AKARSH STEELS PVT. LTD., JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 218/JPR/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6172 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHISHEK SHARMA CIT DHK
• Keywords: Bogus Share capital; Tangible material; Accommodation entries; Assessment record; Reassessment proceedings
• Section: 133(6); 147; 131; 68; 148

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCH SMC, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; DS LE{K BEFORE: SHRI SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 218/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10. M/S. AKARSH STEELS PVT. LTD., PLOT NO. 350, ROAD NO. 15, VKI AREA, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 4(1), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAGCA 2927 D VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI ABHISHEK SHARMA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 01.10.2019. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 04/10/2019. VKNS'K@ ORDER PER VIJAY PAL RAO, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 18.12.2017 OF LD. CIT (APPEALS)-2, UDAIPUR FOR THE ASSESSMENT YEA R 2009-10. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE LD. ITO WARD 4(1) JAIPUR ERRED AND LD. CIT (A) ERRED IN SUSTAINI NG THE ADDITION U/S 68 OF THE I.T. ACT, 1961 AMOUNTING TO RS. 19,20 ,000.00 RECEIVED ON SUBSCRIPTION OF SHARE CAPITAL, IN SPITE OF THE FACT THAT ALL THE EVIDENCES OF IDENTIFICATION, GENUINENESS AN D CREDITWORTHINESS WERE PROVED. HENCE THE ADDITION WA S UNJUSTIFIED AND LIABLE TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. ITO WARD 4(1) JAIPUR ERRED AND LD. CIT (A) ERRED IN SUSTAINI NG THE ADDITION OF RS. 9600.00 ON ACCOUNT OF COMMISSION, SIMPLY ON ASSUMPTION AND PRESUMPTION, WHICH IS UNJUSTIFIED AND LIABLE TO BE QUASHED. 2 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUND W HICH READS AS UNDER :- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E NOTICE ISSUED U/S 148 AND CONSEQUENT ORDER PASSED U/S 147 IS ILLEGAL AND BAD IN LAW. 2. SINCE THE ADDITIONAL GROUND RAISED BY THE ASSESS EE CHALLENGING THE VALIDITY OF NOTICE ISSUED UNDER SECTION 148 AND CONSEQUENTIAL A SSESSMENT ORDER IS A PURE LEGAL ISSUE AND ADJUDICATION OF THE SAME DO NOT REQUIRE A NY INVESTIGATION OR VERIFICATION OF FRESH FACTS, THEREFORE, THE ADDITIONAL GROUND RAISE D BY THE ASSESSEE IS TAKEN UP FOR HEARING AND ADJUDICATION. 3. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE ADDITIONAL GROUND IS A LEGAL GROUND AND DOES NOT REQUIRE ANY VERIFICATION OF FACTS AND CAN BE DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THEREFO RE, THE SAME MAY BE ADMITTED FOR ADJUDICATION. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF CIT VS. NTPC, 229 ITR 383 (SC). THE LD. A/R HAS ALSO REFERRED A LETTER DATED 15.06.2015 WHEREBY THE ASSE SSEE RAISED OBJECTION AGAINST THE NOTICE ISSUED UNDER SECTION 148 OF THE IT ACT AND S UBMITTED THAT THE AO HAS NOT DISPOSED OFF THE SAID OBJECTION RAISED BY THE ASSES SEE BY A SEPARATE SPEAKING ORDER PRIOR TO THE REASSESSMENT ORDER PASSED BY THE AO. 4. ON THE OTHER HAND, THE LD. D/R HAS OBJECTED TO T HE ADDITIONAL GROUND RAISED BY THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE HAS NOT RAISED THIS GROUND EITHER BEFORE THE AO OR BEFORE THE LD. CIT (A). THE ALLEG ED LETTER DATED 15.06.2015 IS NOT AVAILABLE ON THE ASSESSMENT RECORD, THEREFORE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE BE DISMISSED IN LIMINE. 3 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ISSUE RAISED IN THE ADDITIONAL GROUND IS PURELY LEGAL IN NATURE AND DOES NOT REQUIRE ANY INVESTIGATION OR VERIFICATION OF NE W FACTS BUT THE SAID ISSUE CAN BE ADJUDICATED ON THE BASIS OF THE FACTS AND MATERIAL AVAILABLE ON RECORD. FOR CONSIDERING THE MATERIAL AVAILABLE ON RECORD, THE L D. D/R WAS DIRECTED TO PRODUCE THE ASSESSMENT RECORD AND CONSEQUENTLY THE ASSESSMENT R ECORD WAS PRODUCED BEFORE THE TRIBUNAL. THUS IN THE FACTS AND CIRCUMSTANCES WHEN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS LEGAL IN NATURE AND GOES TO THE ROOT OF THE MATTER AND ADJUDICATION OF THE SAME DOES NOT REQUIRE ANY FRESH MATERIAL OR FACTS, THEN IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN CASE O F CIT VS. NTPC (SUPRA), THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS ADMITTE D FOR ADJUDICATION. VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147/148 OF THE IT ACT. 6. THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT T HE ASSESSEE FILED ITS RETURN OF INCOME ON 18.09.2009 DECLARING TOTAL INCOME OF RS. 2,80,000/-. THE RETURN WAS PROCESSED UNDER SECTION 143(1). SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SECTION 148 OF THE IT ACT ON 1 4.05.2015 BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING, MUMBA I. THE LD. A/R HAS REFERRED TO THE REASONS RECORDED BY THE AO AND SUBMITTED THAT T HE AO HAS MADE THE AVERMENTS WHICH ARE VERY VAGUE AND WITHOUT SPECIFYING THE FAC TS AS TO HOW THE ASSESSEE HAS AVAILED THE ALLEGED ACCOMMODATION ENTRIES ON ACCOUN T OF SHARE PREMIUM. THE LD. A/R HAS FURTHER SUBMITTED THAT THE AO HAS REFERRED TO REPORT OF THE INVESTIGATION WING BUT HAS NOT POINTED OUT EVEN THE CORRECT AMOUN T OF THE SHARE PREMIUM RECEIVED BY THE ASSESSEE ON ISSUE OF SHARES TO VARI OUS CONCERNS. THE REASONS 4 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. RECORDED BY THE AO ARE VERY VAGUE AND WITHOUT APPLI CATION OF MIND. THUS IT IS A CASE OF INITIATION OF REASSESSMENT PROCEEDINGS ON B ORROWED SATISFACTION WITHOUT ANY APPLICATION OF MIND AS WELL AS THE EXAMINATION OF S O CALLED MATERIAL AND INFORMATION RECEIVED FROM THE INVESTIGATION WING. IN SUPPORT O F HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF DELHI BENCHES OF THE TRIBUNAL IN CASE OF PIONEER TOWN PLANNERS PVT. LTD VS. DCIT, 170 DTR 237 (DEL. TRIB.). THUS THE LD. A/R HAS SUBMITTED THAT THE BARE READING OF THE REASONS SHOWS THAT THE AO MECHA NICALLY AND BLINDLY ACTED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G WITHOUT APPLYING HIS OWN MIND TO FORM THE BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. HENCE THE REOPENING OF THE ASSESSMENT ONLY AT THE INSTANCE OF INVESTIGATION WING IS ILLEGAL AND BAD IN LAW. THE LD. A/R HAS ALSO RELIED UPON THE D ECISION OF AGRA BENCH OF THE TRIBUNAL IN CASE OF DEEPRAJ HOSPITAL PVT. LTD. VS. ITO, 65 ITR 663 (AGRA TRIB.) AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT IF THE RE OPENING IS BASED ON INFORMATION RECEIVED FROM INVESTIGATION WING, THEN THE REASONS MUST SHOW THAT THE AO INDEPENDENTLY APPLIED HIS MIND TO THE INFORMATION A ND FORMED HIS OWN OPINION. THE AO, IN THE REASONS, HAS THUS STATED THE INFORMATION RECEIVED AND DID NOT STATE AS TO HOW HE HAS ARRIVED TO THE CONCLUSION ABOUT THE ESCA PEMENT OF INCOME OF THE ASSESSEE. THEREFORE, THE REASONS RECORDED BY THE A O ARE NOT IN ACCORDANCE WITH LAW. CONSEQUENTLY, THE INITIATION OF RE-ASSESSMENT PROCEEDINGS ARE NOT SUSTAINABLE IN LAW. THE LD. A/R HAS THEN RELIED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN CASE OF SARTHAK SECURITIES CO. PVT. LTD. VS. ITO, 3 29 ITR 110 (DEL.). 7. ON THE OTHER HAND, THE LD. D/R HAS SUBMITTED THA T THE AO HAS RECEIVED THE INFORMATION FROM THE INVESTIGATION WING MUMBAI WHIC H CLEARLY REVEALS THE FACT THAT THE COMPANIES MANAGED AND CONTROLLED BY SHRI PRAVEE N KUMAR JAIN WERE ENGAGED IN 5 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. PROVIDING ACCOMMODATION ENTRIES OF VARIOUS NATURE L IKE BOGUS UNSECURED LOANS, BOGUS SHARE APPLICATION AND BOGUS SALES ETC. ALONG WITH THE SAID INFORMATION, THE COPIES OF THE STATEMENT RECORDED DURING THE SEARCH AND SURVEY WERE ALSO RECEIVED BY THE AO. COUPLED WITH THE INFORMATION AND STATEM ENT RECEIVED FROM THE INVESTIGATION WING, MUMBAI, WHEN THE ASSESSEE ALSO RECEIVED SHARE PREMIUM FROM THE COMPANIES CONTROLLED AND MANAGED BY SHRI PRAVIN KUMAR JAIN, THEN IT CONSTITUTE A TANGIBLE MATERIAL TO FORM THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS FURTHER SUBMITTED THAT THE AO A LSO CONDUCTED AN ENQUIRY PRIOR TO THE RECORDING OF REASONS AND ISSUING NOTICE UNDE R SECTION 148. THEREFORE, IT CANNOT BE SAID THAT THE AO HAS NOT APPLIED HIS MIND AT THE TIME OF REOPENING OF THE ASSESSMENT. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ORIGINAL RETURN OF INCOME FILED BY THE ASSESSEE WAS THOUGH PROCESSED UNDER SECTION 143(1), HOWEVER, ON RECEIPT OF THE IN FORMATION FROM INVESTIGATION WING MUMBAI VIDE LETTER DATED 07.03.2014 THE AO ISS UED THE NOTICE UNDER SECTION 133(6) TO THE ASSESSEE CALLING UPON THE RELEVANT DE TAILS AND RECORD REGARDING THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE DU RING THE YEAR UNDER CONSIDERATION. IN RESPONSE TO THE NOTICE ISSUED BY THE AO UNDER SECTION 133(6), THE ASSESSEE FILED THE RELEVANT DETAILS AND FINANCIAL S TATEMENTS INCLUDING BALANCE SHEET, LEDGER ACCOUNT, BANK STATEMENT ETC. THUS IT IS CLE AR THAT PRIOR TO THE RECORDING OF THE REASONS, THE AO WAS AWARE ABOUT THE RELEVANT FA CTS OF ISSUANCE OF SHARES BY THE ASSESSEE TO FOUR COMPANIES. THE EXACT AMOUNT OF SH ARE CAPITAL AND SHARE PREMIUM ON THE ALLOTMENT OF SHARES BY THE ASSESSEE TO THOSE FOUR COMPANIES WERE ALSO KNOWN TO THE AO WHEN THE AO HAS CONDUCTED AN ENQUIR Y BY ISSUING NOTICE UNDER 6 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. SECTION 133(6). THUS WHEN ALL THE RELEVANT DETAILS , FACTS AND MATERIAL WERE AVAILABLE BEFORE THE AO PRIOR TO THE RECORDING OF REASONS, TH EN THE FACTS RECORDED IN THE REASONS SHOULD HAVE MANIFEST THE OUT-COME OF THE EN QUIRY CONDUCTED BY THE AO. THE REASONS RECORDED BY THE AO FOR REOPENING OF THE ASSESSMENT ARE AS UNDER :- THE DGIT (INV.), MUMBAI VIDE HIS LETTER NO. DGIT (INV.) INFORMATION/PJ/2013-14 DATED 07.03.2014 HAS SENT A LIST OF BENEFICIARIES AND LIST OF ACCOMMODATION ENTRY PROVI DERS. ON VERIFICATION OF THE SAME, IT IS NOTICED THAT THE ASSESSEE COMPAN Y HAS TAKEN ACCOMMODATION ENTRY FROM THE COMPANIES CONTROLLED B Y SHRI PRAVEEN KUMAR JAIN. A SEARCH AND SURVEY ACTION WAS CARRIED OUT IN THE C ASE OF SHRI PRAVEEN KUMAR JAIN, MUMBAI AND HIS GROUP ON 01.10.2013. THE SEARCH ACTION RESULTED INTO COLLECTION OF EVIDENCES AND OTHER FIN DINGS WHICH CONCLUSIVELY PROVED THAT THE ASSESSEE THROUGH A WEB OF CONCERNS RUN AND OPERATED BY HIM IS ENGAGED IN PROVIDING ACCOMMO DATION ENTRIES OF VARIOUS NATURE LIKE BOGUS UNSECURED LOANS, BOGUS SH ARE APPLICATION AND BOGUS SALES, ETC. DURING THE COURSE OF STATEMENTS RECORDED U/S 132(4) / 131 OF THE IT ACT, 1961, THESE DIRECTORS / PROPRIETORS ADMITTED T HAT THEY WERE MERELY DUMMY DIRECTORS AND USED TO SIGN DIFFERENT PAPERS F OR NOMINAL CONSIDERATION GIVEN BY SHRI PRAVEEN KUMAR JAIN. DURING THE AY 2009-10, THE ASSESSEE HAD RECEIVED SH ARE PREMIUM OF RS. 14,40,000/-. HENCE, THE ASSESSEE HAS RECEIVED A CCOMMODATION ENTRIES FROM COMPANIES CONTROLLED AND MANAGED BY SH RI PRAVEEN KUMAR JAIN. LOOKING TO THE FACTS MENTIONED ABOVE, I HAVE REASON S TO BELIEVE THAT INCOME OF RS. 14,40,000/- HAS ESCAPED ASSESSMENT WI THIN THE MEANING OF SECTION 147 OF THE IT ACT, 1961. THEREFORE, IT I S A FIT CASE TO ISSUE NOTICE U/S 148 OF THE IT ACT, 1961. THE AO HAS ALSO REFERRED TO THE INFORMATION RECEIVE D FROM INVESTIGATION WING AND THE STATEMENTS RECORDED BY THE INVESTIGATION WING O F ONE SHRI PRAVEEN KUMAR JAIN AND OTHER DIRECTORS OF VARIOUS COMPANIES. THE FACT S RELATING TO THE ASSESSEE ARE 7 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. DISCUSSED ONLY IN THE LAST TWO PARAGRAPHS OF THE RE ASONS STATING THAT THE ASSESSEE HAS RECEIVED SHARE PREMIUM OF RS. 14,40,000/- FROM THE COMPANIES CONTROLLED AND MANAGED BY SHRI PRAVEEN KUMAR JAIN. HOWEVER, THE N AMES AND DETAILS OF THESE COMPANIES WERE NOT MENTIONED BY THE AO IN THE REASO NS RECORDED. THE AMOUNT OF RS. 14,40,000/- IS ALSO NOT CORRECT AS THE ASSESSEE HAS ALLOTTED THE SHARE TO FOUR COMPANIES, THE DETAILS OF WHICH ARE GIVEN BY THE AO AT PAGE 3 AS UNDER :- NAME OF CONCERN CONTROLLED AND MANAGED BY PRAVEEN KUMAR JAIN 1 ANSH MERCHANDISE P LTD. (NEWPLANE TRADING CO P LT D.) 2 DUKE BUSINESS P LTD. (JPK TRADING PVT. LTD.) 3 M/S. RAGHUNANDAN RAYONS LTD. 4 M/S. MAGIC BUILDGWELL PVT. LTD IT IS ALSO PERTINENT TO NOTE THAT THE AO WHILE PASS ING THE REASSESSMENT ORDER HAS MADE AN ADDITION OF RS. 19,20,000/- BEING ACCOMMODA TION ENTRIES RECEIVED BY THE ASSESSEE FROM FOUR COMPANIES AND NOT AN ADDITION OF RS. 14,40,000/-. THE AO HAS DISCUSSED THE INFORMATION RECEIVED FROM THE INVESTI GATION WING AT PAGE 4 WHICH GIVES THE DETAILS OF THREE COMPANIES OUT OF FOUR CO MPANIES FROM WHOM THE ASSESSEE RECEIVED THE SHARE CAPITAL AGAINST THE ALLOTMENT OF SHARES. THEREFORE, IT IS CLEAR THAT THE INFORMATION RECEIVED BY THE AO FROM THE INVESTI GATION WING WAS INCOMPLETE AND ONCE THE AO HAS CONDUCTED THE ENQUIRY UNDER SECTION 133(6), THEN THE REASONS RECORDED BY THE AO SHOULD HAVE REFLECTED THE CORREC T FACTS AS EMERGED FROM THE ENQUIRY CONDUCTED BY THE AO. THE REASONS CLEARLY D EMONSTRATE THAT THE AO HAS NOT APPLIED HIS MIND ON THE INFORMATION AND FACTS AVAIL ABLE WITH HIM PRIOR TO RECORDING THE REASONS AND ISSUING THE NOTICE UNDER SECTION 14 8 OF THE IT ACT. EVEN THE REASONS DO NOT SPELL OUT THE DETAILS OF THE COMPANIES TO WH OM THE SHARES WERE ALLOTTED AND 8 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. THE PRICE AND PREMIUM AT WHICH THE SHARES WERE ALLO TTED BY THE ASSESSEE TO THOSE COMPANIES. THEREFORE, THE AO HAS PROCEEDED TO INIT IATE THE PROCEEDINGS UNDER SECTION 147/148 ON THE BASIS THAT THE ASSESSEE HAS RECEIVED THE ACCOMMODATION ENTRIES IN THE GARB OF SHARE PREMIUM FROM THE COMPA NIES MANAGED BY SHRI PRAVEEN KUMAR JAIN. HOWEVER, NEITHER THE NAMES OF THE COMPA NIES ARE MENTIONED IN THE REASONS RECORDED NOR THE CORRECT AMOUNT OF SHARE PR EMIUM IS GIVEN IN THE REASONS RECORDED. WHAT IS GIVEN BY THE AO IN THE REASONS R ECORDED IS THE INFORMATION RECEIVED FROM THE INVESTIGATION WING AND SUBSEQUENT LY IT WAS FOUND THAT THE SAID INFORMATION WAS NOT COMPLETE AND, THEREFORE, THESE REASONS BASED ON INCOMPLETE AND INCORRECT INFORMATION CANNOT BE SAID WITH DUE A PPLICATION OF MIND BY THE AO WHILE FORMING THE BELIEVE THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS ON THE FACE OF RECORD THAT IN THE REASONS RECORD ED BY THE AO APART FROM REPRODUCING THE INFORMATION RECEIVED FROM INVESTIGA TION WING, REVEALS NO OTHER FACT WHICH OUGHT TO HAVE COME AS AN OUTCOME OF THE ENQUI RY CONDUCTED UNDER SECTION 133(6) OF THE ACT. EVEN THE INFORMATION RECEIVED FROM THE INVESTIGATION WING HAS NOT BEEN CO-RELATED WITH THE FACTS AVAILABLE ON REC ORD REGARDING THE SHARES ISSUED BY THE ASSESSEE TO FOUR COMPANIES AT A PREMIUM. THUS IN THE ABSENCE OF THE CORRECT FACT RECORDED BY THE AO IN THE REASONS, THE FORMATI ON OF BELIEF BASED SIMPLY ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WH ICH TURNED OUT TO BE AN INCORRECT AND INCOMPLETE INFORMATION NOT LEADING TO A CONCLUSION THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. THE HON BLE DELHI HIGH COURT IN CASE OF SARTHAK SECURITIES CO. (P) LTD. VS. ITO, 329 ITR 11 0 (DEL.) WHILE CONSIDERING AN IDENTICAL ISSUE HAS HELD IN PARA 23 AS UNDER :- 9 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. 23. THE OBTAINING FACTUAL MATRIX HAS TO BE TESTED ON T HE ANVIL OF THE AFORESAID PRONOUNCEMENT OF LAW. IN THE CASE AT HAND , AS IS EVINCIBLE, THE ASSESSING OFFICER WAS AWARE OF THE EXISTENCE OF FOU R COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS CLEARLY EXPOSIT THAT THE ASSESSING OFFICER WAS MADE AWARE OF THE SI TUATION BY THE INVESTIGATION WING AND THERE IS NO MENTION THAT THE SE COMPANIES ARE FICTITIOUS COMPANIES. NEITHER THE REASONS IN THE INITIAL NOTIC E NOR THE COMMUNICATION PROVIDING REASONS REMOTELY INDICATE INDEPENDENT APP LICATION OF MIND. TRUE IT IS, AT THAT STAGE, IT IS NOT NECESSARY TO HAVE THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME, BUT WHAT IS NECESSARY IS THAT THERE IS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FO RMED THE REQUISITE BELIEF. TO ELABORATE, THE CONCLUSIVE PROOF IS NOT GERMANE A T THIS STAGE BUT THE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATI ON OR PLATFORM OF PRUDENCE WHICH A REASONABLE PERSON IS REQUIRED TO A PPLY. AS IS MANIFEST FROM THE PERUSAL OF THE SUPPLY OF REASONS AND THE ORDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. THEIR EXISTENCE IS NOT DISPUTED. WHAT IS MENTIONED IS THA T THESE COMPANIES WERE USED AS CONDUITS. IN THAT VIEW OF THE MATTER, THE P RINCIPLE LAID DOWN IN LOVELY EXPORTS (P.) LTD.'S CASE (SUPRA) GETS SQUARELY ATTR ACTED. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORDER OF REJECTI ON. THE ASSESSEE IN HIS OBJECTIONS HAD CLEARLY STATED THAT THE COMPANIES HA D BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE-COMPANY THROUGH BANKING CHANNEL. THE IDENTITY OF THE COMPANIES WAS NOT DISPUTED. UND ER THESE CIRCUMSTANCES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO THROUGH THE ENTIRE GAMUT OF PROCEEDINGS. IT IS TOTALLY UNWARRANTED. THUS WHEN THE AO WAS AWARE OR OUGHT TO HAVE KNOWN T HE FACTS THAT THE ASSESSEE ISSUED AND ALLOTTED THE SHARES TO FOUR COMPANIES AN D RECEIVED THE PREMIUM OF MORE THAN RS. 16 LACS, THEN THE SAID FACTS SHOULD HAVE B EEN THE BASIS OF REASONS RECORDED BY THE AO TO FORM THE BELIEF THAT THE INCOME ASSESS ABLE TO TAX HAS ESCAPED ASSESSMENT INSTEAD OF REPRODUCING THE INFORMATION R ECEIVED FROM THE INVESTIGATION WING WHICH TURNED OUT TO BE INCOMPLETE AND INCORREC T. THEREFORE, THE BARE PERUSAL 10 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR. OF THE REASONS RECORDED CLEARLY MANIFEST THAT THERE IS NO INDEPENDENT APPLICATION OF MIND ON THE PART OF THE AO AT THE TIME OF RECORDING THE REASONS AND ARRIVED TO THE CONCLUSION THAT THE INCOME ASSESSABLE TO TAX HAS ES CAPED ASSESSMENT. THE AO HAS NOT MADE ANY INFERENCE TO THE RELEVANT MATERIAL ON WHICH A PERSON OF ORDINARY PRUDENCE CAN REASONABLY FORM THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. ACCORDINGLY, IN VIEW OF THE ABOVE FACT S AND CIRCUMSTANCES, THE REOPENING OF THE ASSESSMENT IS NOT VALID AND THE SA ME IS QUASHED. SINCE THE REOPENING OF THE ASSESSMENT AND CONSEQUENTIAL REASS ESSMENT ORDER IS QUASHED BEING INVALID, THEREFORE, THE OTHER GROUNDS RAISED BY THE ASSESSEE ON THE MERITS OF THE ADDITION BECOME INFRUCTIOUS AND NOT TAKEN UP FO R ADJUDICATION. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 04/10/20 19. SD/- ( FOT; IKY JKWO (VIJAY PAL RAO) U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 04/10/2019. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S. AKARSH STEELS PVT. LTD., JAI PUR. 2. THE RESPONDENT THE ITO WARD 4(1), JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 218/JP/2018) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 11 ITA NO. 218/JP/2018 M/S. AKARSH STEELS PVT. LTD., JAIPUR.