Jai Prakash Gupta, Kolkata V. ITO, Ward-37(1), Kolkata

ITA 2142/KOL/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2886 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 17-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA
• Assessee Lawyers: K M ROY
• Keywords: Reopening of assessment; Earning of tax free income; Tangible material; Reason to believe; Borrowed satisfaction; Set aside; Capital Gains
• Section: 143(1); 147; 148

Judgement Text

ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 1 | P A GE , C(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL C(SMC) BENCH : KOLKATA [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 2142/KOL/2019 ASSESSMENT YEAR: 2013-14 JAI PRAKASH GUPTA (PAN: AGJPG 5316 J) VS. ITO,WARD-37(1), KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 29.04.2021 DATE OF PRONOUNCEMENT 18.06.2021 FOR THE APPELLANT SHRI K. M. ROY, A.R FOR THE RESPONDENT SHRI JAYANTA KHANRA, JCIT, SR. D R ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINS T THE ORDER OF LD. CIT(A)-11, KOLKATA DATED 26.07.2019 FOR ASSESSMENT YEAR 2013-1 4. 2. AT THE OUTSET, THE LD. A.R OF THE ASSESSEE SHR I K. M. ROY ASSAILED THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT U/S 147 OF THE I NCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) WITHOUT SATISFYING THE CONDITION PRECEDEN T I.E. REASON TO BELIEVE, ESCAPEMENT OF INCOME, IN THE REASONS RECORDED BY HIM BEFORE RE-OPENING TH E ASSESSMENT OF AY 2013-14. THEREFORE ACCORDING TO LD. A.R, THE REOPENING ITSEL F IS BAD IN LAW AND WITHOUT JURISDICTION, SO CONSEQUENT FRAMING OF ASSE SSMENT ORDER IS NULL IN THE EYES OF LAW. 3. I NOTE THAT SINCE THE ASSESSEE HAS RAISED A LEGA L ISSUE CHALLENGING THE JURISDICTION OF AO TO REOPEN, WHICH ISSUE IF FOUND TO BE CORRECT, T HEN WILL GO TO THE ROOT OF THE RE- ASSESSMENT ORDER DATED 21.12.2017 ITSELF AND THEREF ORE NEED TO BE ADJUDICATED AT THE FIRST INSTANCE; AND SINCE IT IS A LEGAL ISSUE IT IS NOTE D THAT IT CAN BE RAISED FOR THE FIRST TIME EVEN BEFORE THIS TRIBUNAL AS HELD BY THE HONBLE SUPREME COURT IN NATIONAL THERMAL POWER CO. LTD. VS. CIT IN [1998] 229 ITR 383 (SC). ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 2 | P A GE 4. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE HAD FILED THE RETURN OF INCOME SHOWING RS. 2,84,100/-. THE RETURN OF INCOME (ROI) WAS PROC ESSED U/S 143(1) OF THE ACT. THEREAFTER IN MARCH 2017, THE AO ISSUED NOTICE U/S 148 OF THE ACT CONVEYING HIS DESIRE TO REOPEN THE ASSESSMENT U/S 147 OF THE ACT. PURSUANT TO THE ASSE SSEE SEEKING THE REASONS FOR REOPEN, THE ASSESSEE WAS GIVEN A COPY OF REASON RECORDED FOR R EOPENING AND THEREAFTER THE AO PASSED THE REASSESSMENT ORDER U/S 147/143(3) OF THE ACT ON 21.12.2017 WHEREIN HE TREATED THE LONG TERM CAPITAL GAIN ( HEREINAFTER REFERRED TO AS LTCG) EARNED BY THE ASSESSEE ON SALE OF SHARES OF M/S ESSAR INDIA LTD. AS BOGUS AND ADDED BACK THE LTCG EARNED BY ASSESSEE OF RS. 9,70,583/-. 5. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE LD. CIT(A) WHO WAS PLEASED TO CONFIRM THE ORDER. 