M/s. Mahadev Trading Co., Baroda V. The Income tax Officer,Ward-5(4), Baroda

ITA 2095/AHD/2009

• Counselvise Citation: 209520514 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-08-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 01-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VINOD TANWANI
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard; Audit objection; Source of fund; Reason to believe; Reassessment proceedings
• Section: 147; 69; 148; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER) ITA NO.2095/AHD/2009 A. Y.: 1993-94 M/S. MAHADEV TRADING CO., C/O. BANSIKUMAR NAGINLAL GANDHI, 7, PRAYOSA SOCIETY, OPP. DEEP CHAMBERS, MANJALPUR, VADODARA 390 011 VS THE INCOME TAX OFFICER, WARD- 5(4), AAYAKAR BHAVAN, RACE COURSE, BARODA PA NO. AACFM 8963 B (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI VINOD TANWANI, DR DATE OF HEARING: 24-08-2011 DATE OF PRONOUNCEMENT: 26-08-2011 O R D E R PER BHAVNESH SAINI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF THE CIT(A)-V, BARODA DATE D 06-03-2009 FOR ASSESSMENT YEAR 1993-94. 2. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.1 AND 2 OF THE APPEAL. THE SAME ARE ACCORDINGLY DISMISSED. GROUNDS NO.3 TO 6 OF THE APPEAL OF THE ASSESSEE REA D AS UNDER: 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE ADDITION OF RS.70,000/- MAD E U/S SEC. 69 OF THE I. T. ACT, 1961 IN RESPECT OF DEMAND DRAFT FOR RS.70,000/- PURCHASED FROM BHARAT CO-OP. BANK L TD., FATEHPURA, BARODA. ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 2 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN REOPENING THE ORIGINAL ASSESSMENT (INTIMATION) U/S SEC. 148 OF THE I. T. ACT, 1961. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT APPRECIATING THAT THE APPELLANT COULD NOT PRODUCE BOOKS OF ACCOUNTS FOR VERIFICATION DUE TO T HE HUGE TIME LAG OF ABOUT 15 YEARS. 6. YOUR APPELLANT PRAYS THAT THE ORDER OF THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) BE SET ASIDE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A KIRANA MERCHANT. IN THIS CASE ORIGINALLY THE RETURN WAS PROCESSED U/S 143(1) OF THE IT ACT ON 17-01-2001. LATER ON, REASS ESSMENT PROCEEDINGS WERE INITIATED BY ISSUE OF A NOTICE U/S 148 OF THE IT ACT DATED 23-05-2001, AFTER RECORDING THE REASONS FOR T HE SAME. REASSESSMENT WAS MADE ON 31-03-2003 U/S 143(3) READ WITH SECTION 147 OF THE IT ACT MAKING AN ADDITION OF RS.70,000/- . AGGRIEVED BY THIS ORDER, THE ASSESSEE PREFERRED APPEAL WHICH WAS DISM ISSED BY THE LEARNED CIT(A) VIDE HIS ORDER DATED 28-04-2003. AGG RIEVED BY THE ORDER OF THE LEARNED CIT(A) THE ASSESSEE PREFERRED APPEAL SECOND APPEAL AND ITAT AHMEDABAD VIDE ORDER IN ITA NO.4082 /AHD/2003 DATED 13-06-2005 HAD SET ASIDE THE MATTER TO THE FI LE OF THE AO FOR CONSIDERING THE ADDITION AS WELL AS FOR REOPENING O F THE ASSESSMENT AND TO FRAME THE ORDER DE NOVO AFTER GIVING ADEQUAT E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 4. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE IN THE LIGHT OF THE FINDINGS OF THE AO CON FIRMED THE ORDER OF ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 3 THE AO AND REJECTED BOTH THE EFFECTIVE GROUNDS OF A PPEAL OF THE ASSESSEE. HIS FINDINGS IN PARA 4 AND 5 OF THE APPEL LATE ORDER ARE REPRODUCED AS UNDER: 4. IT MAY BE NOTED HERE THAT AS SEEN FROM THE RECORDS, THE APPELLANT COULD NOT PRODUCE PROPER DETAILS OF PURCHASE OF DD FOR RS. 70,000/-, HENCE THE AO HAS M ADE THE ADDITION U/S 69 OF THE IT ACT, 1961. IT TRANSPI RED THAT THE DDIT(INVESTIGATION), BARODA HAS INFORMED THE AO THAT THE APPELLANT HAS PURCHASED A DD FOR RS. 70,000/- B Y PAYING CASH FROM BHARAT CO-OP BANK LTD., FATEHPURA, BARODA ON 18.08.1992 FAVOURING M/S ANAND ENTERPRISE S, AHMEDABAD. BASED ON SUCH INFORMATION, AFTER RECORDI NG THE REASONS, THE AO HAS REOPENED THE ASSESSMENT. IT SEEMS THAT IN THE ORIGINAL ASSESSMENT THE AO HAS MENTIONED, 'BARODA TRADERS CO-OP BANK' INSTEAD OF 'BHARAT CO-OP BANK LTD.' THIS TYPOGRAPHICAL ERROR H AS GIVEN A TOOL TO THE APPELLANT TO OBTAIN A LETTER FR OM THE BARODA TRADERS CO-OP BANK THAT THE APPELLANT HAS NO T PURCHASED A DD FOR RS. 70,000/- DURING THE ACCOUNTI NG PERIOD RELEVANT, FOR THE ASSESSMENT YEAR 1993-94. T HIS CERTIFICATE WAS PRODUCED AS AN EVIDENCE BEFORE THE CIT(A), WHICH WAS NOT TAKEN COGNIZANCE. HENCE, THE APPELLANT TOOK THIS ISSUE ALSO BEFORE THE TRIBUNAL AND GOT A DIRECTION TO THE AO TO LOOK IN TO THIS ISSUE ALSO . AS SEEN FROM PARA NO. 9 PAGE NO. 4 OF THE ASSESSMENT ORDER U/S 143(3) RWS 254 DATED 24.08.2006, THE AO HAS MADE TH E BRANCH MANAGER OF BHARAT CO-OP BANK TO ATTEND ON 25-07-2006 AND PRODUCE REGISTER FOR ISSUE OF DDS. T HE REGISTER WAS VERIFIED BY THE AO AND THE ENTRY OF IS SUE OF DD NO. 203886 ISSUED TO MAHAVIR TRADING CO., FAVOUR ING M/S ANAND ENTERPRISE FOR CASH PAYMENT OF RS. 70,000 /- WAS OBSERVED AT SERIAL NO. 36 OF THE REGISTER ON 18.08.1992. THEREAFTER, THE AO VIDE HIS OFFICE LETT ER DATED 27.07.2006 INFORMED THE APPELLANT THE INQUIRIES MAD E BY HIM AND THE OUTCOME THEREOF AND OFFER ANY COMMENTS BY 07.08.2006 SO AS TO INCORPORATE THE SAME IN THE ASSESSMENT ORDER. TO THIS THE APPELLANT VIDE LETTER DATED ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 4 03.08.2006 REPLIED THAT ITS EARLIER SUBMISSIONS STA ND GOOD AND THAT THE FIRM IS NOT IN POSSESSION OF BOOKS OF ACCOUNT FOR VERIFICATION. HERE IT MAY BE NOTED THAT AFTER G ATHERING VITAL INFORMATION THAT THE APPELLANT HAS PURCHASED DD FOR RS. 70,000/- BY PAYING CASH, THE AO PUT THE SAME TO THE APPELLANT TO EXPLAIN THE SOURCES, TO WHICH THE APPE LLANT HAS AVOIDED A REPLY. THE ONUS IS ON THE APPELLANT T O EXPLAIN THE SOURCES, WHICH IT HAS NOT DISCHARGED. I N THE CIRCUMSTANCES, THE ACTION OF THE AO IN SUBJECTING T HE ADDITION OF RS. 70,000/- U/S 69 IS CONFIRMED. THE A CTION OF THE AO IN REOPENING THE ORIGINAL ASSESSMENT (I.E., INTIMATION) U/S 148 IS ALSO CONFIRMED AS SUFFICIENT MATERIAL WAS THERE IN THE POSSESSION OF THE AO. 5. IN THE RESULT, THE APPEAL IS DISMISSED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND R EFERRED TO THE COPY OF THE REASONS RECORDED FOR REOPENING OF THE A SSESSMENT AND SUBMITTED THAT IN THE REASONS RECORDED THERE IS A R EFERENCE OF M/S. TOPANDAS CHELLARAM & OTHERS INCLUSIVE OF THE ASSESS EE AND IN CASE OF THE ASSESSEE, PURCHASE OF DEMAND DRAFT IS REFERR ED TO FROM BARODA TRADERS CO-OPERATIVE BANK LTD., HATHIKHANA, BARODA TO WHICH THE ASSESSEE HAS NO CONCERN. THE ASSESSEE ALSO FILED CO NFIRMATION FROM THE SAID BANK BEFORE THE AO THAT NO SUCH DEMAND DRA FT WAS PURCHASED BY THE ASSESSEE FROM BARODA TRADERS CO-OP ERATIVE BANK LTD. THEREFORE, FORMING OF THE BELIEF FOR ESCAPEMEN T OF ASSESSMENT FORMED ON NON-EXISTING REASONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SINCE INFORMATION WAS RECEI VED FROM THE DDIT (INVESTIGATION), BARODA REGARDING PURCHASE OF DEMAND DRAFT FROM BARODA TRADERS CO-OPERATIVE BANK LTD. WHICH WA S FOUND TO BE INCORRECT, THEREFORE, REOPENING OF THE ASSESSMENT O N SUCH INFORMATION ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 5 IS ILLEGAL AND WITHOUT JURISDICTION. HE HAS SUBMITT ED THAT IT WAS PLEADED BEFORE THE TRIBUNAL IN THE FIRST ROUND PROC EEDINGS THAT NO SUCH DEMAND DRAFT WAS PURCHASED BY THE ASSESSEE FRO M BARODA TRADERS CO-OPERATIVE BANK LTD., HATHIKHANA, THEREFO RE, THE TRIBUNAL RESTORED THE MATTER BACK TO THE FILE OF THE AO FOR RECONSIDERATION BECAUSE THE FINDINGS OF THE AO AND THE LEARNED CIT( A) WERE FOUND TO BE CONTRARY TO THE BANK CERTIFICATE PRODUCED BY THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE, THEREFORE, SUBMIT TED THAT IT WAS A TYPOGRAPHICAL MISTAKE IN THE REASONS RECORDED BY TH E AO FOR REOPENING OF THE ASSESSMENT AND THERE IS ALSO NO RE FERENCE OF M/S. ANAND ENTERPRISES IN THE CASE OF THE ASSESSEE IN TH E REASONS RECORDED. HE HAS FURTHER SUBMITTED THAT NO REOPENI NG COULD BE DONE ON THE BASIS OF INFORMATION RECEIVED FROM THE INVES TIGATION WING BECAUSE THE AO HAS TO APPLY HIS INDEPENDENT MIND BE FORE RECORDING THE REASONS FOR REOPENING. THEREFORE, REOPENING OF THE ASSESSMENT IS BASED ON MERE SUSPICION AND AS SUCH IT IS LIABLE TO BE DECLARED NULL AND VOID. THE LEARNED COUNSEL FOR THE ASSESSEE ON M ERIT DID NOT CONTRIBUTE ANYTHING ON THIS ISSUE. THE LEARNED COUN SEL FOR THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. VS ITO, 329 ITR 110 IN WHICH IT WAS HELD AS UNDER: HELD, ALLOWING THE PETITION, THAT THE FORMATION OF BELIEF WAS A CONDITION PRECEDENT AS REGARDS THE ESCAPEMENT OF THE TAX PERTAINING TO THE ASSESSMENT YEAR BY THE ASSESSING OFFICER. THE ASSESSING OFFICE R WAS REQUIRED TO FORM AN OPINION BEFORE HE PROCEEDED TO ISSUE A NOTICE. THE VALIDITY OF REASONS, WHICH W ERE SUPPOSED TO SUSTAIN THE FORMATION OF AN OPINION, WA S ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 6 CHALLENGEABLE. THE REASONS TO BELIEVE WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ONCE THE INGREDIENTS OF SECTION 147 WERE FULFILLED, THE ASSESSING OFFICER WAS COMPETENT IN LAW TO INITIATE THE PROCEEDINGS UNDER SECTION 147. THE ASSESSING OFFICER WAS AWARE OF THE EXISTENCE OF THE FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS SHOWED THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION B Y THE INVESTIGATION WING AND THERE WAS NO MENTION THA T THESE COMPANIES WERE FICTITIOUS COMPANIES. NEITHER THE REASONS IN THE INITIAL NOTICE NOR THE COMMUNICATION PROVIDING REASONS REMOTELY INDICATED INDEPENDENT APPLICATION OF MIND. THOUGH CONCLUSIVE PROOF WAS NOT GERMANE AT THIS STAGE THE FORMATION O F BELIEF MUST BE ON THE BASE OF FOUNDATION OR PLATFOR M OF PRUDENCE WHICH A REASONABLE PERSON WAS REQUIRED TO APPLY. FROM THE PERUSAL OF THE REASONS RECORDED AND THE ORDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY AND THEIR EXISTENCE WAS NOT DISPUTED. THE ASSESSEE IN I TS OBJECTIONS HAD STATED THAT THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE THROUGH BANKING CHANNEL. THE IDENTITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANCES, THE INTIMATION OF PROCEEDINGS UNDER SECTION 147 AND ISSUANCE OF NOTICE UNDER SECTION 14 8 OF THE ACT WERE TO BE QUASHED. HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SAGAR ENTERPRISES VS ACIT, 173 CTR (GUJ) 528 IN WHICH IT WAS HELD AS UNDER: CONCLUSION: NOTICE UNDER S.148 ISSUED ON THE GROUND OF FACTUALL Y INCORRECT BASIS THAT THE ASSESSEE HAD NOT FILED ITS RETURN COULD NOT BE SUSTAINED EVEN ON THE BASIS OF ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 7 ALTERNATIVE REASON SINCE IT COULD NOT BE SAID WITH CERTAINITY AS TO WHICH FACTOR WEIGHED WITH THE CONCERNED OFFICER WHEN HE ISSUED THE IMPUGNED NOTICE AND WHEN THE RESPONDENT AUTHORITY WAS HIMSELF UNSURE AS TO THE YEAR OF TAXABILITY OF THE INCOME WHICH IS STATED TO BE UNDISCLOSED INCOME HE HAS ALSO RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ADANI EXPORTS VS DCIT (ASSESSM ENTS), 240 ITR 224 IN WHICH IT WAS HELD AS UNDER: HELD, THAT, IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT HOLD ANY BELIEF THAT INCOME HAD ESCAPED ASSESSMENT ON ACCOUNT OF ERRONEOUS COMPUTATION OF BENEFIT UNDER SECTION 80HHC. THE MERE FACT THAT AS A SUBORDINATE OFFICER HE ADDED TH E SUGGESTION THAT IF HIS VIEWS WERE NOT ACCEPTED, REMEDIAL ACTIONS MAY BE TAKEN COULD NOT BE SAID TO BE BELIEF HELD BY HIM. HE HAD NO AUTHORITY TO SURRENDE R OR ABDICATE HIS FUNCTION TO HIS SUPERIORS NOR COULD THE SUPERIORS ARROGATE TO THEMSELVES SUCH AUTHORITY. AUDIT OBJECTIONS WERE RAISED BUT THAT WOULD NOT AMOUNT TO INFORMATION WITHIN THE MEANING OF SECTION 147(B). THE BOARD HAD DIRECTED REMEDIAL ACTION UNDE R SECTION 147 (B) ON THE BASIS OF THE AUDIT OBJECTION S. THE DIRECTION WAS NOT VALID. THE NOTICE UNDER SECTI ON 147(B) WAS NOT VALID AND WAS LIABLE TO BE QUASHED. 6. ON THE OTHER HAND, THE LEARNED DR RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT INFORMATIO N RECEIVED FROM FORM THE DDIT (INVESTIGATION) IS VALID AND CAN BE B ASIS FOR REOPENING OF THE ASSESSMENT. HE HAS SUBMITTED THAT THE AO APP LIED HIS MIND TO THE INFORMATION RECEIVED FROM THE DDIT (INVESTIGATI ON), THEREFORE, ON MERE TYPOGRAPHICAL MISTAKE REOPENING SHOULD NOT BE HELD TO BE INVALID. THE LEARNED DR ALSO REFERRED TO SECTION 29 2 B OF THE IT ACT TO ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 8 SAY THAT U/S 148 OF THE IT ACT THE REASONS ARE NOT INVALID IF THREE WAS MISTAKE OR DEFECT THEREIN. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FAC TS NOTED ABOVE ARE NOT IN DISPUTE. THE AO IN THE ORIGINAL ASSESSME NT ORDER DATED 31-03-2003 NOTED THAT THE CASE WAS REOPENED ON THE INFORMATION RECEIVED FROM THE DDIT (INVESTIGATION), BARODA REGA RDING DEMAND DRAFT PURCHASED BY THE ASSESSEE FROM BARODA TRADERS CO-OPERATIVE BANK LTD. AMOUNTING TO RS.70,000/- DURING THE PREVI OUS YEAR RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. NOTICE U/S 148 OF THE IT ACT WAS ACCORDINGLY ISSUED ON 23-05-2001. COPY OF THE REASO NS RECORDED FOR REOPENING OF THE ASSESSMENT IS FILED ON RECORD IN W HICH THE AO HAS MENTIONED THAT THE DDIT (INVESTIGATION), BARODA REC EIVED A TEP IN THE CASE OF M/S. TOPANDAS CHELLARAM AND OTHERS INCL USIVE OF THE ASSESSEE IN QUESTION ALLEGING THAT DEMAND DRAFTS AR E PURCHASED BY THEM BY MAKING CASH PAYMENT TO BHARAT CO-OPERATIVE BANK LTD., FATEHPURA. IT WAS FURTHER NOTED WITH REGARD TO M/S. TOPANDAS CHELLARAM THAT DEMAND DRAFT WAS PURCHASED FROM BHAR AT CO- OPERATIVE BANK LTD. OUT OF CASH ON ACCOUNT OF UNDIS CLOSED SOURCES OF INCOME. AS REGARDS ASSESSEE IS CONCERNED, IT WAS NO TED IN THE REASONS THAT SIMILAR DETAILS WERE CALLED FOR FROM B ARODA TRADERS CO- OPERATIVE BANK LTD., HATHIKHANA, BARODA AND STATEME NT OF BANK MANAGER WAS RECORDED IN WHICH HE HAS STATED THAT MA JORITY OF THE DRAFTS ARE MADE IN CASH HAD BEEN ISSUED TO M/S. MAH ADEV TRADING CO. I.E. THE ASSESSEE IN QUESTION. THE AO ON THE BA SIS OF INFORMATION RECEIVED FROM THE DDIT (INVESTIGATION) HAD REASON T O BELIEVE THAT RS.70,000/- FOR ASSESSMENT YEAR UNDER APPEAL HAS ES CAPED ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 9 ASSESSMENT. THE ASSESSEE IN THE FIRST ROUND PROCEED INGS TOOK UP THE MATTER BEFORE THE TRIBUNAL AND FILED CONFIRMATION F ROM THE BANK THAT NO SUCH DRAFT WAS PURCHASED BY THE ASSESSEE. THE TR IBUNAL FOUND THAT THE FINDINGS OF THE LEARNED CIT(A) ARE CONTRAR Y TO THE BANK CERTIFICATE PRODUCED BY THE ASSESSEE, THEREFORE, TH E ENTIRE ASSESSMENT WAS RESTORED TO THE FILE OF THE AO FOR R ECONSIDERATION OF THE REOPENING AS WELL AS ADDITION ON MERIT. THESE FACTS CLEARLY PROVE ON RECORD THAT IN THE REASONS RECORDED FOR REOPENING O F THE ASSESSMENT THE AO RECEIVED INFORMATION FROM THE DDIT (INVESTIG ATION) AND ON THE BASIS OF STATEMENT OF THE BANK MANGER OF BARODA TRA DERS CO- OPERATIVE BANK LTD., HATHIKHANA THAT THE ASSESSEE P URCHASED DEMAND DRAFT IN CASH BUT IT WAS FOUND TO BE INCORRE CT BECAUSE BARODA TRADERS CO-OPERATIVE BANK LTD., HATHIKHANA LATER ON CONFIRMED THAT NO SUCH DRAFT IS ISSUED IN FAVOUR OF THE ASSESSEE. IN THE SET ASIDE PROCEEDINGS THE ASSESSEE AGAIN REITERATED THE SAME FACTS BEFORE THE AO AND EXPLAINED THAT NO SUCH DRAFT IS PURCHASED FR OM BARODA TRADERS CO-OPERATIVE BANK LTD., THEREFORE, BELIEF O F THE AO FOR ESCAPEMENT OF INCOME WAS BASED ON NON-EXISTENT REAS ONS. THE LEARNED CIT(A) HOWEVER, TOOK IT AS TYPOGRAPHICAL E RROR BECAUSE THE CORRECT NAME WAS BHARAT CO-OPERATIVE BANK LTD. THE AO CALLED FOR THE BRANCH MANAGER OF BHARAT CO-OPERATIVE BANK LTD. TO ASSIST THE PROCEEDINGS LATER ON, ON 25-7-2006 IN THE SET ASIDE PROCEEDINGS TO SHOW THAT DRAFTS WERE ISSUED TO THE ASSESSEE FAVOUR ING M/S ANAND ENTERPRISES AGAINST CASH PAYMENT. THESE FACTS CLEAR LY PROVE ON RECORD THAT THE ASSESSEE DID NOT PURCHASE ANY DRAFT FROM BARODA TRADERS CO-OPERATIVE BANK LTD., HATHIKHANA AS IS ME NTIONED IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AS WELL AS ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 10 RECORDED IN THE ORIGINAL ASSESSMENT ORDER. THUS, TH E REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT ARE NOT MERE TYPOGRAPHICAL ERROR IN THE REASONS BUT FACTUALLY IN CORRECT REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT. THE AO REOPENED THE ASSESSMENT ON NON-EXISTING REASONS. TH E AO FAILED TO EXAMINE THE INFORMATION RECEIVED FROM THE DDIT (INV ESTIGATION) BEFORE RECORDING THE REASONS. THUS, THE AO DID NOT APPLY INDEPENDENT MIND TO THE INFORMATION RECEIVED FROM T HE DDIT (INVESTIGATION) BEFORE RECORDING THE REASONS FOR RE OPENING OF THE ASSESSMENT. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ATLAS CYCLE, 180 ITR 319 HELD AS UNDER: HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELING THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASSESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND, THEREFORE, THE INCOME-TAX OFFICER DID N OT GET JURISDICTION TO MAKE A REASSESSMENT. 7.1 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF PR ASANT S. JOSHI AND ANOTHER VS ITO AND ANOTHER, 324 ITR 154 HELD AS UNDER: THE QUESTION AS TO WHETHER THERE WAS REASON TO BELIEVE, WITHIN THE MEANING OF SECTION 147 THAT INCOME HAS ESCAPED ASSESSMENT, MUST BE DETERMINED WITH REFERENCE TO THE REASONS RECORDED B Y THE ASSESSING OFFICER. THE REASONS WHICH ARE RECORDED COULD NOT BE SUPPLEMENTED BY AFFIDAVITS. 7.2 THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SMT. PARAMJIT KAUR, 311 ITR 38 HELD AS UNDER: ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 11 HELD, THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEF ORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED ONLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASE D ON BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE ASSESSING OFFICER HAD TO ACT ON THE BASIS OF REASONS TO BELIEVE AND NOT ON REASO NS TO SUSPECT. THE TRIBUNAL RIGHTLY CONCLUDED THAT TH E ASSESSING OFFICER HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SATISFACTION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID 8. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DISCUSSIONS AND DECISIONS, IT IS CLEAR THAT THE REA SONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT WERE FACTUALLY I NCORRECT AND WERE NON-EXISTING BASED ON INCORRECT INFORMATION. T HE AO IN THIS CASE LATER ON CALLED FOR THE BRANCH MANAGER OF BHARAT CO -OPERATIVE BANK LTD. IN THE SET ASIDE PROCEEDINGS AND CAME TO KNOW THAT THE ASSESSEE PURCHASED DEMAND DRAFT FAVOURING M/S. ANAN D ENTERPRISES ON CASH PAYMENT. THE REASONS ARE RECORDED PRIOR TO THAT. THEREFORE, SUBSEQUENT INFORMATION RECEIVED IN THE SET ASIDE PR OCEEDINGS WOULD HAVE NO BEARING IN THE REOPENING OF THE ASSESSMENT BECAUSE THE QUESTION AS TO WHETHER THERE WAS REASON TO BELIEVE WITHIN THE MEANING OF SECTION 147 OF THE IT ACT THAT INCOME HA S ESCAPED ASSESSMENT, MUST BE DETERMINED WITH REFERENCE TO TH E REASONS RECORDED BY THE AO. THE REASONS WHICH ARE RECORDED CANNOT BE SUPPLEMENTED BY RECEIVING FURTHER INFORMATION FROM THE BRANCH MANAGER OF BHARAT CO-OPERATIVE BANK LTD. IN THE LAT ER STAGE IN SET ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 12 ASIDE PROCEEDINGS. SAME VIES IS TAKEN BY THE HONB LE BOMBAY HIGH COURT IN THE CASE OF PRASANT S. JOSHI (SUPRA). I MA Y ALSO FURTHER ADD HERE THAT IN THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT QUA THE ASSESSEE, THERE IS NO REFERENCE OF M/S. ANA ND ENTERPRISES IN WHOSE FAVOUR THE ASSESSEE ALLEGED TO HAVE GOT ISSUE D THE DEMAND DRAFT. SINCE, THERE IS NO MENTION OF M/S. ANAND ENT ERPRISES IN THE REASONS RELEVANT TO THE ASSESSEE; THEREFORE, FINDIN GS OF THE AUTHORITIES BELOW ARE INCORRECT TO THAT EXTENT ALSO . SINCE THE RECORDING OF THE REASONS IS THE FOUNDATION OF INITIATION OF T HE PROCEEDINGS U/S 148 OF THE IT ACT, THEREFORE, IT WOULD NOT BE EFFEC TED BY THE PROVISIONS OF SECTION 292B OF THE IT ACT. CONSIDERING THE ABOV E DISCUSSIONS, I AM OF THE VIEW THAT THE AO PROCEEDED FOR REOPENING OF THE ASSESSMENT ON NON-EXISTENT AND FACTUALLY INCORRECT REASONS AND HAS NOT APPLIED INDEPENDENT MIND AND DID NOT VERIFY THE INFORMATION RECEIVED FROM THE DDIT (INVESTIGATION) PRIOR TO REC ORDING OF THE REASONS. THEREFORE, REOPENING OF THE ASSESSMENT IN THE MATTER IS CLEARLY INVALID AND UNJUSTIFIED. THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. I ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REASSESSMENT PROCEE DINGS. IN VIEW OF THIS FINDING, THERE IS NO NEED TO GIVE ANY FINDI NG ON MERIT BECAUSE IT WOULD BE OF ACADEMIC INTEREST ONLY BECAUSE ONCE REA SSESSMENT IS QUASHED ALL ADDITIONS WOULD STAND DELETED. ITA NO. 2095/AHD/2009 M/S. MAHADEV TRADING CO. VS ITO, W- 5(4), BARODA 13 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A)- CONCERNED 5. THE DR, ITAT, CONCERNED 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD