.5. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS INFORMATION SYSTEMS LTD., VS., ACIT & OTHERS [2007] 293 ITR 548 (BOM.) HELD AS UNDER : ITA NO.1855/DEL/2016 14 THE PETITIONER HAD SEVERAL EOU/STP UNITS ENGAGED I N THE BUSINESS OF EXPORT OF SOFTWARE. IN RESPONSE TO THE NOTICE FOR REOPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR 19 99-2000, THE PETITIONER, OBJECTING TO THE ISSUANCE OF THE NOTICE , STATED THAT THE REASONS FURNISHED BY THE AUTHORITY HAD QUOTED THE P ROVISIONS OF SECTION 10A AS AMENDED BY THE FINANCE ACT, 2000, WI TH EFFECT FROM THE ASSESSMENT YEAR 2001-02 AND AS SUCH COULD NOT H AVE BEEN MADE APPLICABLE TO THE ASSESSMENT YEAR 1999-2000 AN D THE NOTICE HAD BEEN ISSUED UNDER THE MISTAKEN BELIEF ABOUT THE CORRECT POSITION OF LAW. HOWEVER, OPPORTUNITY TO SHOW CAUSE WAS GIVEN TO THE PETITIONER AS TO WHY THE LOSS CLAIMED SHOULD NO T BE DISALLOWED TO BE CARRIED FORWARD. ON A WRIT PETITION : HELD, ALLOWING THE PETITION, (I) THAT IT WOULD BE C LEAR FROM THE REASONS GIVEN THAT THE AUTHORITY PROCEEDED ON THE P RESUMPTION THAT THE LAW APPLICABLE WAS THE LAW AFTER THE AMEND MENT AND NOT THE LAW IN RESPECT OF WHICH THE PETITIONER HAD FILE D THE RETURN FOR THE YEAR 1999-2000. THIS BY ITSELF CLEARLY DEMONSTR ATED THAT THERE WAS TOTAL NON-APPLICATION OF MIND ON THE PART OF TH E AUTHORITY AND CONSEQUENTLY, THE NOTICE BASED ON THAT REASON WOULD AMOUNT TO NON-APPLICATION OF MIND. (II) THAT THE INCOME DERIVED BY THE ASSESSEE FROM AN IND USTRIAL UNDERTAKING TO WHICH SECTION 10A APPLIES COULD NOT BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. THEREFORE, THE PE TITIONER WAS RIGHT IN FILING THE RETURN BY EXCLUDING THE INCOME IN TER MS OF SECTION 10A. 6.6. IN THE CASE OF PR. CIT VS., RMG POLYVINYL (I) LTD., 396 ITR 5 (DEL.) THE HONBLE DELHI HIGH COURT HELD AS UNDER: 'IN THE PRESENT CASE TOO, THE INFORMATION RECEIVED FROM THE INV. WING CANNOT BE SAID TO BE TANGIBLE MATERIAL PE R SE WITHOUT A FURTHER ENQUIRY BEING UNDERTAKEN BY THE L EARNED ASSESSING OFFICER' 6.7. IN THE CASE OF PR. CIT VS., MEENAKSHI OVERSE AS (P) LTD., 395 ITR 677 (DEL.), THE HONBLE DELHI HIGH COURT HELD A S UNDER : 'REASSESSMENT NOTICE CONDITION PRECEDENT RECORDING OF REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT MERE REPRODUCTION OF INVESTIGATION REPORT IN REASONS REC ORDED ABSENCE OF LINK BETWEEN TANGIBLE MATERIAL AND FORMA TION OF CEDING ILLEGAL INCOME TAX ACT, 1961, SEC.147, 148' 6.8. IN THE CASE OF PR. CIT VS., G AND G PHARMA I NDIA LTD., [2016] 384 ITR 147 (DEL.), THE HONBLE DELHI HIGH C OURT HELD AS UNDER : REASSESSMENT CONDITION PRECEDENT APPLICATION OF MI ND BY ASSESSING OFFICER TO MATERIALS PRIOR TO FORMING REA SON TO BELIEVE INCOME HAS ESCAPED ASSESSMENT - NO INDEPEND ENT APPLICATION OF MIND TO INFORMATION RECEIVED FROM DI RECTORATE OF ITA NO.1855/DEL/2016 15 INVESTIGATION AND NO PRIMA FACIE OPINION FORMED- REASSESSMENT ORDER INVALID. 6.9. IN THE CASE OF SARTHAK SECURITIES CO. (P) LTD ., 329 ITR 110 (DEL.), THE HONBLE DELHI HIGH COURT HELD AS UNDER : [NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSI NG OFFICER BUT ACTING UNDER INFORMATION FROM INV. WING - NOTIC E U/S. 147 TO BE QUASHED. 6.10. THE CRUX OF THE ABOVE JUDGMENTS HAD BEEN THA T IN CASE INCORRECT, WRONG AND NON-EXISTING REASONS ARE RECOR DED BY THE A.O. FOR REOPENING OF THE ASSESSMENT AND A.O. FAILED TO VERI FY THE INFORMATION RECEIVED DUE TO NON APPLICATION OF MIND TO INFORMAT ION, REOPENING OF THE ASSESSMENT WOULD BE UNJUSTIFIED AND IS LIABLE TO BE QUASHED. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF MATERIAL ON RECORD, WE ARE OF THE VIEW THAT REOPENI NG OF THE ASSESSMENT IS ILLEGAL AND BAD IN LAW AND IS LIABLE TO BE QUASH ED. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REOPENING OF THE ASSESSMENT. RESULTANTLY, ALL ADDITIONS STAND DELETE D. IN VIEW OF THE ABOVE, THERE IS NO NEED TO DECIDE OTHER ISSUES RAIS ED IN THE PRESENT APPEAL WHICH ARE LEFT WITH ACADEMIC DISCUSSION ONLY . ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE ALLOWED. 9.1. CONSIDERING THE ABOVE DISCUSSION IN THE LIGHT OF DECISION OF ITAT, DELHI E-BENCH, DELHI IN THE CASE OF SHRI NATR AJAN MONIE, GURGAON VS., ITO, WARD-2(5), GURGAON (SUPRA), IT IS CLEAR T HAT A.O. HAS RECORDED INCORRECT, WRONG AND NON-EXISTING REASONS IN THE RE ASONS RECORDED FOR REOPENING OF THE ASSESSMENT REPRODUCED ABOVE AND HA VE ALSO DID NOT APPLY HIS MIND TO THE INFORMATION RECEIVED FROM REI C THROUGH ITO, WARD- 43(4), NEW DELHI. THEREFORE, WE ARE OF THE VIEW THA T REOPENING OF THE ASSESSMENT IS ILLEGAL AND BAD IN LAW AND LIABLE TO BE QUASHED. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND QUASH THE REOPENING OF THE ASSESSMENT. RESULTANTLY, ALL ADDIT IONS STAND DELETED. IN VIEW OF THE ABOVE, THERE IS NO NEED TO DECIDE OTHER ISSUES RAISED IN THE PRESENT APPEAL ON MERITS WHICH ARE LEFT WITH ACADEM IC DISCUSSION ONLY. ACCORDINGLY, APPEAL OF THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE ALLOWED. 15. SINCE, THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS OF THE CASE IN THE SUCCEEDING ASSESSMENT YEAR WHICH HAVE ALREADY BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE, THEREFORE, IN ABSE NCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE, WE HOLD THAT THE ASSESS ING OFFICER IN THE INSTANT CASE HAS RECORDED INCORRECT/WRONG AND NON-EXIS TING REASONS IN THE REASON FOR REOPENING OF THE ASSESSMENT AND HAS NOT APP LIED HIS MIND TO THE ITA NO.1855/DEL/2016 16 INFORMATION RECEIVED FROM REIC, WARD 43(4)(NEW DELHI). THEREFO RE, THE REOPENING OF THE ASSESSMENT IS ILLEGAL AND BAD IN LAW AND IS LIABLE TO BE QUASHED. THEREFORE, THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 16. SINCE, THE ASSESSEE SUCCEEDS ON THE LEGAL GROUNDS CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT, THE OTHER GRO UNDS CHALLENGING THE ADDITION ON MERIT ARE NOT BEING ADJUDICATED BEING ACADEMIC IN NAT URE. 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ODER PRONOUNCED IN THE OPEN COURT ON 18.05.2021. SD/- SD/- (SUDHANSHU SRIVASTAVA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI/DATED- 18.05.2021 F{X~{T COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSISTANT REGISTRAR, ITAT, DELHI