6. AGGRIEVED THE ASSESSEE IS BEFORE US. 7. THE LD. A.R. ASSAILING THE ACTION OF AO TO REOPE N CHALLENGES THE VERY INITIATION TO REOPEN U/S 147 OF THE ACT. ACCORDING TO HIM, THE AO HAS MERELY REPRODUCED THE INFORMATION WHICH HE RECEIVED FROM THE INVESTIGATIO N WING IN THE REASONS RECORDED U/S 147 OF THE ACT. AND THAT HE HAS NEITHER GIVEN THE DETAI LS OF THE INFORMATION ON THE BASIS OF WHICH HE PROPOSED TO REOPEN NOR HAS HE APPLIED HIS MIND AND MERELY CONCLUDED THAT THE TRANSACTIONS AS BOGUS. THUS ACCORDING TO HIM, THESE REASONS ARE THEREFORE NOT IN FACT REASONS BUT ONLY HIS CONCLUSION AND THAT TOO WITHOU T ANY BASIS. FURTHER ACCORDING TO HIM, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD ON TH E BASIS OF WHICH ANY NEXUS COULD HAVE BEEN ESTABLISHED BETWEEN THE MATERIAL AND THE ESCAP EMENT OF INCOME. THUS ACCORDING TO HIM, THE REASONS RECORDED BY AO, FAIL TO DEMONSTRAT E THE LINK BETWEEN THE ALLEGED TANGIBLE MATERIAL AND FORMATION OF THE REASON TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT. SO, HE SUBMITTED THAT THE VERY BASIS/FOUNDATION WHICH ENAB LES AN OFFICER TO ASSUME JURISDICTION U/S 147 IS ABSENT; SO ACCORDING TO HIM, THE AO HAS NO JURISDICTION TO REOPEN THE ASSESSMENT. FURTHER ACCORDING TO LD. A.R. FROM A PE RUSAL OF ASSESSMENT ORDER IT CAN BE SEEN THAT THE AO HAS ADDED A SUM OF RS. 9,73,583/-. HOWEVER, ON A PERUSAL OF THE REASONS- RECORDED FOR RE-OPENING ASSESSMENT, AO HAS ALLEGED THAT A SUM OF RS. 5,55,624/- HAS ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 3 | P A GE ESCAPED ASSESSMENT. SO ACCORDING TO LD. A.R, THE AP PARENT DISCREPANCY IN THE TWO FIGURES WHICH FORMS THE BEDROCK TO RE-OPEN THE ASSESSMENT S HOWS THE WHIMSICAL/LACKADAISICAL ATTITUDE ADOPTED BY AO AND THEREFORE FOR NON-APPLIC ATION OF MIND, THE REASONS- RECORDED FOR RE-OPENING ASSESSMENT ITSELF IS BAD IN LAW. AN D THEREFORE THE ACTION OF AO TO RE-OPEN THE ASSESSMENT WAS WITHOUT JURISDICTION, SO CONSEQU ENT FRAMING OF ASSESSMENT ORDER IS NULL IN THE EYES OF LAW NEEDS TO BE QUASHED. 8. PER CONTRA, THE LD. D.R SHRI JAYANTA KHANRA OPPO SING THE ARGUMENTS OF THE LD. AR SUBMITTED THAT THE ASSESSEE HAS NOT CHALLENGED THE LEGAL VALIDITY OF REOPENING EITHER BEFORE THE AO OR LD. CIT(A) AND THEREFORE THE ASSESSEE SHO ULD NOT BE ALLOWED TO ASSAIL THE ACTION OF REOPENING FOR THE FIRST TIME IN THIS TRIBUNAL. A ND ACCORDING TO HIM, IN THIS FINANCIAL YEAR THE ASSESSEE HAS DEALT WITH THE PENNY STOCK OF M/S ESSAR INDIA AND HAS MADE HUGE GAIN WHICH IS PER SE BOGUS AND THEREFORE ON RECEIPT OF I NFORMATION FROM DIT(INV) HAS RIGHTLY REOPENED THE ASSESSMENT AND MADE ADDITION OF BOGUS LTCG AND SO HE DOES NOT WANT THIS TRIBUNAL TO INTERFERE IN THE ACTION OF AO / LD. CIT (A). 9. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. THE ASSESSEE HAS RAISED THE LEGAL ISSUE OF REOPENING THE ASSESSMENT U/S 147 OF THE ACT. ONE HAS TO BEAR IN MIND THAT THE CONCEPT OF ASSESSMENT IS GOVERNED BY THE TIME BARRI NG RULE AND THE ASSESSEE ACQUIRED A RIGHT AS TO THE FINALITY OF PROCEEDINGS. QUIETUS OF THE COMPLETED ASSESSMENTS CAN BE DISTURBED ONLY WHEN THERE IS INFORMATION OR EVIDENC E REGARDING UNDISCLOSED INCOME OR AO HAD TANGIBLE MATERIAL/ INFORMATION IN HIS POSSESSIO N SHOWING ESCAPEMENT OF INCOME. SO IF THE AO HAS REASON TO BELIEVE THAT IN AN ASSESSMENT YEAR, IF THERE IS AN ESCAPEMENT OF INCOME, HE CAN REOPEN THE ASSESSMENT PROVIDED THE L EGAL REQUIREMENTS AS PRESCRIBED IN THE STATUTE IS SATISFIED. THE LEGAL REQUIREMENT AS PRES CRIBED BY SECTION 147 OF THE ACT IS THAT AO SHOULD HAVE REASON TO BELIEVE, ESCAPEMENT OF INCOME. IN THIS REGARD IT IS SETTLED PRINCIPLE OF LAW THAT THAT REASON TO BELIEVE POSTUL ATES A FOUNDATION BASED FOR INFORMATION AND A BELIEF BASED ON REASON. AFTER A FOUNDATION BA SED ON INFORMATION IS MADE, THERE STILL MUST BE SOME REASON WHICH SHOULD WARRANT HOLDING OF BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; AND IN THIS CONTEXT IT SHOU LD BE KEPT IN MIND THAT INFORMATION ADVERSE MAY TRIGGER REASON TO SUSPECT, THEN AO TO MAKE REASONABLE ENQUIRY AND COLLECT ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 4 | P A GE MATERIAL WHICH WOULD MAKE HIM FORM THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. AND FURTHER IT IS SETTLED THAT WHEN THERE IS A CHALLENG E TO THE VALIDITY OF THE REASONS RECORDED BY THE AO TO RE-OPEN, THEN IT ( REASONS RECORDED BY THE AO ) SHOULD BE EXAMINED ON A STANDALONE BASIS; MEANING THAT NOTHING CAN BE ADDED OR OMITTED IN THE REASONS RECORDED BY THE AO. THE REASONS SHOULD SPEAK FOR ITSELF AND THERE IS N O SCOPE FOR GUESS WORK. FURTHER IN THE HONBLE SUPREME COURT IN THE CASE OF GANGA SARAN AND SONS P LTD. VS. ITO IN 130 ITR 1 (SC) HELD THAT THE EXPRESSION REASON TO BELIEVE AS OCCURRING IN SECTION 147 OF THE ACT IS STRONGER THEN THE EXPRESSION IS SATISFIED WHICH IS THE REQUIREMENT OF LAW FOR THE AO TO REOPEN THE ASSESSMENT. KEEPING THE AF ORESAID LEGAL PRINCIPLES IN MIND LET ME HAVE A LOOK AT THE REASON RECORDED BY THE AO TO REO PEN THE ASSESSMENT WHICH IS REPRODUCED AS UNDER: IN THE INSTANT CASE, THERE IS INFORMATION ON RECOR D FROM INVESTIGATION REGARDING SUSPICIOUS TRANSACTIONS OF LONG TERM CAPITAL GAIN IN SHARES AM OUNTING TO RS. 10,67,310/- BY THE ASSESSEE SHRI JAI PRAKASH GUPTA ON DIFFERENT DATES DURING TH E FINANCIAL YEAR 2012-13 RANGING IN A SHAM SCRIPT NAMELY ESSAR INDIA. THE DIRECTOR OF INCOME T AX (INVESTIGATION) IN HIS COMMUNICATION HAD REPORTED THAT THE ASSESSEE HAD MADE BOGUS TRANSACTI ONS WITH ESSAR INDIA AND HAD SHOWN BOGUS LONG TERM CAPITAL GAINS BY WAY OF ACCOMMODATION ENT RY AND SUBSEQUENTLY CLAIMED IT AS EXEMPT INCOME U/S 10(38) OF THE ACT. SINCE THE TRANSACTIONS CARRIED OUT BY THE ASSESSEE IS A BOGUS ONE, THE AMOUNT OF INCOME THAT HAS ESCAPED ASSESSMENT IN THE INSTANT CASE IS RS. 5,55, 624/- AND IN VIEW OF THE ABOVE, I HAVE SUBSTANTIAL REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT IN THE INSTANT CASE. IN VIEW OF THE ABOVE I HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT DURING THE FINANCIAL YEAR 2012-13 RELEVANT TO ASSESSMENT YEAR 2013-14 AND REMEDIAL MEASURE FOR OPENING THE CASE U/S 147 OF THE ACT IS PROPOSED FOR KIND APPROV AL. 10. A PERUSAL OF THE AFORESAID REASONS RECORDED SHO WS THAT THE AO RECEIVED AN INFORMATION FOR INVESTIGATION REGARDING SUSPICIOUS TRANSACTION OF LTCG IN SHARES AMOUNTING TO RS. 10,67,310/- BY THE ASSESSEE ON DIF FERENT DATES DURING THE FINANCIAL YEAR 2012-13 IN SHAM SCRIPT NAMELY M/S ESSAR INDIA. ACC ORDING TO AO, THE DIT (INVESTIGATION) HAS COMMUNICATED THAT THE ASSESSEE HAS MADE BOGUS T RANSACTION WITH M/S ESSAR INDIA AND SHOWN BOGUS LTCG BY RESORTING TO ACCOMMODATION ENTR Y. THEREAFTER, THE AO CONCLUDES THAT THE ASSESSEE HAS CARRIED OUT BOGUS TRANSACTION AND THEREBY THE AMOUNT OF RS. 5,55,624/- HAS ESCAPED ASSESSMENT FOR WHICH HE HAS REOPENED THE ASSESSMENT U/S 147 OF THE ACT. FROM A MERE PERUSAL OF THE AFORESAID REASONS R ECORDED IT IS CLEAR THAT THE AO HAS BORROWED THE SATISFACTION OF THE DIRECTOR OF INCOME TAX THAT THE ASSESSEE HAS TRANSACTED IN ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 5 | P A GE BOGUS SHARES OF M/S ESSAR INDIA AND THEREBY THERE H AS BEEN AN ESCAPEMENT OF INCOME OF RS. 5,55,624/- WHICH PROMPTED HIM TO REOPEN THE ASS ESSMENT. HOWEVER IT HAS BEEN POINTED OUT TO ME THAT WHEN THE AO FRAMED THE ASSESSMENT OR DER HE HAS STATED THAT THE AMOUNT OF LTCG IN RESPECT OF SHARES OF M/S ESSAR INDIA WAS TO THE TUNE OF RS. 9,70,583/- AND NOT RS. 5,55,624/- AS HE HAS RECORDED IN THE REASONS FOR RE OPENING, WHICH DIFFERENCE IN THE FIGURES SHOWS NON-APPLICATION OF MIND BY THE AO WHILE RECOR DING THE REASONS OF REOPENING. AS I HAVE TAKEN NOTE (SUPRA) THAT ANY ADVERSE INFORMATIO N MAY TRIGGER ONLY REASON TO SUSPECT AND NOT REASON TO BELIEVE ESCAPEMENT OF INCOME WHEN THERE IS REASON TO SUSPECT, THEN AO HAS TO MAKE REASONABLE ENQUIRY AND COLLECT MATER IAL WHICH WOULD MAKE HIM FORM A BELIEF THAT THERE IS ESCAPEMENT OF INCOME. I FIND T HAT AO HAS SIMPLY BORROWED THE SATISFACTION OF DIT (INV.) AND BELIEVED IT AS GOSPE L TRUTH AND HAS CONCLUDED THAT THERE IS AN ESCAPEMENT OF INCOME WITHOUT EVEN MAKING A PRELIMIN ARY ENQUIRY AS TO WHETHER THERE IS ANY ESCAPEMENT OF INCOME. THEREFORE, THE REASONS RE CORDED BY AO TO USURP JURISDICTION TO RE-OPEN IS NOT SATISFIED AND FOR SAYING SO, I RELY ON THE FOLLOWING CASE LAWS: I) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. 395 ITR 677. II) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. G & G PHARMA INDIA LTD. 387 ITR 147. III) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. RMG POLYVINYL (I) LTD. 396 ITR 5 IV) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SAB INFRASTRUCTURE LTD. VS. ACIT 2017-(9)-TMI-1589. ITA NO. 366/DEL/2016 M/S KE Y COMPONENTS (P) LTD., DELHI. V) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ATUL JAIN 299 ITR 383. VI) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SHIV SAI INFRASTRUCTURE PVT. LTD. VS. DCIT 2018-(8)-TMI-205. VII) ORDER OF ITAT, DELHI BENCH IN THE CASE OF M/S MRY A UTO COMPONENTS LTD. VS. ITO, IN ITA NO. 2418/DEL/2014, DATED 15.09.2017. ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 6 | P A GE 11. AS WELL AS THE DECISION OF THE DELHI TRIBUNAL I N THE CASE OF M/S KEY COMPONENTS P LTD. VS. ITO, NEW DELHI IN ITA NO. 366/DEL/2016 DAT ED 12.02.2019 WHEREIN IT WAS HELD AS FOLLOWS: 30.1. IN COMMISSIONER OF INCOME TAX, NEW DELHI V. H IGH GAIN FINVEST (P) LIMITED (2007) 164 TAXMAN 142 (DEL) IT WAS NOTED THAT THE R EASONS TO BELIEVE READ AS UNDER: 'IT HAS BEEN INFORMED BY THE ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT VII, NEW DELHI VIDE LETTER NO. 138 DATED 8THAPRIL 2 003 THAT THIS COMPANY WAS INVOLVED IN THE GIVING AND TAKING BOGUS ENTRIES/ TR ANSACTIONS DURING THE FINANCIAL YEAR 1996-97, AS PER THE DEPOSITION MADE BEFORE THEM BY SHRI SANJAY RASTOGI, CA DURING A SURVEY OPERATION CONDUCTED AT HIS OFFICE PREMISES B Y THE INVESTIGATION WING. THE PARTICULARS OF SOME OF THE TRANSACTION OF THIS NATU RE ARE AS UNDER: DATE PARTICULARS OF CHEQUE DEBIT AMT. CREDIT A MT 18.11.96 305002 5,00,000 THROUGH THE BANK ACCOUNT NO. CA 4266 OF M/S. MEHRAM EXPORTS PVT. LTD. IN THE PNB, NEW ROHTAK ROAD, NEW DELHI. NOTE: IT IS NOTED THAT THERE MIGHT BE MORE SUCH ENTRIES APART FROM THE ABOVE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-98 WAS FILED BY THE ASSESSEE ON 4TH MARCH 1998 WHICH W AS ACCEPTED UNDER SECTION 143 (1) AT THE DECLARED INCOME OF RS. 4,200. IN VIEW OF THESE FACTS, I HAVE REASON TO BELIEVE THAT THE AMOUNT OF SUCH TRANSACTIONS PARTICULARLY T HAT OF RS. 5,00,000 (AS MENTIONED ABOVE) HAS ESCAPED THE ASSESSMENT WITHIN THE MEANIN G OF THE PROVISO TO SECTION 147 AND CLAUSE (B) TO THE EXPLANATION 2 OF THIS SECTION . SUBMITTED TO THE ADDITIONAL CIT, RANGE -12, NEW DELHI FOR APPROVAL TO ISSUE NOTICE U NDER SECTION 148 FOR THE ASSESSMENT YEAR 1997-98, IF APPROVED.' 30.2. THE AO WAS NOT MERELY REPRODUCING THE INFORMA TION RECEIVED FROM THE INVESTIGATION BUT TOOK THE EFFORT OF REFERRING TO T HE DEPOSITION MADE DURING THE SURVEY BY THE CHARTERED ACCOUNTANT THAT THE ASSESSEE COMPA NY WAS INVOLVED IN THE GIVING AND TAKING OF BOGUS ENTRIES. THE AO THUS INDICATED WHAT THE TANGIBLE MATERIAL WAS WHICH ENABLED HIM TO FORM THE REASONS TO BELIEVE TH AT INCOME HAS ESCAPED ASSESSMENT. IT WAS IN THOSE CIRCUMSTANCES THAT IN THE CASE, THE COURT CAME TO THE CONCLUSION THAT THERE WAS PRIMA FACIE MATERIAL FOR THE AO TO COME T O THE CONCLUSION THAT THE ASSESSEE HAD NOT MADE A FULL AND TRUE DISCLOSURE OF ALL THE MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. 31. IN COMMISSIONER OF INCOME TAX V. G&G PHARMA (S UPRA) THERE WAS A SIMILAR INSTANCE OF REOPENING OF ASSESSMENT BY THE AO BASED ON THE INFORMATION RECEIVED FROM THE DIT (I). THERE AGAIN THE DETAILS OF THE EN TRY PROVIDED WERE SET OUT IN THE 'REASONS TO BELIEVE'. HOWEVER, THE COURT FOUND THAT THE AO HAD NOT MADE ANY EFFORT TO DISCUSS THE MATERIAL ON THE BASIS OF WHICH HE FORME D PRIMA FACIE VIEW THAT INCOME HAD ESCAPED ASSESSMENT. THE COURT HELD THAT THE BASIC R EQUIREMENT OF SECTION 147 OF THE ACT THAT THE AO SHOULD APPLY HIS MIND IN ORDER TO F ORM REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT HAD NOT BEEN FULFILLED. LIKE WISE IN CIT-4 V. INDEPENDENT MEDIA P. LIMITED (SUPRA) THE COURT IN SIMILAR CIRCU MSTANCES INVALIDATED THE INITIATION OF THE PROCEEDINGS TO REOPEN THE ASSESSMENT UNDER S ECTION 147 OF THE ACT. ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 7 | P A GE 32. IN ORIENTAL INSURANCE COMPANY LIMITED V. COMMIS SIONER OF INCOME TAX 378 ITR 421 (DEL) IT WAS HELD THAT 'THEREFORE, EVEN IF IT I S ASSUMED THAT, IN FACT, THE ASSESSEES INCOME HAS ESCAPED ASSESSMENT, THE AO WOULD HAVE NO JURISDICTION TO ASSESS THE SAME IF HIS REASONS TO BELIEVE WERE NOT BASED ON ANY COG ENT MATERIAL. IN ABSENCE OF THE JURISDICTIONAL PRE-CONDITION BEING MET TO REOPEN TH E ASSESSMENT, THE QUESTION OF ASSESSING OR REASSESSING INCOME UNDER SECTION 147 O F THE ACT WOULD NOT ARISE.' 33. IN RUSTAGI ENGINEERING UDYOG (P) LIMITED (SUPRA ), IT WAS HELD THAT '...THE IMPUGNED NOTICES MUST ALSO BE SET ASIDE AS THE AO H AD NO REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS HAD ESCAPED ASSESSMENT. CONCEDEDLY, THE AO HAD NO TANGIBLE MATERIAL IN REGA RD TO ANY OF THE TRANSACTIONS PERTAINING TO THE RELEVANT ASSESSMENT YEARS. ALTHOU GH THE AO MAY HAVE ENTERTAINED A SUSPICION THAT THE ASSESSEES INCOME HAS ESCAPED AS SESSMENT, SUCH SUSPICION COULD NOT FORM THE BASIS OF INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT. A REASON TO BELIEVE - NOT REASON TO SUSPECT - IS THE PRECONDITI ON FOR EXERCISE OF JURISDICTION UNDER SECTION 147 OF THE ACT. ' 34. RECENTLY IN AGYA RAM V. CIT (SUPRA), IT WAS EMP HASIZED THAT THE REASONS TO BELIEVE 'SHOULD HAVE A LINK WITH AN OBJECTIVE FACT IN THE FORM OF INFORMATION OR MATERIALS ON RECORD...' IT WAS FURTHER EMPHASIZED T HAT 'MERE ALLEGATION IN REASONS CANNOT BE TREATED EQUIVALENT TO MATERIAL IN EYES OF LAW. MERE RECEIPT OF INFORMATION FROM ANY SOURCE WOULD NOT BY ITSELF TANTAMOUNT TO R EASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENTS.' 35. IN THE DECISION OF THIS COURT DATED 16TH MARCH 2016 IN W.P. (C) NO. 9659 OF 2015 (RAJIV AGARWAL V. CIT) IT WAS EMPHASIZED THAT 'EVEN IN CASES WHERE THE AO COMES ACROSS CERTAIN UNVERIFIED INFORMATION, IT IS NECESS ARY FOR HIM TO TAKE FURTHER STEPS, MAKE INQUIRIES AND GARNER FURTHER MATERIAL AND IF S UCH MATERIAL INDICATES THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT, FORM A BELIE F THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT.' 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE RE ASONS TO BELIEVE CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE TANGIBLE MATER IAL WHICH FORMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INV ESTIGATION REPORT. INDEED IT IS A 'BORROWED SATISFACTION'. THE REASONS FAIL TO DEMONS TRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SA TISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMIT TED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROC EEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QUESTI ON DOES NOT SATISFY THE REQUIREMENT OF LAW. 38. THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE , I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS, ACCORDINGLY , DISMISSED BUT WITH NO ORDERS AS TO COSTS. ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 8 | P A GE 5.1. IN THIS CASE, THE REASONS FOR REOPENING ARE AL SO REPRODUCED IN THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN WHICH SIMILARLY INFORMA TION HAS BEEN RECEIVED FROM DIRECTOR OF INCOME TAX (INVESTIGATION), NEW DELHI T HAT ASSESSEE HAS RECEIVED AMOUNT OF RS.5 LAKHS. THE A.O. ON GOING THROUGH THE INFORM ATION FOUND THAT IT IS AN ACCOMMODATION ENTRY AND REOPENED THE ASSESSMENT. IN THE INSTANT CASE UNDER APPEAL, THE A.O. HAS REPRODUCED THE PRECISE INFORMATION HE HAS RECEIVED FROM INVESTIGATION WING OF THE REVENUE AND REPRODUCED THE SAME IN THE REASONS RECORDED UNDER SECTION 148 OF THE I.T. ACT. THIS INFORMATION SHOWS THAT AS SESSEE HAS RECEIVED THE AMOUNT OF CREDIT THROUGH BANKING CHANNELS BY MENTIONING NAMES OF THE PARTIES AND CHEQUE NOS. WITH AMOUNT. THIS INFORMATION BY ITSELF CANNOT BE S AID TO BE TANGIBLE MATERIAL. THE A.O. HAS NOT GONE THROUGH THE DETAILS OF THESE INFO RMATION AND HAS NOT EVEN APPLIED HIS MIND AND MERELY CONCLUDED THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASON TO BELIEVE A RE THEREFORE, NOT IN FACT REASONS BUT ONLY CONCLUSION OF THE A.O. THE EXPRESSION ACCOMMO DATION ENTRY IS USED TO DESCRIBE THE INFORMATION SET-OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SUCH CONCLUSION. IN THE CASE OF MEENAKSHI OVERSEAS PVT. LTD., (SUPRA), THE A.O. IN THE REASONS HAS EVEN MENTIONED THAT HE HAS GONE THROUGH THE INFORMATION SO RECEIVED WHICH IS LACKING IN THE INSTANT CASE. THE A.O. BEIN G A QUASI-JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A SUBJECTIVE SATISFACTION IND EPENDENTLY ON AN OBJECTIVE CRITERIA. THE A.O. HOWEVER, MERELY REPEATED THE REPORT OF INV ESTIGATION WING IN THE REASONS AND FORMED HIS BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHOUT ARRIVING AT HIS SATISFACTION. THE REASON TO BELIEVE CONTAIN NO REASON BUT THE CONCLUSION OF A.O. WITHOUT ANY BASIS. THUS, THERE IS NO INDEPE NDENT APPLICATION OF MIND BY THE A.O. TO THE REPORT OF INVESTIGATION WING WHICH FORM THE BASIS FOR REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE CONCLUSION OF THE A.O. IN THE REASON ARE AT BEST REPRODUCTION OF CONCLUSION OF THE INVESTIGATIO N REPORT. IT IS BORROWED SATISFACTION NOT PERMISSIBLE IN LAW. THE REASONS FAIL TO DEMONST RATE THE LINK BETWEEN THE ALLEGED TANGIBLE MATERIAL AND THE FORMATION OF THE REASON T O BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE ISSUE IS THEREFORE, IDENTICAL IN TH E PRESENT APPEAL AS HAS BEEN CONSIDERED AND DECIDED BY THE HONBLE DELHI HIGH CO URT IN THE CASE OF MEENAKSHI OVERSEAS PVT. LTD., (SUPRA). THE ISSUE IS THEREFORE , COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CAS E OF MEENAKSHI OVERSEAS PVT. LTD., (SUPRA). 5.2. THE HONBLE BOMBAY HIGH COURT I N THE CASE OF GENERAL ELECTORAL TRUST VS., ITO (SUPRA) HELD AS UNDER: NON-FILING OF RETURN OF INCOME AND/OR NOT OBTAININ G OF PAN DOES NOT IPSO FACTO GIVE JURISDICTION TO REOPEN AN ASSESSMENT UND ER SECTION 147/148, PRIMA FACIE JURISDICTION EVEN IN CASE OF NON-FILING OF TH E RETURN OF INCOME, TO ISSUE NOTICE OF REOPENING NOTICE IS A REASONABLE BELIEF O F THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 5.3. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELI ED UPON THE ORDER OF ITAT, DELHI G BENCH IN THE CASE OF MRS. SONIA CHOUDHARY VS. I TO (SUPRA), IN WHICH ON IDENTICAL FACTS THE REOPENING OF THE ASSESSMENT HAVE BEEN QUA SHED. 5.4. IN VIEW OF THE ABOVE, REOPENING OF ASSESSMENT IN THE FACTS AND CIRCUMSTANCES OF THE CASE ARE NOT JUSTIFIED AND HAVE TO BE QUASHED. 6. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE C ASE, IN THE LIGHT OF ABOVE DISCUSSION AND DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF MEENAKSHI OVERSEAS PVT. ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 9 | P A GE LTD., (SUPRA), WE SET ASIDE THE ORDERS OF THE AUTHO RITIES BELOW AND QUASH THE REOPENING OF THE ASSESSMENT UNDER SECTION 147/148 OF THE I.T. ACT. RESULTANTLY, THE ENTIRE ADDITIONS OF RS.27,54,000 ARE DELETED. SINCE THE RE OPENING OF THE ASSESSMENT IS QUASHED, THEREFORE, THERE IS NO NEED TO DECIDE THE ADDITION ON MERIT. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . 12. RELYING ON THE AFORESAID DECISION OF HONBLE CO URTS IT IS CLEAR THAT IN THE INSTANT CASE THE AO HAS SIMPLY REPRODUCED THE INFORMATION F ROM DIT(INV) THAT SINCE THE ASSESSEE HAS TRANSACTED IN THIS FINANCIAL YEAR IN THE SCRIP OF M/S ESSAR INDIA, THE LTCG CLAIM IS BOGUS; AND THE AO WHILE RECORDING THE REASON CONCLU DED THAT BY DOING THE SAID TRANSACTION THERE WAS AN ESCAPEMENT OF INCOME OF RS. 5,55,624/- WHEREAS WHEN THE ASSESSMENT ORDER WAS FRAMED THE AO HAS FOUND THAT ASSESSEE HAS MADE LTCG OF RS. 9,70,583/-. IT HAS TO BE BORNE IN MIND THAT WHEN THE AO GOT ADVERSE INFORMAT ION FROM THE DIT(INV) AS A PRUDENT AND RESPONSIBLE OFFICER, THE AO SHOULD HAVE MADE PR ELIMINARY ENQUIRY AND COLLECTED MATERIALS WHICH COULD HAVE MADE HIM FORM THE BELIEF THAT THERE IS ESCAPEMENT OF INCOME. IT IS NOTED THAT AO BASED ON THE INFORMATION FROM D IT(INV) NEITHER FURNISHED A COPY OF THE SAME TO ASSESSEE NOR EVEN RECORDED THE GIST OF THE INFORMATION FROM DIT IN THE REASONS RECORDED BY HIM TO CONCLUDE THAT LTCG ON M/S ESSAR INDIA IS BOGUS. IN THE FACTS AND CIRCUMSTANCES DISCUSSED IT IS NOTED THAT THE LEGAL REQUIREMENT TO REOPEN I.E. REASON TO BELIEVE ESCAPEMENT OF INCOME HAS NOT BEEN SATISFIED. SINCE THE REQUIREMENT OF L AW PRESCRIBED U/S 147 OF THE ACT HAS NOT BEEN MET IN T HE REASONS RECORDED IN THE CASE OF ASSESSEE, THE AO DID NOT HAVE JURISDICTION TO REOPE N THE ASSESSMENT AND THEREFORE THE VERY ACTION OF ISSUING NOTICE U/S 148 IS BAD IN LAW AND CONSEQUENTLY ALL ACTION TAKEN BY THE AO IS NULL IN THE EYES OF LAW AND THEREFORE QUASHED. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18 TH JUNE, 2021. SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 18.06.2021 SB, SR. PS ITA NO.2142/KOL/2019 JAI PRAKASH GUPTA A.Y. 2013-14 10 | P A GE COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- JAI PRAKASH GUPTA, ROOM NO. 18, 1 ST FLOOR, KRISHNA SADAN, 26, P.K. TAGORE STREET, JORABAGAN, KOLKATA-700006. 2. RESPONDENT ITO, WARD-37(1), KOLKATA 3. THE CIT(A)- 11, KOLKATA (SENT THROUGH E-MAIL) 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA