Shri Rajiv Mardia, Ahmedabad V. The ACIT.,Cent.Circle-2(2), Ahmedabad

ITA 2188/AHD/2009

• Counselvise Citation: 218820514 RSA 2009
• Duration Of Justice: 2 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-11-2011
• Assessment Year: 1997-1998
• Appeal Filed On: 10-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Salary income; Principle of natural justice; Source of fund; Question of law; Wrong claim; Difference of opinion; Corroborative evidences; Accommodation entries; Non compliance; Assessment record; Onus to prove; Bogus loan; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 234B; 133(6); 147; 131; 68; 148; 263; 132; 139

Judgement Text

, , , , , , . .. .' ' ' ' ' ' ' ' , # # # # $ $ $ $ IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD BEFORE SHRI BHAVNESH SAINI, HONBLE J.M. & SHRI A.M OHAN ALANKAMONY, HONBLE A.M.) . ITA NO. 2382/AHD./2009 : %& - 1997-1998 SHRI RASIKLAL MARDIA, AHMEDABAD VS- DCIT, CIRCLE-4, AHMEDABAD (PAN : AAPPM 5974J) ( '( /APPELLANT) ( )*'( /RESPONDENT ) . ITA NO. 2188/AHD./2009 : %& - 1997-1998 SHRI RAJIV MARDIA, AHMEDABAD-VS-ACIT, CENT.CIRC LE-2(2), AHMEDABAD (PAN : AADPM 5975K) ( '( /APPELLANT) ( )*'( /RESPONDENT ) . ITA NO. 2371/AHD./2009 : %& - 1997-1998 SHRI RAKESH MARDIA, AHMEDABADVS-ACIT,CENT.CI RCLE-2(2), ABAD (PAN : AAPPM 5972Q) ( '( /APPELLANT) ( )*'( /RESPONDENT ) '( + , / APPELLANT BY : SHRI S.N.SOPARKAR, SR.ADV., WITH SHRI P.D.SHAH & MS. URVASHI SODHAN )*'( + , / RESPONDENT BY : SHRI ALOK JOHRI, CIT,D.R. -. + /0# / DATE OF HEARING : 08/11/2011 1'% + /0# / DATE OF PRONOUNCEMENT : 23/12/2011 / ORDER PER SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER : THESE THREE APPEALS INSTITUTED BY THREE ASSESSEES, NAMELY, (I) SHRI RASIKLAL MARDIA; (II) SHRI RAJIV MARDIA AND (III) S HRI RAKESH MARDIA ARE ITA NOS. 2382, 2188 & 2371-AHD-2009 2 DIRECTED AGAINST THE IMPUGNED APPELLATE ORDERS OF T HE LD. CIT (A)-III, AHMEDABAD IN ITA NOS. CIT (A)-III/ 382/ACIT-CC 2(2) /07-08, CIT (A)- III/267/ACIT, CC 2(2)/07-08 AND CIT (A)-III/383/ACI T-CC 2(2)/07-08 ALL DATED 19.6.2009 RESPECTIVELY FOR THE ASSESSMENT YEAR 1997-98 . 2. AS THE ISSUES RAISED AND THE STATE OF AFFAIRS OF THE ASSESSEES ARE SIMILAR AND RATHER IDENTICAL IN NATURE, THESE THREE APPEALS WERE HEARD, CONSIDERED AND DISPOSED OFF IN THIS COMMON ORDER FO R THE SAKE OF CLARITY AND ALSO FOR APPRECIATION OF FACTS. 2.1. SINCE THE ISSUES INVOLVED IN THE GROUNDS OF AP PEALS RAISED BY THE RESPECTIVE ASSESSEES AND ALSO THE STAND OF THE REVE NUE AS WELL AS THE FINDINGS OF THE LD. CIT (A) ARE IDENTICAL, IT WAS A RGUED BY BOTH THE PARTIES THAT ONE OF THE APPEALS OF THE ASSESSEES MAY BE CON SIDERED FOR ADJUDICATION AND THE FINDINGS RECORDED BY THE BENCH WOULD BE APPLICABLE TO THE APPEALS OF OTHER TWO ASSESSEES. ACCORDINGLY , THE APPEAL OF SHRI RASIKLAL MARDIA IN ITA NO.2382/AHD/2009 IS TAKEN U P FOR ADJUDICATION AND THE FINDINGS RECORDED IN HIS APPEAL ARE APPLIC ABLE IN RESPECT OF THE APPEALS PREFERRED BY (I) SHRI RAJIV MARDIA AND (II) SHRI RAKESH MARDIA AS WELL. ITA NO.2382/AHD/2009 SHRI RASIKLAL MARDIA: 3. THE ASSESSEE HAS RAISED SIX GROUNDS IN THE GROUNDS OF APPEAL, IN WHICH, GROUND NO.6 BEING GENERAL AND NO SPECIFIC ISSUE INVOLVED, IT BECOMES INCONSEQUENTIAL. CHARGING OF INTEREST U/S 234B AND 234C OF THE ACT [GROUND NO.4] IS MANDATORY AND CONSEQUENTIA L IN NATURE AND, THEREFORE, THIS GROUND IS DISMISSED AS NOT MAINTAIN ABLE. GROUND NO.5 IS ALSO NOT MAINTAINABLE AS INITIATION OF PENALTY PROC EEDINGS AT THE TIME OF FINALIZATION OF ASSESSMENT PROCEEDING WAS IN ITS IN FANCY. THEREFORE, THIS ITA NOS. 2382, 2188 & 2371-AHD-2009 3 GROUND IS DISMISSED. IN THE REMAINING GROUNDS, THE ISSUES RAISED, IN BRIEF, ARE AS UNDER: 1. THAT THE LD. CIT (A) HAS ERRED IN LAW AND FACTS BY NOT HOLDING REASSESSMENT PROCEEDINGS AS BAD IN LAW AND WITHOUT JURISDICTION AND, THEREFORE, ORDER PASSED BY THE LEARNED AO SHOU LD BE QUASHED AND THE ADDITIONS MADE THEREIN SHOULD BE DELETED IN FULL. 2. THAT THE LEARNED CIT (A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE ADDITION OF RS.10,40,00,000 U/S 68 OF THE ACT OF THE LOANS TAKEN AND THEREFORE THE LEARNED AO SHOULD BE DIRECT ED TO DELETE THE SAID ADDITION, WHILE COMPUTING THE TOTAL INCOME . 3. THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FAC TS BY CONFIRMING THE DISALLOWANCES OF INTEREST OF RS.1,03,78,302/- O N THE AMOUNT OF THE ADDITION MADE U/S 68 OF THE ACT AND THEREFORE T HE LEARNED AO SHOULD BE DIRECTED NOT TO DISALLOW THE SAID INTERES T, WHILE COMPUTING THE TOTAL INCOME. 4. THE FACTS OF THE ISSUE, IN BRIEF, ARE THAT THE A SSESSEE, AN INDIVIDUAL, THE SOURCE OF INCOME BEING SALARY, BUSINESS AND INC OME FROM OTHER SOURCES, FURNISHED HIS RETURN OF INCOME FOR THE ASS ESSMENT YEAR UNDER CONSIDERATION. THE ASSESSMENT WAS ORIGINALLY CONCLU DED AFTER DUE SCRUTINIZATION U/S 143(3) OF THE ACT ON 31.3.2000 O N A TOTAL INCOME OF RS.82.810/-. THE ASSESSMENT WAS, HOWEVER, REOPENED BY ISSUANCE OF A NOTICE U/S 147 OF THE ACT AFTER RECORDING REASONS F OR THE SAME ON 29.3.2004. THE STAND OF THE REVENUE WAS OBJECTED TO BY THE ASSESSEE VIDE HIS COMMUNICATIONS DATED: 26.4.2004 AND AGAIN ON 18.5.2004. THE AO, HAD, HOWEVER, REJECTED THE ASSESSEES OBJECTION VIDE HIS ORDER DATED 3.12.2004 FOR THE REASONS RECORDED THEREIN. THE HO NBLE JURISDICTIONAL HIGH COURT, ON THE ASSESSEES CIVIL APPLICATION NO. 307 OF 2005 PASSED AN INTERIM ORDER DATED 1.3.2005 ALLOWING THE ENQUIR Y/ASSESSMENT PROCEEDINGS, HOWEVER, RESTRICTED THE REVENUE THAT T HE ASSESSMENT ORDER SHOULD NOT BE SERVED. THE INTERIM ORDER WAS, SUBSE QUENTLY, VACATED BY ITA NOS. 2382, 2188 & 2371-AHD-2009 4 THE HONBLE COURT ON 23.1.2008, ENABLING THE REVENU E TO SERVE THE ASSESSMENT ORDER DATED 31.3.2005 ON THE ASSESSEE. 4.1. THE REASONS FOR REOPENING THE ASSESSMENT OF TH E ASSESSEE WERE THAT ON RECEIPT OF INFORMATION THAT THE APPELLANT AND HIS TWO BROTHERS, NAMELY, RAKESH MARDIA AND RAJIV MARDIA HAD INTRODUC ED LOANS IN THE AY UNDER CHALLENGE WHICH WERE ACTUALLY ARRANGED BY PAY ING CASH AND OBTAINING CHEQUES IN LIEU FROM VARIOUS PARTIES. IN TEREST WAS ALSO CREDITED (BUT NOT PAID) IN THE NAME OF THOSE PARTIES. THE A O HAD OBSERVED THAT NEITHER THE BALANCE SHEET WAS FURNISHED NOR PRODUCE D THE RELEVANT BOOKS OF ACCOUNT/BANK DETAILS. ON ENQUIRIES CONDUCTED AT MUMBAI, IT WAS NOTICED THAT THE SAID CREDITOR FIRM/COMPANIES PERTA INED TO A GROUP KNOWN AS KHANDHAR GROUP. ACTION U/S 132 OF THE ACT WAS CONDUCTED ON THIS GROUP IN 1991 AND CONSEQUENTLY, THIS GROUP WAS FOUN D TO BE HAWALA OPERATORS AND THE FIRMS OF THIS GROUP WERE TREATED EVEN IN THEIR ASSESSMENTS FOR THE AY 1997-98 AS SUCH. ACCORDINGL Y, THE AO CAME TO THE CONCLUSION THAT THE LOANS SHOWN FROM SUCH PARTI ES/FIRMS WERE NON- GENUINE. SINCE NO PRINCIPAL AMOUNT AND INTEREST THEREON WAS RETURNED AND NO ACTION FOR RECOVERY OF THEIR LOANS/INTEREST WAS TAKEN EVEN BY THE ALLEGED CREDITOR FIRMS, THE AO FELT THAT THE REQUIS ITE INGREDIENTS OF S.68 OF THE ACT WERE FLOATED. THUS, THE AO CAME TO A CONCLU SION THAT HE HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. 4.2. IN HIS IMPUGNED ORDER UNDER CONSIDERATION, THE AO HAD POINTED OUT THAT THE CREDITORS WERE NOT AVAILABLE AT THE GIVEN ADDRESSES IN MUMBAI AND THE COMMUNICATIONS SENT THROUGH RPAD WERE RETUR NED UN-SERVED WITH THE REMARKS NOT KNOWN WHICH WAS APPRAISED TO THE ASSESSEE, FOR WHICH, THE ASSESSEE VIDE HIS LETTER DT.23.3.05 CONT ENDED THAT COMPLETE DETAILS OF THE DEPOSITORS HAD BEEN FURNISHED DURING THE SCRUTINY ITA NOS. 2382, 2188 & 2371-AHD-2009 5 PROCEEDINGS ALONG WITH THE BALANCE SHEET AND BANK D ETAILS AS THE DEPOSITS HAD BEEN RECEIVED THROUGH A/C PAYEE CHEQUE S. IT WAS, FURTHER, CONTENDED THAT THE LOAN/INTEREST THEREON COULD NOT BE RETURNED FULLY/PARTIALLY AS HE HAD SUFFERED HEAVY LOSSES IN SHARE TRADING AND THAT DECREES HAVE BEEN ISSUED AGAINST HIM BY THE DEBT RE COVERY TRIBUNAL/HSBC BANK ETC., AND THAT THERE WAS NO EVI DENCE THAT THE CHEQUES FOR THE LOAN AMOUNTS HAD BEEN OBTAINED AS A QUID PRO BY PAYING EQUIVALENT CASH AMOUNTS IN LIEU; AND THAT IN THE AB SENCE OF SUCH EVIDENCE/NEXUS, THE REOPENING OF THE ASSESSMENT WAS NOT JUSTIFIED, PARTICULARLY, NO OPPORTUNITY HAD BEEN PROVIDED FOR CROSS-EXAMINATION. WITH REGARD TO THE AOS STAND THAT THE STATEMENT/DI SCLOSURE OF ONE SHRI S.M.KHANDHAR WHEREIN HE HAD OFFERED FOR TAXATION TH E PEAK OF THE AMOUNTS APPEARING IN HIS BANK STATEMENT AND TO CLOS URE OF ALL SUCH BANK ACCOUNTS, THOUGH THOSE BANK ACCOUNTS WERE NOT CLOSE D AS PROMISED, BUT, WERE CONTINUOUSLY USED FOR HAWALA OPERATIONS EVEN B EYOND THE AY 1997-98 AND, THUS, IMPLYING THAT THE LOANS SHOWN RE CEIVED BY THE ASSESSEE HAD FLOWN OUT OF SUCH TAINTED BANK ACCOUNT S, THE ASSESSEE VIDE REPLY DATED 30.3.2005 BRIEFLY STATED THAT THE STATEMENT OF SHRI KHANDHAR WAS NOT RELEVANT AND THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD PAID CASH AND INTRODUCED BOGUS LOAN. 4.3. THE REPLY OF THE ASSESSEE DATED 23.3.2005 BEFO RE THE LD. A.O. READS AS UNDER: (5.01 OF THE ASST. ORDER) (1) MY ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS A SCRUTINY ASSESSMENT U/S 143(3) OF THE INCOME-TAX ACT, AND DU RING THE COURSE OF ASSESSMENT FULL DETAILS RELATING TO DEPOS ITORS WERE FURNISHED AND THE SAID DEPOSITS WERE ACCEPTED AS EX PLAINED U/S 68 OF THE ACT. FURTHER, I HAD SUBMITTED MY BALANCE SH EET AND ALSO PRODUCED MY BOOKS OF ACCOUNTS AND BANK PASSBOOK/STA TEMENTS FOR VERIFICATION. ALL THESE DEPOSITS HAVE BEEN ACCEPTE D THROUGH ITA NOS. 2382, 2188 & 2371-AHD-2009 6 ACCOUNT PAYEE CHEQUES AND ALL THE DEPOSITORS ARE AS SESSED TO INCOME-TAX. THESE ARE UNDISPUTED FACTS. AND THUS I HAD FULFILLED MY ONUS LONG AGO IN THE REGULAR ASSESSMENT U/S 143( 3) OF THE INCOME-TAX ACT AND, THEREFORE, NO ONUS CAN BE SHIFT ED ON ME. (2) I COULD NOT REPAY CREDITORS DUE TO MY DAY-TO-DA Y DETERIORATING FINANCIAL POSITION BECAUSE OF HEAVY LOSSES AND SUBS TANTIAL REDUCTION IN THE VALUE OF SHARES HELD BY ME. FURTH ER, THE HONBLE MUMBAI DEBT RECOVERY TRIBUNAL HAS ISSUED A DECREE P ERSONALLY AGAINST ME AS THE CHAIRMAN OF M/S. AMAR DYE-CHEM LI MITED AND HONGKONG & SANGHAI BANKING CORPORATION LTD IS ALSO HOLDING A DECREE AGAINST ME AS THE DIRECTOR AND PERSONAL GUAR ANTOR FOR LOANS GRANTED TO MARDIA STEEL LIMITED. FURTHER, I AM NOT ABLE TO PAY MY DUES SINCE LAST SEVERAL YEARS AND THE SAME IS EVIDE NT FROM MY ASSESSMENT RECORDS ALSO, AND NO ADVERSE INFERENCE O N THIS COUNT CAN BE TAKEN ON ACCOUNT OF MY INABILITY TO REPAY, AND THEREFORE, NON-PAYMENT OF THE LOAN CANNOT BE THE REASON FOR RE ASSESSMENT; (3) WITH YOUR LETTER, YOUR HONOUR HAVE ENCLOSED ASS ESSMENT ORDERS OF FEW PARTIES INCLUDING THOSE PARTIES WHOSE ASSESS MENT ORDERS WERE ALREADY GIVEN ALONG WITH REASONS RECORDED. HO WEVER, THERE IS NO SINGLE EVIDENCE GIVEN BY YOUR HONOUR EVEN AT THIS REASSESSMENT STAGE WITH THE HELP OF WHICH YOU CAN E VEN REASONABLY HOLD, MUCH LESS PROVE THAT I HAVE PAID C ASH AND INTRODUCED BOGUS LOANS IN MY BOOKS OF ACCOUNTS. T HERE IS NOTHING IN THE LETTER AND ITS ENCLOSURES SENT BY YOU TO SHO W THAT THE LOANS ARE BOGUS LOANS. YOU HAVE FURTHER NOT GIVEN ANY PR OOF OR EVIDENCE COLLECTED, RECEIVED OR RECORDED BY YOU WHICH PROVES OR EVEN GIVE A WHISPER TO THINK THAT I HAVE PAID ANY CASH MONEY OR HAVE DONE ANY CASH TRANSACTION. THE REASON FOR A FORMATION OF TH E BELIEF MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTU LATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MAT ERIAL COMING TO THE NOTICE AND FORMATION OF BELIEF THAT THERE HAS B EEN ESCAPEMENT OF INCOME OF THE ASSESSEE BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NOT ANY AND E VERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE A ND FARFETCHED WHICH WOULD WARRANT THE FORMATION OF THE BELIEF REL ATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT. IN ANY EVENT, THE LINK GIVEN BY YOU DO NOT PROVIDE ANY BASIS FOR YOUR ACTION OF REOPENING AND CONTINUANCE OF THIS REASSES SMENT PROCEEDING. HENCE, THE CONTINUANCE OF THIS REASSES SMENT PROCEEDING IS TOTALLY ILLEGAL AND NOT PERMITTED IN LAW. THEREFORE, I ITA NOS. 2382, 2188 & 2371-AHD-2009 7 REQUEST YOU TO DROP THIS ILLEGAL PROCEEDING, AND NO T TO TAKE ANY ACTION WHICH IS NOT LEGAL. (4) WITHOUT PREJUDICE TO ABOVE, IF YOUR GOOD OFFICE RELY ON ANY INQUIRY, ADMISSION DIRECTLY AGAINST ME, PLEASE GIVE ME THE COPIES OF SUCH STATEMENT AND ALLOW ME TO CROSS EXAMINE SUC H PERSON(S). TILL THIS DATE YOU HAVE NOT GIVEN ME ANY MATERIAL W HICH GIVES ANY TYPE OF ADMISSION DIRECTLY OR INDIRECTLY AGAINST ME . THEREFORE, THERE IS NO REASON FOR YOU TO CONTINUE WITH THIS REASSESS MENT PROCEEDINGS, HENCE, THE SAME IS ILLEGAL AND TO BE D ROPPED FORTHWITH. (5) AT THE COST OF REPETITION, I FIRMLY DENY THAT I HAVE DONE ANY CASH TRANSACTIONS AS ALLEGED. HOWEVER, FROM MY EIGHT YE ARS EXPERIENCE OF MY WEAK FINANCIAL POSITION, I CAN SAY THAT THE I MPUGNED TAX EVASION PETITION WHICH IS THE MAIN BASE OF THIS WHO LE REASSESSMENT PROCEEDINGS, IS A FICTITIOUS AND MALAFIDE PETITION BY SOMEONE TO TAKE REVENGE ON ME AND I HAVE STRONG APPREHENSION T HAT THIS TAX EVASION PETITION MUST BE FROM SOME ANONYMOUS UNKNOW N SOURCE. IF THIS IS THE TRUTH THEN AND ON CONSIDERING THE FA CT THAT NOTHING HAS COME TO LIGHT AS ALLEGED IN THIS TAX EVASION PETITI ON, I HUMBLY AND RESPECTFULLY REQUEST YOU TO KINDLY DROP THIS REASSE SSMENT PROCEEDINGS TO GIVE ME JUSTICE WHICH WILL HELP ME T O AVOID THE COSTLY UNWARRANTED LITIGATION. AS MY FINANCIAL PO SITION IS VERY WEAK, IT IS DIFFICULT FOR ME TO PAY THE LEGAL FEES, THEREFORE, I ONCE AGAIN I REQUEST YOU TO KINDLY DROP THE TOTALLY ILLE GAL PROCEEDING AGAINST ME.. 4.4 REBUTTING THE ASSESSEES CONTENTIONS AND ALSO T AKING REFUGE IN THE RULINGS OF THE HONBLE APEX COURT IN THE CASES OF ( I) CIT V. DURGA PRASAD MORE REPORTED IN 82 ITR 540 (SC); AND (II) SRI KRIS HNA (P) LTD V. ITO & OTHERS REPORTED IN 221 ITR 538 (SC), THE AO TOOK A VIEW THAT THE ALLEGED CREDITORS SHOWN BY THE ASSESSEE TALLIED WIT H THE BANK ACCOUNTS MAINTAINED BY SHRI KHANDHAR; THAT THE PERSONS IN WH OSE NAMES THE BANK ACCOUNTS OPERATED BY SHRI KHANDHAR HAD NOT FILED R ETURNS OF INCOME (EXCEPT FOR 9 SUCH PERSONS); THAT EVEN IN CASE OF S UCH PERSONS (WHOSE RETURNS HAD BEEN FILED) THE LOANS AND ADVANCES SHOW N BY THEM IN THE AY 1997-98 WERE LESS THAN THE CUMULATIVE TOTAL OF THE LOANS GIVEN TO THE ITA NOS. 2382, 2188 & 2371-AHD-2009 8 APPELLANT AND HIS TWO BROTHERS; THAT THE VERACITY A ND GENUINENESS OF THE TRANSACTIONS RELATING TO LOANS WERE NOT ESTABLISHED AND THAT THE PRINCIPAL/INTEREST WAS NOT PAID AND NO EFFORTS WERE MADE BY THE ALLEGED CREDITORS FOR THE RECOVERY. IT WAS THE STAND OF TH E LD. AO THAT THE OUTCOME OF THE ENQUIRIES, NON-FURNISHING OF REQUISI TE DETAILS SUCH AS CURRENT ADDRESSES OF THE PARTIES, RELEVANT BANK DET AILS, COPIES OF BALANCE SHEETS, THE CONFESSIONAL STATEMENT/ACTION OF SHRI K HANDHAR OF HIS HAWALA OPERATIONS BY FLOATING SEVERAL BANK ACCOUNTS/NAME L ENDERS ETC., AND THAT THE ASSESSEE HAD NOT DISCLOSED MATERIAL FACTS FULLY AND TRULY DURING THE ORIGINAL PROCEEDINGS AND ALSO HAD NOT ESTABLISH ED THE GENUINENESS OF THE TRANSACTIONS EVEN IN THE REOPENED PROCEEDINGS A ND, THUS, THE BURDEN OF PROOF U/S 68 OF THE ACT WAS NOT DISCHARGED BY TH E ASSESSEE. THE AO THEREFORE ADDED THE AMOUNT OF RS.10.4 CRORES AS UNE XPLAINED CASH CREDIT AND DISALLOWED INTEREST DEBITED THEREON I.E., RS.1, 03,78,302/-. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). THE SUBMISSIONS OF THE ASSESSEE BEFORE THE LD. CIT (A) ARE AS UNDER: 9. BEFORE ME, IT WAS CONTENDED THE REOPENING OF THE ASSESSMENT WAS UNJUSTIFIED. ALL DETAILS/CONFIRMATI ONS IN RESPECT OF THE CREDITORS HAD BEEN FILED IN THE ORIGINAL ASS ESSMENT PROCEEDINGS. THE NON-VERIFICATION OF CONFIRMATIONS (OF THE CREDITORS), THE STATEMENT OF MR. KHANDHAR WERE NOT VALID REASONS FOR REOPENING OF THE ASSESSMENT. THE NAME OF THE A PPELLANT HAD NOT FIGURED IN ANY HAWALA TRANSACTIONS. THE LOAN A MOUNTS WERE GENUINELY RECEIVED AND THE TAX RECOVERY OFFICER OF THE CREDITOR(S) HAD SENT NOTICES U/S 226(3) TO THE APPELLANT. THE LENDERS WERE TREATED AS HAWALA OPERATORS IN THE YEAR 1990-91 WHE REAS THE BORROWINGS OF THE APPELLANT WERE IN AY 1997-98. AL L THE CREDITS WERE RECEIVED THROUGH A/C PAYEE CHEQUES. NON-COMPL IANCE OF NOTICE(S) U/S 131 BY THE CREDITORS COULD NOT BE HEL D AGAINST THE APPELLANT. SIMILARLY THE REPAYMENTS COULD NOT BE M ADE DUE TO FINANCIAL CRISIS. THERE WAS NO EVIDENCE OF CHEQUE BADLI AND NONE WAS FOUND EVEN IN THE SEARCH (U/S 132 OF THE A CT) ON 9.1.1997, AT THE PREMISES OF THE APPELLANT. FURTHE R CROSS- EXAMINATION WAS NOT PROVIDED TO THE APPELLANT. IF THE NAME OF ITA NOS. 2382, 2188 & 2371-AHD-2009 9 THE APPELLANT DID NOT APPEAR IN THE BALANCE SHEET O F SOME OF THESE CREDITORS, IT COULD NOT BE THE BASIS FOR THE ADDITION U/S 68 OF THE ACT. THE APPELLANT ALSO CITED SEVERAL DECISION S AND QUOTED FROM THESE DECISIONS, PARTICULARLY FROM THOSE REPOR TED IN 158 TAXMAN 440 (DELHI), 245 ITR 160 (MP), 59 ITR 632 (A SSAM), 224 ITR 180 (P & H), 264 ITR 254 (GAUHATI), 76 TTJ 521 (AHD), 256 ITR 360 (GUJ), 254 ITR 275, 223 ITR 11 (GUJ) ET C. THE REOPENING OF THE ASSESSMENT AND THE ADDITIONS / DIS ALLOWANCES, MADE WERE SO ASSAILED. 5.1. THE LD. CIT (A), HOWEVER, DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND DISMISSED THE APPEAL OF THE ASSESSEE. THE FINDINGS OF THE LD. CIT (A) ARE EXTRACTED AS UNDER: 10. THE CONTENTIONS/ DETAILS ON RECORD WERE CAREFU LLY CONSIDERED. IT IS SEEN THAT THE AO HAD RECORDED (A ND COMMUNICATED) DETAILED REASONS FOR REOPENING THE AS SESSMENT U/S 147/148 OF THE I.T. ACT. THE NOTICE U/S 148 WA S ISSUED/SERVED WITHIN THE STATUTORY PERIOD. THE AO HAS DETAILED THE NATURE/EXTENT OF INFORMATION CONSTITUTING HIS R EASONS FOR REOPENING THE ASSESSMENT. THE OBJECTIONS OF THE AP PELLANT HAD BEEN DEALT WITH VIDE ORDER 3.12.2004 IN LINE WITH R ATIO OF THE DECISION OF THE HONBLE SC IN THE CASE OF GKN DRIVE SHAFTS (259 ITR 19). HENCE, THERE WAS NO INFIRMITY IN HIS ACTI ON U/S 147/148 OF THE ACT. AS SUCH THE RELATED GROUND OF APPEAL, IS DEVOID OF MERIT AND IS REJECTED. 11. IN RESPECT OF THE OTHER COMMON GROUND OF APPEA L, AGITATING THE ADDITION U/S 68 AND DISALLOWANCE OF INTEREST (U NPAID), IT WAS BROADLY ARGUED, WITH SUPPORT OF A NUMBER OF DECISIO NS, THAT THE NAME, ADDRESS, CONFIRMATION(S) OF THE CREDITORS HAD BEEN FURNISHED. THEIR LACK OF RESPONSE TO NOTICE U/S 13 3(6)/131 CANT BE HELD AGAINST THE ASSESSEE. THEIR CREDITWORTHINE SS WAS SATISFACTORILY EXPLAINED BUT THEIR SOURCE(S) WERE N OT REQUIRED TO BE EXPLAINED BY THE ASSESSEE. THE LOANS WERE RECEI VED BY A/C PAYEE CHEQUES AND SO THE REJECTION BY THE AO, WAS N OT ON COGENT GROUNDS. THE LENDERS WERE TREATED AS HAWALA OPERATORS IN THE YEAR 1990-91, WHICH IS UNRELATED AND FOR REM OVED FROM THE BORROWINGS, MADE FROM THEM IN THE YEAR 1997-98. TH E NON- REPAYMENT OF PRINCIPAL AMOUNT OF LOAN AND INTEREST WAS DUE TO SEVERE UNDISPUTED FINANCIAL CRISIS, STILL UNRESOLVE D. THERE IS NO EVIDENCE THAT LOANS RECEIVED BY CHEQUES, WERE ARRAN GED BY ITA NOS. 2382, 2188 & 2371-AHD-2009 10 PAYING CASH IN LIEU AS QUID PRO QUO. EVEN IF THE N AME OF THE APPELLANT DIDNT FIGURE IN THE BALANCE SHEET OF SOM E OF THE CREDITORS, IT COULD BE DUE TO VARIOUS REASONS AND S O WAS OF NO CONSEQUENCE. BESIDES, THE RATIO OF THE DECISIONS C ITED WAS APPLICABLE AND SO THE ADDITION U/S 68 OF THE ACT AN D DISALLOWANCE OF INTEREST IS UNJUSTIFIED. 12. ON CAREFUL CONSIDERATION OF THE FACTS AND DETA ILS ON SECOND AND THE DECISIONS CITED, IT IS SEEN THAT THE ARGUME NTS OF THE APPELLANT ARE FLAWED. IN THE DECISION REPORTED IN 159 ITR 78 (SC), THE SUMMONS U/S 131 OF THE ACT WERE RECEIVED BY THE CREDITORS BUT WERE NOT COMPLIED WITH. THEIR WHEREABOUTS/ADDRESS WAS NOT IN DOUBT, UNLIKE THE FA CTS IN THE PRESENT CASE. IN DECISION REPORTED IN 212 ITR 199 (ORISSA), THE AO HAD NOT SUMMONED THE CREDITORS TO ADDUCE FURTHER EVIDENCE. IN VARIOUS OTHER DECISION CITED BY THE APPELLANT I. E., REPORTED IN 151 ITR 150, 204 ITR 285, 223 ITR 11 AND 256 ITR 36 0 (GUJARAT), THE LENDERS WERE ALL ASSESSED TO TAX AS INDICATED BY THEIR CONFIRMATIONS AND PAN WHICH WAS NOT SO IN THE PRESENT CASE. THE AO HAS POINTED OUT THAT THE ASSESSMENT R ECORDS OF ONLY 9 OF SUCH CREDITORS COULD BE TRACED OUT (PARA 6 OF THE ASSESSMENT ORDER) AND EVEN IN THEIR CASE, THE NAME OF THE ASSESSEE WAS NOT FOUND IN THEIR BALANCE SHEET (PARA 8.01 OF THE ORDER). IN THE CASE OF METACHEM INDUSTRIES (248 IT R 160 (MP) THE FACTS INDICATE THAT THE CREDITORS WERE PRODUCED AND EXPLANATION GIVEN WAS FOUND TO BE SATISFACTORY. BU T NO CREDITOR WAS PRODUCED, FOR EXAMINATION IN THE CASE OF THE AP PELLANT. IN THE CASE OF ROHINI BUILDERS 256 ITR 360 (GUJ), THE LOANS WERE RECEIVED AND ALSO REPAID BY A/C PAYEE CHEQUES ALONG WITH INTEREST. THE INTEREST PAID WAS ALSO NOT DISALLOWE D. THIS, HOWEVER IS NOT THE SITUATION IN THE CASE OF THE APP ELLANT. BRIEFLY STATED, THE DECISIONS CITED BY THE APPELLANT, DONT ADVANCE THE CASE OF THE APPELLANT BEING ON DIFFERENT FACTS/CIRC UMSTANCES. ON THE OTHER HAND, THE RATIO OF THE DECISION IN CASE O F DURGA PRASAD 82 ITR 540 QUOTED BY THE AO IS RELEVANT. IN CASE O F THE APPELLANT ALSO, THE EXPLANATION GIVEN DOES NOT ACCO RD WITH HUMAN PROBABILITIES. THE APPELLANT AND HIS BROTHER S HAVE SHOWN LOANS FROM A NUMBER OF ENTITIES, MOST OF WHICH WERE UNDER THE CONTROL OF AN ADMITTED HAWALA OPERATIONS SINCE LONG . 13. THE SO CALLED CREDITORS IN CASE OF THE APPELL ANT AND HIS BROTHERS WERE MOSTLY THE SAME. THE AMOUNTS SHOWN R ECEIVED BY THESE BROTHERS WERE HUGE, AND SOMETIMES IDENTICA L. ITA NOS. 2382, 2188 & 2371-AHD-2009 11 MOREOVER THE PERIOD DURING WHICH THESE AMOUNTS WERE SHOWN RECEIVED BY THESE BROTHERS WAS ALMOST THE SAME I.E. , BETWEEN AUGUST TO SEPTEMBER 1996 AND IN SEVERAL INSTANCES O N THE SAME DAYS. SURPRISINGLY LOANS WERE SHOWN RECEIVED FROM A PARTY IN SEVERAL INSTALLMENTS ON THE SAME DATE, IN CASE OF T HE APPELLANT/ HIS BROTHERS. THIS FEATURE OF STAGGERED RECEIPT OF LOAN ON THE SAME DAY IS NOT EXPLAINED. FOR AN INSTANCE, THE AP PELLANT IS SHOWN HAVING RECEIVED LOAN OF RS.10 LACS ON 7.8.96 AND ANOTHER LOAN OF RS.10 LACS ON 7.8.96 ITSELF FROM THE SAME P ARTY NAMELY RAJ ELECTRICAL FOLLOWED BY YET ANOTHER LOAN OF RS .10 LACS ON 9.8.96. SUCH INSTANCES OF STAGGERED TRANCE OF LOAN S ABOUNDS IN CASE OF THE APPELLANT AND HIS BROTHERS. ALSO THE S AME PARTIES ARE SHOWN HAVING GIVEN LOANS OF HUGE AMOUNTS TO THE APPELLANT AND HIS BROTHERS(S) ON THE SAME DATE, IN MANY INSTA NCES. STRANGELY NONE OF THE RECIPIENTS HAVE REPAID THESE STATED LOANS, FULLY OR IN PART, EVEN IN ONE CASE. SIMILARLY, THO UGH THE APPELLANT AND HIS BROTHERS HAVE CREDITED INTEREST ON THESE ST ATED LOANS, NONE OF THEM HAVE PAID, IN ANY CASE, FULLY OR PARTI ALLY. NONE OF THE STATED CREDITORS HAVE INITIATED RECOVERY PROCEE DINGS DESPITE THE MAGNITUDE OF THE STATED LOAN AMOUNTS DESPITE TH E LAPSE OF CONSIDERABLE TIME. A DETAILED STUDY OF THE PERIODI CITY, AMOUNT, MANNER ETC., OF THE STATED LOANS OF THE APPELLANT A ND HIS BROTHERS AS ALSO OF THE CREDITING OF INTEREST ITS NON PAYMEN T THE SIMULTANEOUS TAKING OF STATED LOANS AND OF SUFFERIN G FINANCIAL CRISIS ETC., LEADS TO THE INEVITABLE CONCLUSION THA T THESE WERE ALL CONTRIVED MANIPULATIONS OF THE APPELLANT AND HIS BR OTHERS. THE FACTS AND CIRCUMSTANCES ARE INDICATIVE OF SHAM TRAN SACTIONS OF THE APPELLANT WITH THE HAWALA OPERATOR(S) OF KHANDH AR GROUP WHO HAD CONTINUED THIS ACTIVITY DESPITE THEIR CONFESSIO N AND PROMISE TO CEASE IT. THE HONBLE SUPREME COURT IN ITS DECI SION REPORTED IN AIR 1974 SC 859 HAS HELD THAT REVENUE NOT REQUI RED TO PROVE ITS CASE WITH MATHEMATICAL, DEMONSTRABLE DEGR EE FOR ALL. IN HUMAN AFFAIRS, ABSOLUTE CERTAINLY IS A MYTH AND PROOF OF EXACTNESS A FARCE. THE LAW ACCEPTS PROBABILITY A S A SUBSTITUTE IN THIS WORK-A DAY WORLD. THE LAW DOESNT REQUIRE THE DEPARTMENT TO PROVE THE IMPOSSIBLE. IN THE DECISION REPORTED IN 24 ITR 506 (SC) IT WAS HELD THAT AO CAN IGNORE FORM WHERE THE TRANSFER IS MAKE BELIEVE, ARTIFICIAL OR COLOURABLE OR WHERE STEPS TAKEN ARRIVING AT A PARTI CULAR RESULT HAS NO REAL PURPOSE OTHER THAN TO AVOID TAX. ITA NOS. 2382, 2188 & 2371-AHD-2009 12 SIMILARLY IN 214 ITR 801 (SC) IT WAS HELD THAT IF ON TEST OF HUMAN PROBABILITIES, A TRANSACTION IS HELD TO BE NOT GENU INE, IT IS REASONABLE TO PRESUME, IT IS ASSESSEES INCOME. IN THE DECISION REPORTED IN 235 ITR 785 IT WAS HE LD THAT DOCUMENT EVIDENCING AN APPARENT SITUATION NOT ENOU GH IF THEY DONT RECORD A REAL TRANSACTION BUT ARE MADE TO COV ER UP CAN BE INFERRED AS UNREAL. IN THE EVENT, THE AO WAS JUSTIFIED IN HOLDING THAT THE REQUISITES U/S 68 OF THE ACT WERE NOT MET WITH BY THE APPELLAN T. THE GENUINENESS OF THE RELATED TRANSACTIONS ITSELF REMA INS UNPROVED. HENCE, THE ACTION OF THE AO IN MAKING THE ADDITION (S) U/S 68 AND DISALLOWANCE OF STATED INTEREST IS JUSTIFIED AND IS UPHELD. THE RELATED GROUND OF APPEAL IS REJECTED. 14. THE NEXT GROUND OF APPEAL CONTESTING THE CHAR GING OF INTEREST IS NOT ENTERTAINED AND IS REJECTED BEING J USTIFIED AND CONSEQUENTIAL IN NATURE. 15. IN THE RESULT, THE APPEAL IS DISMISSED. 6. DURING THE COURSE OF HEARING, THE LD. A R REITER ATED MORE OR LESS WHAT WAS PORTRAYED BEFORE THE FIRST APPELLATE AUTHO RITY. IN FURTHERANCE, IT WAS SUBMITTED IN THE WRITTEN SUBMISSION PRESENTED D URING THE COURSE OF EARLIER HEARING DATED 8.10.2009 THAT: (I) THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT AND THE NOTICE U/S 148 OF THE ACT HAS BEEN ISSUED ON 29 /3/2004 I.E., AFTER FOUR YEARS FROM THE END OF RELEVANT ASSESSMEN T YEAR. DURING THE COURSE OF ASSESSMENT, THE APPELLANT HAS DISCLOS ED FULLY AND TRULY ALL MATERIAL FACTS BY FILING CONFIRMATION OF THE NEW DEPOSITORS AND INTEREST PAYMENT DETAILS BY PRODUCING BOOKS OF ACCOUNTS AND BANK STATEMENT. THE SAID FACT IS EVIDENT FROM THE QUESTIONNAIRE ISSUED BY THE ASSESSING OFFICER AND MY REPLY AS MEN TIONED AT PARA 2 OF THE IMPUGNED ASSESSMENT ORDER AND THE ORIGINAL ASSESSMENT ITA NOS. 2382, 2188 & 2371-AHD-2009 13 ORDER ALSO. ON READING NOTICE U/S 133(6), IT IS EV IDENT THAT THE DEPARTMENT HAS COPY OF BALANCE SHEET AS ON 31.3.199 7; (II) THERE WAS NO SPECIFIC INFORMATION WITH THE A O FOR THE REOPENING OF THE COMPLETED ASSESSMENT AND HE HAD TAKEN RECOUR SE OF S.133(6) AND INQUIRIES WERE MADE AT MUMBAI. IN OTH ER WORDS, THE AO WAS PROBING INTO THE MATTER FOR ASSUMING THE JUR ISDICTION OF REASSESSMENT; (III) THE REASONS RECORDED AT PARAGRAPH 5 SUGGESTS THAT THE BALANCE SHEETS AS ON 31.3.1997 AND 31.3.1998 WERE O N THE RECORDS OR OTHERWISE THE AO CANNOT DETERMINE WHETHE R THE AMOUNT OF INTEREST HAS BEEN PAID OR NOT; THAT NON-PAYMENT OF INTEREST AND PRINCIPAL AMOUNT CANNOT BE THE GROUND FOR THE REASS ESSMENT FOR THE ADDITION U/S 68 OF THE ACT; (IV) THE AO DID NOT HAVE ANY AUTHENTIC EVIDENCE OF ADMISSION OR THE ALLEGATION FOR THE INFORMATION RECEIVED OR OTHE RWISE THE AO WOULD HAVE SPECIFICALLY STATED IN THE REASONS RECOR DED, BUT, HE HAD NOT STATED THAT WHAT WAS THE SPECIFIC INFORMATION A ND FROM WHOM HAD BEEN RECEIVED AND IN WHICH PROCEEDINGS IT HAS BEEN RECEIVED; (V) THE INFORMATION GATHERED BY THE AO WAS VERY OL D AND CANNOT BE RELEVANT AS THE PROCEEDINGS U/S 132 OF THE ACT WERE CONDUCTED IN KHANDHAR GROUP OF CASES DURING 1991 WHEREAS THE AS SESSMENT YEAR UNDER CONSIDERATION IS OF 1997-98 AND NO MAN C AN BE A HAWALA OPERATOR FOR EVER, IN PARTICULAR WHEN THERE WERE PROCEEDINGS U/S 132 OF THE ACT; AND THAT IT WAS ON LY ASSUMPTION OF THE DEPARTMENT FOR HAWALA OPERATOR ON THE BASIS OF PROCEEDINGS U/S 132 OF THE ACT DURING THE YEAR 1991; ITA NOS. 2382, 2188 & 2371-AHD-2009 14 (VI) THE OBSERVATION OF THE AO THAT THE NAME OF TH E APPELLANT WAS NOT FOUND IN THE BALANCE SHEET OF CREDITOR CANNOT B E A GROUND TO USE THE SAME AGAINST THE APPELLANT AS THE APPELLAN T HAD NO CONTROL OVER THE METHOD OF MAINTAINING THEIR BOOKS OF ACCOU NT; THAT IT WAS POSSIBLE THAT THEY MIGHT HAVE NET OUT THEIR LOANS T AKEN AND THE LOANS ADVANCED OR FOR ANY OTHER REASONS, THEY HAVE NOT MENTIONED MY NAME IN THEIR BALANCE SHEETS; (VII) THAT THE NOTICE OF THE TRO U/S 226(3) OF THE ACT ALONG WITH THE LIST SHOWING THE NAMES OF THE LENDERS, DATES AND AM OUNTS GIVEN BY THE CREDITORS [SOURCE : P 14 18 OF ASSESSEES WRI TTEN SUBMISSION] CONFIRMS THAT THE LENDER HAD ADVANCED THE AMOUNTS A ND IT WAS ON THE RECORD OF THE DEPARTMENT AND, THEREFORE, THE RE ASONS RECORDED BY THE AO WAS AGAINST THE FACTS OF THE CASE; (VIII) IN PARAGRAPH 9, THE AO UNAMBIGUOUSLY CONCEDE D THAT THE APPELLANT MIGHT HAVE FILED CONFIRMATION WITH PANS A T THE RELEVANT TIME, BUT, THERE WAS NOTHING ON RECORD THAT THE GEN UINENESS OF THE TRANSACTION WAS VERIFIED. IN THIS REGARD, IT WAS A SSERTED THAT THE NON-VERIFICATION OF SUCH DETAILS BY THE REVENUE CAN NOT BE ATTRIBUTED AS A FAILURE ON THE PART OF THE APPELLAN T; (IX) NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE PROCEEDINGS U/S 132 OF THE ACT AT THE APPELLANTS PREMISES ON 9 .1.1997 AS THOSE LOANS HAVE BEEN TAKEN BEFORE THE SEARCH DATE; THAT NO INCRIMINATING DOCUMENTS/STATEMENTS/ADMISSION DURING ANY PROCEEDINGS AGAINST THE LENDERS WERE FOUND AFTER TH E DATE OF THE GRANTING LOANS TO THE APPELLANT, BUT, ONLY ON THE B ASIS OF THE PROCEEDINGS U/S 132 OF THE ACT, THE REVENUE HAS BEE N TREATING THE ITA NOS. 2382, 2188 & 2371-AHD-2009 15 SAID LOAN AS NON-GENUINE AND, THUS, IT WAS ONLY SUS PICION AND PRESUMPTION OF THE AO BUT, NOT A REASONED BELIEF OF THE AO; RELIES ON THE FINDINGS IN THE CASES OF (I) DURGA PRASHAD GOYAL V. ITO 98 ITD 227 (SB) ITAT AMRITSAR; (II) LAKHMANI MEWAL DAS (1976) 103 ITR 437 (S C) (III) NITIN P SHAH V. DCIT 276 ITR 414 (GUJ); (IV) SHANKARLAL NAGJI & CO. AND OTHERS V. ITO 20 DTR 116 (GUJ)& (V) ASSAM TEA CO V. ITO 92 ITD (ASSAM)(SB) (X) THE ASSESSEE HAD PRODUCED BOOKS OF ACCOUNT, BA NK PASSBOOK/STATEMENTS, CONFIRMATION FROM THE PARTIES BEFORE THE AO AND THAT ALL THESE DEPOSITS HAVE BEEN ACCEPTED THRO UGH ACCOUNT PAYEE CHEQUES AND ALL THE DEPOSITORS ARE BEING ASS ESSED TO INCOME-TAX; THAT NEITHER CROSS EXAMINATION WAS ALLO WED NOR THE STATEMENT OF EVIDENCE WAS GIVEN WHICH WAS AGAINST T HE PRINCIPLES OF NATURAL JUSTICE; (XI) THE ASSESSEE COULD NOT ABLE TO REPAY THE CRE DITORS DUES DUE TO DAY TO DAY DETERIORATING OF HIS FINANCIAL POSITI ON BECAUSE OF HEAVY LOSSES IN THE BUSINESS AND SUBSTANTIAL REDUCT ION IN THE VALUE OF SHARES HELD; THAT THE ASSESSEE WAS NOT ABLE TO R EPAY HIS DUES SINCE LAST SEVERAL YEARS WHICH WAS EVIDENT FROM THE ASSESSMENT RECORDS AND NO ADVERSE INFERENCE ON THIS COUNT CAN BE TAKEN (XII) ASSESSEE HAD PRODUCED BOOKS OF ACCOUNT AND B ANK PASS BOOK/STATEMENTS, CONFIRMATION FROM THE PARTIES WERE ALSO FURNISHED TO AO. ALL THESE DEPOSITS HAVE BEEN ACCEPTED THROU GH ACCOUNT PAYEE CHEQUES AND ALL THE DEPOSITORS ARE ASSESSED T O INCOME-TAX. ITA NOS. 2382, 2188 & 2371-AHD-2009 16 (XIII) NO CROSS EXAMINATION WAS ALLOWED OR STATEME NT OF EVIDENCE WAS GIVEN AND THE SAID COURSE OF ACTION IS AGAINST THE PRINCIPAL OF NATURAL JUSTICE. REFER PARA 5 OF PAGE NO.5 OF THE ASSESSMENT. (XIV) THE ASSESSEE COULD NOT REPAY CREDITORS DUE T O HIS DAY TO DAY DETERIORATING FINANCIAL POSITION BECAUSE OF HEAVY L OSSES AND SUBSTANTIAL REDUCTION IN THE VALUE OF SHARES HELD B Y HIM. FURTHER, ASSESSEE IS NOT ABLE TO PAY HIS DUES SINCE LAST SEV ERAL YEARS WHICH IS EVIDENT FROM THE ASSESSMENT RECORDS ALSO, AND NO ADVERSE INFERENCE ON THIS ACCOUNT CAN BE TAKEN. THEREFORE, THE THEORY OF HUMAN PROBABILITY SUPPORT THE CASE OF THE APPELLANT AND THEREFORE NON REPAYMENT OF THE AMOUNT CANNOT BE USED AGAINST THE APPELLANT FOR THE ADDITIONS U/S 68. THE SAID REASO NS FOR THE NON PAYMENT OF THE AMOUNT TO THE LENDERS HAS BEEN GIVEN BEFORE THE LOWER AUTHORITIES (REFER PARA 5 OF PAGE NO.3 OF CIT ) (XV) AOS CONTENTION THAT NAME OF THE ASSESSEE W AS NOT FOUND IN THE BALANCE SHEETS OF CREDITORS CANNOT BE ADDUCED A GAINST THE ASSESSEE AS THE ASSESSEE CANNOT CONTROL THEIR METHO D OF MAINTAINING THEIR BOOKS OF ACCOUNTS. IT IS POSSIBL E THAT THEY MIGHT HAVE NET OUT THEIR LOANS TAKEN AND LOANS ADVANCED O R FOR ANY OTHER REASONS THEY HAVE NOT MENTIONED IN THE BALANCE SHEE T. FURTHER, NOTICE U/S 226(3) OF THE ACT WAS ISSUED BY THE TRO OF THE CREDITORS CONFIRM THE FACT THAT THE LENDER HAD ADVANCED THE A MOUNT (REFER PARA 9 OF CIT (A) ORDER). (XVI) NO PROCEEDINGS UNDER SECTION 269SS AND 269T OF THE ACT HAS BEEN INITIATED AGAINST PERSONS. ITA NOS. 2382, 2188 & 2371-AHD-2009 17 (XVII) CONTENTIONS OF WHERE-ABOUT OF THE CREDITORS IS INCORRECT AS THE CREDITORS ARE INCOME-TAX ASSESSEES AND IT COMING OU T OF THE NOTICE OF TRO AND SAME ADDRESSES ARE THERE IN ASSESSMENT O RDER. (XVIII) IN VIEW OF THE ABOVE SUBMISSION, THE ADDITI ONS MADE U/S 68 OF THE ACT AND INTEREST THEREON IS BAD IN LAW AND S HOULD BE DELETED IN FULL. 6.1. THE LEARNED AR STATED THAT ASSESSMENT YEAR UND ER APPEAL IS 1997- 98 AND THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 14 3(3) OF THE IT ACT ON 31-03-2000 ON THE MATTER IN ISSUE AND GENUINENES S OF THE CASH CREDITS IN QUESTION WAS ACCEPTED BY THE AO AFTER SC RUTINY AND DUE ENQUIRY. THE ASSESSMENT WAS HOWEVER, REOPENED ON 29 -03-2004. AT THE ORIGINAL ASSESSMENT STAGE, THE AO ISSUED QUERY LETT ER DATED 28-02-2000 (WRITTEN SUBMISSION SUBMITTED ON 08.10.2009 PAGE-2) ASKING FOR FURNISHING OF CONFIRMATIONS FROM THE DEPOSITORS, DE TAILS OF BANKER, ADDRESS, PERMANENT ACCOUNT NUMBER, CIRCLE AND WARD OF THE DEPOSITORS. THE ASSESSEE FILED THE DETAILED REPLY B EFORE THE AO DATED 14-03-2000 (WRITTEN SUBMISSION SUBMITTED ON 08.10.2 009 PAGE-7) GIVING COMPLETE DETAILS OF THE DEPOSITORS/ CASH CREDITORS ALONG WITH THEIR CONFIRMATIONS IN ORIGINAL ALONG WITH THEIR ADDRESSE S, PERMANENT ACCOUNT NUMBER/ GIR NUMBER AND DETAILS REGARDING WARD/CIRCL E WHERE THE CREDITORS WERE ASSESSED TO TAX. ALL DETAILS AND CON FIRMATIONS WERE FILED ALONG WITH THIS REPLY AND THE AO AFTER DUE SCR UTINY OF THE CONFIRMATIONS RECORDS AND DETAILS SUBMITTED BY THE ASSESSEE, ACCEPTED THE GENUINENESS OF CLAIM OF THE CREDITORS. SINCE THE ASSESSEE DISCLOSED SALARY INCOME, SHARE OF PROFIT, INTEREST FROM PARTNERSHIP AND CAPITAL GAINS, THEREFORE, THE ASSESSEE WAS NOT REQ UIRED TO FILE BALANCE SHEET ALONG WITH THE RETURN OF INCOME. THE AO IN THE REASONS FOR REOPENING OF THE ASSESSMENT WRONGLY MENTIONED THAT NO VERIFICATION IS DONE BY THE AO. SINCE THE ASSESSEE FILED COMPLETE DETAILS ITA NOS. 2382, 2188 & 2371-AHD-2009 18 BEFORE THE AO AT THE ORIGINAL ASSESSMENT STAGE WH ICH WERE VERIFIED BY THE AO AND ALL RELEVANT PARTICULARS WERE DISCLOSED AT THE ORIGINAL ASSESSMENT STAGE ON THE MATTER IN ISSUE ALONG WITH CASH CREDIT, THEREFORE, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT IN THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSEE OBJECTED TO THE REASSESSMENT PROCEEDINGS BUT THE AUTHORITIES BELOW HAVE NOT APPRECIATED THE FACTS AND HAVE NOT CONSIDERED THE I SSUE IN DETAILS. HE HAS RELIED UPON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CWT VS JAWAHARBHAI D. PATEL, 225 ITR 582 (G UJ.), IN THE CASE OF CALCUTTA DISCOUNT COMPANY LTD. VS ITO, 41 ITR 191 ( SC), IN THE CASE OF PARASHURAM POTTERY WORKS CO. LTD. VS ITO, 106 ITR 1 (SC), IN THE CASE OF VARELI WEAVES PVT. LTD. VS DCIT, 240 ITR 77 (GUJ ) AND IN THE CASE OF AVANI CORPORATION VS ITO, 238 ITR 407. HE HAS FURTH ER SUBMITTED THAT THE ASSESSEE FILED COMPLETE DETAILS AT THE ASSESSME NT STAGE WHICH HAVE BEEN ACCEPTED AS GENUINE CREDITS; THEREFORE, EVEN N O ADDITION SHOULD HAVE BEEN MADE AGAINST THE ASSESSEE. HE HAS RELIED UPON THE DECISION IN THE CASE OF CIT VS ORISSA CORPORATION, 159 ITR 7 8 (SC), IN THE CASE OF CIT VS PRAGATI CO-OPERATIVE BANK LTD., 278 ITR 170 (GUJ AND IN THE CASE OF MURLIDHAR LAHORIMAL VS CIT, 280 ITR 512 (GUJ.). STATEMENT OF KANDAHAR WAS RECORDED AFTER 6 YEARS WHICH WAS WITHD RAWN, THEREFORE, IS NOT RELEVANT TO THE MATTER. THE TRO ISSUED NOTICE U /S 226 (3) OF THE IT ACT THROUGH WHICH THE TRO ASKED NOT TO PAY TO THE D EBTORS THE AMOUNT IN QUESTION WOULD SHOW THAT THE DEPARTMENT ACCEPTED GE NUINENESS OF THE CREDITS IN THE MATTER. HE HAS SUBMITTED THAT CREDIT S WERE OBTAINED THROUGH BANKING CHANNEL; THEREFORE, ADDITION EVEN O N MERIT WAS UNJUSTIFIED. IN CONCLUSION, IT WAS ARGUED THAT THE WHOLE EXERCISE HAS BEEN ENACTED BY THE REVENUE PURELY ON SURMISE, FANT ASY AND HYPOTHESIS ON THE PART OF THE AO AND THAT THE REASONS RECORDED NOT VALID WHICH WERE ITA NOS. 2382, 2188 & 2371-AHD-2009 19 QUITE CONTRARY TO THE ACTUAL FACTS AND LEGAL POSITI ON. IT WAS, THEREFORE, PLEADED THAT THE REASSESSMENT PROCEEDINGS REQUIRE T O BE ANNULLED AS THEY WERE BAD IN LAW AND WITHOUT JURISDICTION. 6.2. ON THE OTHER HAND, THE LD. D R CAME UP WITH TH E ARGUMENTS THAT THE ASSESSMENT WAS REOPENED MAINLY ON THE BASIS OF INFO RMATION RECEIVED IN THE FORM OF TAX EVASION PETITION AFTER COMPLETION O F THE ASSESSMENTS ALLEGING THAT THE ASSESSEE AND HIS TWO BROTHERS HAV E INTRODUCED BOGUS LOANS IN THEIR BOOKS OF ACCOUNTS DURING THE ASSESSM ENT YEAR UNDER CONSIDERATION BY PAYING CASH AND OBTAINED CHEQUES F ROM THE PARTIES. IT WAS, FURTHER, SUBMITTED IN THE WRITTEN SUBMISSION D ATED 18.12.2009 THAT (I) BEFORE ISSUANCE OF NOTICE U/S 148 OF THE ACT, THE AO HAD MADE NECESSARY ENQUIRIES FROM MUMBAI TO ASCERTAIN THE VE RACITY OF INFORMATION AND WAS ABLE TO TRACE THE INCOME-TAX RE CORDS OF SIX CONCERNS, VIZ., RAJ ENTERPRISES, SHEKHAKA & CO., P RABHAVEE, RAJ ELECTRICALS, HPS INTERNATIONAL AND RAJ ENGINEERS FR OM WHOM THE ASSESSEE HAD RECEIVED LOANS; THAT ON PERUSAL OF BAL ANCE-SHEETS OF THESE CONCERNS REVEALS THAT THE TOTAL LOANS AND ADV ANCES ADVANCED BY THEM WERE FAR LESS COMPARED TO THE LOAN S RECEIVED BY THE ASSESSEE AND HIS BROTHERS AND THE DETAILS OF LO ANS/ADVANCES MADE BY THOSE CONCERNS AND LOANS RECEIVED BY THE AS SESSEE AND HIS TWO BROTHERS ARE INCORPORATED IN THE REASONS RE CORDED BY THE AO; (II) THE AO HAD REACHED TO A CONCLUSION THAT THE AS SESSEE HAD FAILED TO DISCLOSE MATERIAL FACTS FULLY AND TRULY NECESSAR Y FOR THE FOLLOWING REASONS: (A) THE ASSESSEE HAD NOT FILED THE BALANCE-SHEET AL ONG WITH THE RETURN OF INCOME OR DURING THE ASSESSMENT PROCEEDIN GS; (B) THE ASSESSEE HAD NOT PRODUCED BOOKS OF ACCOUNT AS REQUIRED BY THE AOS LETTER DT.9.6.2003; (C) THE ASSESSEE HAD NOT FURNISHED THE DETAILS OF B ANK ACCOUNTS THROUGH WHICH THOSE DEPOSITS WERE RECEIVED, THE DET AILS OF BANK ACCOUNTS THROUGH WHICH INTEREST HAD BEEN PAID TO TH E SUNDRY CREDITORS AS REQUIRED BY THE AOS LETTER OF 3.12.20 03; ITA NOS. 2382, 2188 & 2371-AHD-2009 20 (D) ON PERUSAL OF THE INCOME-TAX RECORDS OF THE CRE DITORS REVEAL THAT THOSE PERSONS WERE NOT HAVING ENOUGH SOURCES TO MAK E HUGE ADVANCES RECEIVED BY THE APPELLANT; (E) ALTHOUGH THE INTERESTS WERE CREDITED IN THE ACC OUNTS OF THOSE CREDITORS, HOWEVER, NO INTEREST WAS PAID TILL DATE; (F) THE REASONS RECORDED FURTHER REVEAL THAT THE AP PELLANT HAD RECEIVED LOANS OF RS.10.4 CRORES FROM 33 PERSONS AN D ALSO CREDITED INTEREST TO THOSE PERSONS TO THE TUNE OF R S.1.03 CRORES, THAT THOUGH THE APPELLANT VIDE HIS LETTER OF 14/3/2 000 CLAIMED THAT STATEMENTS OF ACCOUNTS OF NEW DEPOSITS/UNSECURED LO ANS IN ORIGINAL DULY CONFIRMED BY THEM ALONG WITH THEIR AD DRESSES, PANS/GIR NOS. AND THE DETAILS OF WARDS/CIRCLES WHER E THOSE PERSONS ASSESSED WERE FURNISHED, THE RECORDS REVEAL THAT NO SUCH EVIDENCES WERE FURNISHED BY THE ASSESSEE; (G) THAT SINCE THE ASSESSEE HAD NOT FURNISHED THE B ALANCE-SHEET AND SUPPORTING EVIDENCES TO PROVE THE IDENTITY, GENUINE NESS AND CREDIT WORTHINESS OF THE CREDITORS, THE AO WAS JUST IFIED TO CONCLUDE THAT THE APPELLANT HAD FAILED TO DISCLOSE FULLY AND TRULY THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THE AY UNDER DISPUTE AND, THUS, THE REQUIREMENTS OF PROVISO TO S . 147 OF THE ACT WERE FULFILLED AND THE AO HAD RIGHTLY RE-OPENED THE ASSESSMENT; (H) THAT S.147(A) OF THE ACT CASTS AN OBLIGATION UP ON AN ASSESSEE NOT MERELY OF DISCLOSING FULLY AND TRULY ALL MATERIAL F ACTS, BUT, ALSO OF DISCLOSING THEM TRULY; THAT THE APPELLANT WAS UNDER OBLIGATION NOT TO MISLEAD THE AO BY DISCLOSING CERTAIN THINGS WHIC H DO NOT REPRESENT TRUE FACTS; THAT IF THE AO FINDS REASON T O BELIEVE THAT ESCAPEMENT OF INCOME HAS BEEN CAUSED BY THE FACT TH AT THE ASSESSEE HAD NOT DISCLOSED THE MATERIAL FACTS TRULY THAT WOULD GIVE HIM JURISDICTION TO REOPEN THE ASSESSMENT; AN D THAT AN ASSESSMENT CAN BE REOPENED EVEN AFTER THE AO HAD TR EATED CERTAIN TRANSACTIONS AS GENUINE ON THE BASIS OF THE DOCUMENTS DISCLOSED, BUT LATER ON AND EVEN AFTER THE CLOSURE OF ASSESSMENT, HE FINDS THAT THOSE DOCUMENTS WERE NOT GENUINE. RELIED ON THE CASE LAWS: (I) GRAHAMS TRADING CO. (INDIA) LTD. V. ITO (1976) 105 ITR 127 (CAL); ITA NOS. 2382, 2188 & 2371-AHD-2009 21 (II) HAZI AMIR MOHD. MIR AHMED V. CIT (1977) 110 IT R 630 (P & H); (III) ITO V. MAHADEO LAL TULSIAN (1977) 110 ITR 786 (CAL); (IV) ITO V. MAHADEO LAL TULSYAM (1978) 111 ITR 25 (CAL); (V) NAWBGANJ SUGAR MILLS CO. LTD V. CIT (1980) 123 ITR 287 (DEL); (VI) KIRPA RAM RAMJI DASS V. ITO (1982) 135 ITR 68 (P & H); (VII) CIT V. ESS ESS KAY ENG. CO. P. LTD. (1982) 13 7 ITR 446 (P & H); & (VIII) GENERAL MRIGENDRA SHUM SHER JUNG BAHADUR RAN A V. ITO (1980) 123 ITR 329 (DEL); & (IX) RENUSAGAR POWER CO. LTD V. ITO (1979) 117 ITR 719 (ALL) (I) THAT THE ONUS WAS ON THE APPELLANT TO DISCLOSE MATERIAL FACTS FULLY AND TRULY AND ON RECORD THAT THE APPELLANT HAD NOT FURNISHED BALANCE SHEET EITHER ALONG WITH THE RETURN OR DURIN G THE ASSESSMENT PROCEEDINGS AND, THUS, THE APPELLANT HA D NOT DISCLOSED FULLY AND TRULY THE RECEIPTS OF FRAUDULE NT LOANS. EVEN DURING THE ASSESSMENT PROCEEDINGS, THE APPELLANT HA D CLAIMED TO HAVE FILED CONFIRMATION FROM THE CREDITORS; HOWEVER , THE SAME WAS NOT FILED. THE SCRUTINY OF THOSE CREDITORS DUR ING THE RE- ASSESSMENT PROCEEDINGS REVEALS THAT THOSE TRANSACTI ONS WERE STRUCTURED AND ENGINEERED TO INTRODUCE BOGUS LOANS IN THE BOOKS OF THE APPELLANT, HOWEVER, THESE FACTS WERE NOT DIS CLOSED FULLY AND TRULY EITHER DURING THE ASSESSMENT OR REASSESSM ENT PROCEEDINGS; (K) APART FROM STRONGLY RELYING ON THE ASSESSMENT O RDER AS WELL AS THE FINDINGS OF THE LD. CIT (A), THE FOLLOWING ARGU MENTS ARE PUT FORWARD BY THE LD. D R THAT- (WRITTEN SUBMISSION D ATED 08.11.2011); - AS AGAINST THE CONTENTION OF REOPENING ON 29.3.2 004 I.E., AT THE FAG END OF THE LIMITATION DATE, IT IS EVIDENT FROM THE REASONS RECORDED FOR REOPENING BY THE AO THAT AFTER THE COMPLETION O F ORIGINAL ASSESSMENT IN ALL THE THREE CASES, HE WAS IN RECEIP T OF SPECIFIC INFORMATION IN THE FORM OF TAX EVASION PETITION WHE REIN THE ALLEGATION WAS MADE THAT ALL THE THREE ASSESSEES HA VE INTRODUCED BOGUS LOANS IN THEIR BOOKS OF ACCOUNTS DURING THE A Y 1997-98 BY PAYING CASH AND OBTAINING CHEQUES FROM THE PARTIES. THE AO AFTER PERUSAL OF RESPECTIVE ASSESSEES CASE RECORDS FOUN D THAT THE ASSESSEE HAD NOT FILED ANY BALANCE SHEET. HE FURTH ER OBSERVED THAT ITA NOS. 2382, 2188 & 2371-AHD-2009 22 FROM THE DETAILS OF INTEREST PAYMENT AS CLAIMED BY THE ASSESSEE DURING THAT PERIOD, THESE PARTIES ARE APPEARING- TO WHOM INTEREST WAS CREDITED. HAVING ESTABLISHED THE CREDIBILITY O F INFORMATION, HE GRANTED AN OPPORTUNITY TO THE ASSESSEE BY CALLING FOR DETAILS RELATED TO THE ISSUE VIDE HIS LETTER DT.9.6.2003 U/S 133(6) OF THE ACT. THE ASSESSEES REPLY DT.1.9.2003 IN RESPONSE TO THE QUE RY SHOWED THAT THE APPELLANTS REPLY WAS NOT SATISFACTORY; - THAT THE AO MADE INDEPENDENT INQUIRY BASED ON THE INFORMATION AND FOUND THAT THE FIRMS/COMPANIES PERTAIN TO A GRO UP KNOWN AS KHANDHAR GROUP OF MUMBAI AND THAT IT WAS ASCERTAI NED THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERATION BY THE D EPARTMENT ON THIS GROUP IN 1991, THESE FIRMS/ CONCERNS WERE FOUN D TO BE INVOLVED IN HAWALA TRANSACTION I.E., PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PARTIES IN THE FORM OF LOAN AND ADVANCES BY ACCEPTING CASH FOR THE RESPECTIVE AMOUNT OF CHEQUES AND CHARGING T HEIR COMMISSION FOR SUCH ENTRY; THAT IT WAS ALSO ASCERTA INED FROM THE CASE RECORDS OF SOME OF SUCH PARTIES THAT THE TOTAL LOANS AND ADVANCES MADE BY THOSE PARTIES DURING THE COURSE OF AY 1997-98 WERE LESS THAN THE AMOUNT SHOWN BY ALL THE THREE AP PELLANTS IN AGGREGATE. THEREFORE, IT WAS SUBMITTED, THE AO HAD REASON FOR STRONG BELIEF THAT THE LOAN SHOWN BY THE APPELLANT FROM THE PARTIES WERE NOT GENUINE AND THE INFORMATION THEREFORE WAS CREDIBLE. THIS BELIEF WAS FURTHER STRENGTHENED WITH THE FACT THAT INTEREST CREDITED AND CLAIMED BY THE APPELLANT FOR AY 1997-98 WAS NOT PAID BY THE APPELLANT TILL DATE, NOT ONLY THE INTEREST EVEN THE PRINCIPAL AMOUNT WAS NOT PAID TILL THE DATE OF RECORDING REASON AND INTERESTINGLY NO LEGAL ACTION WAS INITIATED BY ANY OF THE CREDITOR F OR RECOVERY OF PRINCIPAL AND INTEREST. - THAT THE AO ACCEPTED THAT THE ORIGINAL ASSESSMENT RECORD HAS A COPY OF LETTER (DATED 14.3.2000) WHEREIN IT WAS MEN TIONED THAT COPIES OF CONTRA ACCOUNT, CONFIRMATION ETC. WERE F ILED BY ALL THE THREE APPELLANTS. HOWEVER, AO RECORDED HIS SATISFA CTION THAT THERE IS NOTHING OR (SIC) ON RECORD TO SHOW THAT THE GEN UINENESS OF THE TRANSACTION WAS VERIFIED. ON ACCOUNT OF THIS SATIS FACTION, HE CAME TO THE CONCLUSION THAT BECAUSE OF NON-DISCLOSURE OF P ROPER DETAILS, GENUINENESS OF LOAN TRANSACTIONS REMAIN TO BE UNVER IFIED WITHIN THE MEANING OF SEC.68 OF THE ACT, RESULTING INTO UNDER- ASSESSMENT OF INCOME. HE THEREFORE SPECIFIED THE SUM OF LOAN SO RECEIVED BY THE APPELLANT AT RS.11,43,78,302/- INCLUDING INTEREST C REDITED THEREON AS INCOME ESCAPING THE ASSESSMENT. ITA NOS. 2382, 2188 & 2371-AHD-2009 23 - THAT AS VERIFIABLE FROM THE ORIGINAL ASSESSMENT CASE RECORDS IN ALL THE THREE CASES THAT THE AO VIDE NOTICES AND QUESTI ONNAIRE EXCEPT IN THE CASE OF PRESENT ASSESSEE DID NOT ASK FROM OTHER TWO ASSESSEES TO FILE SUCH CONTRA ACCOUNT, CONFIRMATION, ADDRESSE S AND PAN DETAILS; THAT CONSIDERING THE TIME BARRING DATED 31 .3.2000 AND SUBSEQUENT SHOW-CAUSE RELATED TO MAJOR ISSUE INVOLV ED ABOUT CAPITAL GAIN CLEARLY REFLECTS THAT THE AO HAD NOT A PPLIED HIS ON THIS SUBMISSION AND HAD CALLED FOR ANY FURTHER VERIFICAT ION/EVIDENCES AND SIMPLY OVERLOOKED THE REPLY. THE ASSESSMENT ORDER DATED31.3.2000 CAN BE TREATED AS PASSED IN HASTE BY THE AO OVERLOO KING THIS ISSUE; THAT THE APPELLANT IF SO SUBMITTED COPIES OF CONTRA ACCOUNT AND CONFIRMATION WITH ADDRESSES AND PAN OF ALL THESE PA RTIES WITH A SHORT NOTICE FROM THE AO I.E., NOTICE WAS ISSUED TO SUBMIT SUCH DETAIL ONLY IN THE CASE OF THE ASSESSEE ON 28.2.200 0, HE COULD HAVE DONE THE SAME EXERCISE WHEN GIVEN OPPORTUNITY BEFOR E REASSESSMENT BECAUSE BOTH PRINCIPAL AMOUNT AS WELL AS INTEREST THEREON WAS DUE ON THAT DATE ALSO. NO REASON FOR N OT SUBMITTING SUCH DETAIL WAS GIVEN BY THE APPELLANT. THE CIRCUM STANTIAL EVIDENCE SHOWS THAT IN FACT EXCEPT THE LETTER DATED 14.3.200 0 APPELLANT HAS NOT SUBMITTED ANY OF SUCH CONFIRMATION AND SINCE TH IS ISSUE WAS NOT THE MAIN ISSUE OF THE SCRUTINY ASSESSMENT THE AO IN HASTE OVERLOOKED SUCH NON-COMPLIANCE; - THAT THE ORIGINAL ASSESSMENT PROCEEDINGS WERE COM PLETED ON 31.3.2000 AND INITIAL LETTER TO INITIATE RE-ASSESSM ENT PROCEEDINGS WERE IN THE MONTH OF JUNE, 2003; THAT ON BOTH THE D ATES THE APPELLANTS CASE FILE WAS WITH ONE AO AND WHEN THE APPELLANT ASKED FOR THE COPIES FROM THE CASE RECORD, IT WAS NOT INS ISTED UPON AO TO GIVE THE COPIES OF SUCH CONFIRMATION SINCE NO MATER IAL TIME LAPSED BETWEEN 31.3.2000 AND JUNE 2003. IN FACT, NO SUCH DETAILS WERE FILED BY THE APPELLANT AND THIS WAS KNOWN TO THE AP PELLANT AND, THEREFORE, HE REMAINED CONTENDED WITH THE LETTER DT .14.3.2000. IT WAS ONLY IN THE MONTH OF JUNE, 2006 THE CASES WERE DECENTRALIZED AND TRANSFER OF FILES TOOK PLACE; & - THAT ON ACCOUNT OF FAILURE ON THE PART OF THE APP ELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACT BEFORE THE AO ON THIS ISSUE, THE INCOME HAS ESCAPED THE ASSESSMENT. (L) WITH REGARD TO THE APPELLANTS CONTENTION THA T HE WAS UNDER NO OBLIGATION TO FILE THE BALANCE-SHEET SINCE HE HAD NO PROPRIETARY CONCERN I.E., BUSINESS OR PROFESSION AND A REFERENC E WAS MADE TO S.44AA OF THE ACT, THE LD. D RS SUBMISSION WAS THA T ITA NOS. 2382, 2188 & 2371-AHD-2009 24 I) WITHOUT PREJUDICE TO THE APPLICATION OF S.44AA O F THE ACT FOR MAINTENANCE OF ACCOUNTS, IT IS AN ADMITTED FACT THA T THE APPELLANT HAS MAINTAINED BOOKS OF ACCOUNTS WHICH WE RE PRODUCED BEFORE THE AO. IN WHATEVER FORM SUCH BOOK S OF ACCOUNTS WERE MAINTAINED, IT REQUIRES TO BE CLOSED AT THE YEAR END AND FINAL ACCOUNTS AS APPROPRIATELY REQUIRED SH OWING PROFIT/INCOME WITH STATEMENT OF ASSETS AND LIABILIT IES ARE DRAWN. THE APPELLANT IS FROM A REPUTED AND RICH FAM ILY GROUP I.E., MARDIA GROUP SINCE MANY YEARS AND LIABILITY O F WEALTH-TAX IN THEIR CASES ARE ALSO REQUIRED TO PREPARE SUCH BA LANCE SHEET OR ASSETS AND LIABILITY STATEMENT; II) S.44AA(2)(I) OF THE ACT DEALS WITH THE MAINTENA NCE OF BOOKS OF ACCOUNTS OF EXISTING BUSINESSMAN BEFORE THIS SEC TION BEING AMENDED FOR MONITORY LIMIT [S.44AA(2)] WAS BROUGHT INTO THE ACT W.E.F. 1.4.1988. THE LIMIT OF INCOME FROM BU SINESS OR PROFESSION AS PER THE FINANCE ACT 1992 W.E.F. 1.4.1 993 AND EXPLAINED IN CIRCULAR NO.636 DT.31.8.1992 WAS REVIS ED FROM RS.25000 TO RS.40000 ONLY). TO FURTHER ELABORATE, ALL THOSE BUSINESSMEN WHOSE INCOME FROM BUSINESS OR PROFESSIO N EXCEEDS CERTAIN MONITORY LIMIT THEY WERE REQUIRED T O CONTINUE MAINTAINING THE BOOKS OF ACCOUNTS. THE STATEMENT O F INCOME OF THE APPELLANT SHOWS INCOME UNDER THE HEAD BUSINE SS OR PROFESSION AND ALSO MAINTAINING BOOKS OF ACCOUNT BE FORE THIS AMENDMENT AND, THEREFORE, THE PROVISIONS OF S. 44AA (2)(I) OF THE ACT ARE APPLICABLE TO THE APPELLANT. IN FACT, AS PER THE PROVISIONS OF THE ACT, THE APPELLANT WAS ENTITLED T O CLAIM CERTAIN EXPENDITURE OUT OF THE INCOME SO SHOWN UNDE R THE HEAD INCOME FROM BUSINESS OR PROFESSION; (M) IN RESPECT OF THE APPELLANTS CONTENTION THAT ALL THE DEPOSITS WERE GENUINE AND ASSESSED TO TAX AND THAT BY FILING CONTRA ACCOUNT, CONFIRMATION AND THEIR ADDRESSES WITH PAN/ GIRS IN THE ORIGINAL ASSESSMENT WERE SUFFICIENT TO DISCHARGE TH E ONUS OF THE APPELLANT, IT WAS AVERRED BY THE REVENUE THAT - WITHOUT PREJUDICE TO THE ASSESSEES CONTENTION OF SUBMITTING SO CALLED CONFIRMATION FROM DEPOSITOR (NEITHER AVAILAB LE ON CASE RECORD NOR ANY DETAILS OR EVIDENCES OF SUCH CONFIRMATION F ILED LATER ON BY THE APPELLANT),AFTER THE FINDING OF THE FACT BY THE AO THAT SUCH DEPOSITS/LOANS WERE GIVEN BY THE PARTIES/CONCERNS W HO WERE FOUND TO BE INDULGED IN GIVING ACCOMMODATION ENTRY I.E., HAWALA BUSINESS AND ALSO THE APPELLANT WAS PROVIDED WITH THE OUTCOM E OF ITA NOS. 2382, 2188 & 2371-AHD-2009 25 INDEPENDENT INVESTIGATION CARRIED ON BY THE AO IN R ESPECT OF THOSE PARTIES ON THE BASIS OF INFORMATION RECEIVED THROUG H TAX EVASION PETITION ALONG WITH COPIES OF ASSESSMENT ORDERS OF SOME OF SUCH PARTIES AND THE MAIN PERSON, THE ONUS NOW SHIFTS ON THE ASSESSEE TO ADDUCE EVIDENCES TO PROVE GENUINENESS OF TRANSAC TION. AS HELD BY VARIOUS COURTS OF LAW THAT U/S 68 OF THE ACT, TH E ASSESSEE HAS TO PROVE THE IDENTITY, CAPACITY AND GENUINITY OF THE T RANSACTION. IF ANY ONE OF THESE THREE INGREDIENTS ARE MISSING, THEN TH E PROVISIONS OF S.68 OF THE ACT ARE ATTRACTED. MERE FILING OF CON FIRMATORY LETTERS OR FURNISHING OF PARTICULARS OR EVEN CONTENTION THAT P AYMENT WAS RECEIVED BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT MAKE NON-GENUINE TRANSACTION GENUINE. (N) WITH REGARD TO THE APPELLANTS CONTENTION THAT HE WAS SERVED WITH NOTICE U/S 226(3) OF THE ACT IN RESPECT OF TAX LIABILITY RELATED TO SHRI SURENDRA M KHANDHAR OF KHANDHAR GROUP, IT WAS CONTENDED BY THE LD. D R THAT - THE AO OF SHRI SURENDRA M KHANDHAR ASSESSED THE P EAK CREDIT OF ALL THE 110 BANK ACCOUNTS OPERATED THROUGH VARIOUS FIRMS/CONCERNS FOR HAWALA OPERATION AS FOUND DURING THE COURSE OF SEARCH ON KHANDHAR GROUP AND ADMISSION MADE BY SHRI S.M. KHAN DHAR. IT WAS IN THIS RESPECT THE APPELLANTS NAME APPEARING AT RESPECTIVE PLACES AS DEBTOR OF THE RESPECTIVE FIRM/CONCERN FRO M WHERE HE HAD TAKEN LOAN. THE AO IS EMPOWERED TO RECOVER THE TAX LIABILITY AS PER THE PROCEDURE LAID DOWN FOR RECOVERY. HOWEVER, ON OTHER SIDE NEITHER SHRI S.M. KHANDHAR ACCEPTED SUCH LIABILITY NOR APPELLANT ADMITTED THAT LOAN AND DEPOSITS WERE FROM HIM. THE APPELLANT ON THE CONTRARY STILL TREAT THE FIRMS AND CONCERNS OF KHANDHAR GROUP AS CREDITOR AS THE PRINCIPAL AMOUNT WITH INTEREST IS S TILL OUTSTANDING ON ONE HAND AND HAS NOT PAID ANY AMOUNT AGAINST THE NO TICE U/S 226(3) OF THE ACT.. IT IS THEREFORE THIS ARGUMENT IS CONTRADICTORY TO SUPPORT THE CONTENTION OF THE APPELLANT THAT THE LO AN SO RECEIVED BY HIM WAS A GENUINE TRANSACTION. IT IS WORTHWHILE TO NOTE THAT THE ASSESSMENT IN THE CASE OF FIRM/CONCERN AS APPEARING IN THE REASONS RECORDED WERE ASSESSED FOR COMMISSION INCOM E FOR PROVIDING ACCOMMODATION ENTRY. IT WAS, THEREFORE, THEIR CAPACITY WAS TREATED AS DUBIOUS. FURTHER, AS HIGHLIGHTED BY THE AO, THE FACT THAT THE RECORDS OF SUCH FIRMS/CONCERNS SHOW THE LO ANS AND ADVANCES TO VARIOUS PARTIES IN AGGREGATE WAS LESS T HAN THE AMOUNTS SO SHOWN BY THE APPELLANT BEING RECEIVED FR OM SUCH FIRMS/CONCERNS. THE APPELLANT HAS TO FURNISH THE RE CONCILIATION AND CONFIRMATION IN RESPECT OF SUCH DISCREPANCIES WITH PROPER ITA NOS. 2382, 2188 & 2371-AHD-2009 26 EVIDENCES. THE BURDEN OF PROOF TO RECONCILE SUCH D ISCREPANCY WAS ON THE APPELLANT AFTER BEING PROPERTY CONFRONTED. IN THE ABSENCE OF DISCHARGE OF SUCH BURDEN, THOSE TRANSACTIONS CANNOT BE ACCEPTED AS GENUINE TRANSACTION. RELIES ON THE FOLLOWING CASE LAWS: (I) KALE KHAN MOHAMMAD HANIF V. CIT 50 ITR 1 (SC); & (II) CIT V. KERALA ROADLINES CORPORATION 162 ITR 66 9 (SC) APART FROM STRONGLY RELYING ON THE ASSESSMENT ORDER AS WELL AS LD. CIT (A)S ORDER IN THE CASE OF RESPECTIVE ASSESSEE, THE FOLLOWING ARGUMENTS ARE PUT FORWARD INCLUDING THE REPLY TO TH E APPELLANTS SUBMISSION. I) AS AGAINST THE CONTENTION OF REOPENING ON 29.3. 2004 I.E., AT THE FAG END OF THE LIMITATION DATE IT IS EVIDENT FROM T HE REASONS RECORDED FOR REOPENING BY THE AO THAT AFTER THE COM PLETION OF ORIGINAL ASSESSMENT IN ALL THE THREE CASES, HE WAS IN RECEIPT OF SPECIFIC INFORMATION IN THE FORM OF TAX EVASION PET ITION (TEP) WHEREIN THE ALLEGATION WAS MADE THAT ALL THE THREE ASSESSEES HAVE INTRODUCED BOGUS LOAN IN THEIR BOOKS OF ACCOUNTS DU RING THE AY 1997-98 BY PAYING CASH AND OBTAINING CHEQUES FROM T HE PARTIES AS PER THE LIST MARKED AS EXHIBIT A (PARA 2 OF REASO NS RECORDED). THE AO AFTER PERUSAL OF RESPECTIVE ASSESSEES CASE RECORD FOUND THAT THE ASSESSEE HAS NOT FILED ANY BALANCE SHEET. HE FURTHER OBSERVED THAT FROM THE DETAILS OF INTEREST PAYMENT AS CLAIMED BY THE ASSESSEE DURING THAT PERIOD, THESE PARTIES AS P ER EXHIBIT A ARE APPEARING. TO WHOM INTEREST WAS CREDITED. HAVING ESTABLISHED THE CREDIBILITY OF INFORMATION, HE GRANTED AN OPPORTUNI TY TO THE ASSESSEE BY CALLING FOR DETAILS RELATED TO THE ISSUE VIDE HI S LETTER AS EARLY AS 9.6.2003 U/S 133(6) OF THE ACT. THE ASSESSEES REP LY DATED 1.9.2003 IN RESPONSE TO THIS QUERY SHOWS THAT THE A PPELLANTS REPLY WAS NOT SATISFACTORY (PARA 3 OF REASONS RECORDED). ONCE AGAIN THE AO VIDE LETTER DATED 3.12.2003 ASKED THE ASSESSEE CERTAIN SPECIFIC DETAILS BUT THE SAME WERE NOT SUBM ITTED (PARA 4, 5 OF REASONS RECORDED). THE AO MADE INDEPENDENT INQUIRY BASED ON THE INFORM ATION AND FOUND THAT FIRMS/COMPANIES AS PER EXHIBIT A PERTA IN TO A GROUP KNOWN AS KHANDHAR GROUP OF MUMBAI. IT WAS ALSO A SCERTAINED THAT DURING THE COURSE OF SEARCH AND SEIZURE OPERA TION BY THE ITA NOS. 2382, 2188 & 2371-AHD-2009 27 DEPARTMENT ON THIS GROUP IN 1991, THESE FIRMS/CONCE RNS WERE FOUND TO BE INVOLVED IN HAWALA TRANSACTION I.E., PR OVIDING ACCOMMODATION ENTRIES TO VARIOUS PARTIES IN THE FOR M OF LOAN AND ADVANCES BY ACCEPTING CASH FOR THE RESPECTIVE AMOU NT OF CHEQUES AND CHARGING THEIR COMMISSION FOR SUCH ENTRY (PARA 6 OF REASONS RECORDED). IT WAS ALSO ASCERTAINED FROM THE CASE RECORDS OF SO ME OF SUCH PARTIES THAT TOTAL LOANS AND ADVANCES MADE BY THOSE PARTIES DURING THE COURSE OF AY 1997-98 ARE LESS THAN THE AMOUNT SHOWN BY ALL THREE APPELLANT IN AGGREGATE (EXHIB IT C TO REASO N RECORDED) (PARA 7 OF REASONS RECORDED). THE AO THEREFORE HAD REASO N FOR STRONG BELIEF THAT THE LOAN SHOWN BY THE APPELLANT FROM TH E PARTIES AS PER EXHIBIT A ARE NOT GENUINE AND THE INFORMATION THE REFORE WAS CREDIBLE. THIS BELIEF WAS FURTHER STRENGTHENED WIT H THE FACT THAT INTEREST CREDITED AND CLAIMED BY THE APPELLANT FOR AY 1997-98 WAS NOT PAID BY THE APPELLANT TILL DATE NOT ONLY THE IN TEREST EVEN THE PRINCIPLE AMOUNT WAS NOT PAID TILL THE DATE OF RECO RDING REASON AND INTERESTINGLY NO LEGAL ACTION WAS INITIATED BY ANY OF THE CREDITOR FOR RECOVERY OF PRINCIPAL AND INTEREST (PARA 8 OF REASO NS RECORDED). THE AO ACCEPTED THAT THE ORIGINAL ASSESSMENT RECORD HAS A COPY OF LETTER (DATED 14.3.2000) WHERE IT IS MENTIONED T HAT COPIES OF CONTRA ACCOUNT, CONFIRMATION ETC., WERE FILED BY A LL THE THREE APPELLANT. HOWEVER, AO RECORDED HIS SATISFACTION T HAT THERE IS NOTHING ON RECORD TO SHOW THAT THE GENUINENESS OF T HE TRANSACTION WAS VERIFIED. ON ACCOUNT OF THIS SATISFACTION HE CA ME TO THE CONCLUSION THAT BECAUSE OF NON DISCLOSURE OF PROPE R DETAILS, GENUINENESS OF LOAN TRANSACTIONS REMAINS TO BE UNVE RIFIED WITHIN THE MEANING OF S.68 OF THE ACT RESULTING INTO UNDER ASSESSMENT OF INCOME. HE THEREFORE SPECIFIED THE SUM OF LOAN SO RECEIVED BY EACH APPELLANT INCLUDING THE INTEREST CREDITED THER EON IN EACH INDEPENDENT REASON AS INCOME ESCAPING THE ASSESSMEN T. THIS SUM IN THREE CASES WAS AS FOLLOWS: SL.NO NAME AMOUNT 1 SHRI RASIKLAL S MARDIA RS.11,43,78,302 2 SHRI RAKESH S MARDIA RS. 8,29,81,645 3 SHRI RAJIV S MARDIA RS. 2,63,95,694 (PARA 9 OF REASONS RECORDED) ITA NOS. 2382, 2188 & 2371-AHD-2009 28 FURTHER SUBMISSION ON THIS ISSUE I) AS VERIFIABLE FROM THE ORIGINAL ASSESSMENT CASE RECORDS IN ALL THE THREE CASES THAT THE AO VIDE NOTICES AND QUESTI ONNAIRE (SR.NO.10 OF THE KEY REFERENCER) EXCEPT IN THE CASE OF SHRI RASIKLAL S MARDIA DID NOT ASK FROM OTHER TWO ASSESSEES TO FI LE SUCH CONTRA ACCOUNT, CONFIRMATION, ADDRESSES AND PAN DETAILS. II) IN ALL THE THREE CASE RECORDS EXCEPT THE LETTER DATED 14.3.2000 NO SUCH DETAILS IS AVAILABLE. THE SIGNATURE ON THI S LETTER IS ALSO NOT OF REGULAR AUTHORIZED REPRESENTATIVE AND DIFFERENT IN ALL THE THREE CASES; III) CONSIDERING THE TIME BARRING DATE OF 31.3.2000 AND SUBSEQUENT SHOW CAUSE RELATED TO MAJOR ISSUE INVOLV ED ABOUT CAPITAL GAIN CLEARLY REFLECTS THAT THE AO HAS NOT A PPLIED HIS MIND ON THIS SUBMISSION AND HAS CALLED FOR ANY FURTHER VERIFICATION/EVIDENCES AND SIMPLY OVERLOOKED THE RE PLY. THE ASSESSMENT ORDER DATED 31.3.2000 CAN BE TREATED AS PASSED IN HASTE BY THE AO OVERLOOKING THIS ISSUE. IV) THE APPELLANT IF SO SUBMITTED COPIES OF CONTRA ACCOUNT AND CONFIRMATION WITH ADDRESSES AND PAN OF ALL THESE PA RTIES WITH A SHORT NOTICE FROM THE AO I.E., NOTICE WAS ISSUED TO SUBMIT SUCH DETAIL ONLY IN THE CASE OF SHRI RASIKLAL S MARDIA O N 28.2.2000, HE COULD HAVE DONE THE SAME EXERCISE WHEN GIVEN OPPORT UNITY BEFORE REASSESSMENT BECAUSE BOTH PRINCIPLE AMOUNT AS WELL AS INTEREST THEREON WAS DUE ON THAT DATE ALSO. NO REASON FOR N OT SUBMITTING SUCH DETAIL WAS GIVEN BY THE APPELLANT. THE CIRCUM STANTIAL EVIDENCE SHOWS THAT IN FACT EXCEPT THE LETTER DATED 14.3.2000 APPELLANT HAS NOT SUBMITTED ANY OF SUCH CONFIRMATIO N AND SINCE THIS ISSUE WAS NOT THE MAIN ISSUE OF THE SCRUTINY ASSESS MENT THE AO IN HASTE OVERLOOKED SUCH NON COMPLIANCE. V) THE ORIGINAL ASSESSMENT PROCEEDINGS WERE COMPLET ED ON 31.3.2000 AND INITIAL LETTER TO INITIATE REASSESSME NT PROCEEDINGS WERE IN THE MONTH OF JUNE, 2003. ON BOTH THE DATES THE APPELLANT CASE FILE WAS WITH THE ONE ASSESSING OFFICER I.E., THE ACIT, CENTRAL CIRCLE 2, AHMEDABAD. WHEN THE APPELLANT ASKED FOR T HE XEROX FROM THE CASE RECORD, IT WAS NOT INSISTED UPON AO TO GIV E COPIES OF SUCH CONFIRMATION SINCE NO MATERIAL TIME LAPSED BETWEEN 31.3.2000 AND JUNE, 2003. IN FACT, NO SUCH DETAILS WERE FILED BY THE APPELLANT AND THIS WAS KNOWN TO THE APPELLANT AND, THEREFORE, HE REMAINED ITA NOS. 2382, 2188 & 2371-AHD-2009 29 CONTENDED WITH THE LETTER DATED 14.3.2000. IT IS O NLY IN THE MONTH OF JUNE, 2006, THE CASES WERE DECENTRALIZED AND TRANSF ER OF FILES TOOK PLACE. VI) IT IS THEREFORE ON ACCOUNT OF FAILURE OF THE PA RT OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACT BEFORE THE AO ON THIS ISSUE, THE INCOME HAS ESCAPED THE ASSESSMENT. RELIANCE IS PLACED ON THE FOLLOWING CASE LAWS: (I) SRI KRISHNA PVT. LTD ETC V. ITO & ORS. 135 CT R (SC) 75 (II) PHOOL CHAND BAJRANG LAL V. ITO 203 ITR 456 (SC ) (III) ESS KAY ENGINEERING CO. (P) LTD V. C IT 247 I TR 818 (SC) (IV) CIT V. A.RAMAN & CO. 67 ITR 11 (SC) (V) INDI-ADEN SALT MFG. & TRADING CO. (P) LTD V. CI T 159 ITR 624 (SC) (VI) ITO V. PURUSHOTTAM DAS BANGUR & ANR. 224 ITR 3 62 (SC) (VII) KALYANJI MAVJI & CO. V. CIT 102 ITR 287 (SC) (VIII) V.JAGANMOHAN RAO & ORS V. CIT 75 ITR 373 (SC ) (IX) DISHMAN PHARMACEUTICALS AND CHEMICALS LTD V. DCIT (OSD) SPECIAL CIVIL APPLICATION NOL15304 OF 2010 UNREPORTED CASE OF GUJARAT HIGH COURT (COPY SUPPLIED) (X) AGR INVESTMENT LTD V. ACIT 333 ITR 146 (DEL) (XI) DALMIA (P) LTD V. CIT 202 TAXMAN 372 (DEL) (XII) PRECOT MILLS LTD V. CIT 273 ITR 347 (MAD) (XIII) REVATHY C.P.EQUIPMENTS LTD V. DCIT & ANR. 24 1 ITR 856 (MAD) (XIV) PIAGGIO VEHICLES (P) LTD V. DCIT & ANR. 290 ITR 377 (BOM) (XV) SWARAJ ENGINE LTD V. ACIT & ANR. 260 ITR 202 ( P&H) (XVI) A.L.A FIRM V. CIT 102 ITR 622 (MAD) 6.3. THE LEARNED DR FILED DETAILED PAPER BOOK ALONG WITH WRITTEN SUBMISSION WHICH CONTAINED THE ORDER SHEETS, LETTER S ISSUED TO THE ASSESSEE AND THE REPLY ETC. WHICH ARE DOCUMENTS FIL ED AT THE ORIGINAL ASSESSMENT STAGE AND SUBMITTED ALONG WITH THE ORIGI NAL RETURN OF INCOME. NO BALANCE SHEET WAS FILED. THOUGH THE REPLY OF THE ASSESSEE DATED 14- 3-2000 FILED AT THE ORIGINAL ASSESSMENT STAGE IS AV AILABLE ON RECORD BUT ENCLOSED DOCUMENTS ARE NOT AVAILABLE WITH THIS REPL Y AND IN OTHER CASE EVEN COPIES OF THE ACCOUNTS CALLED FOR BY THE AO AR E NOT AVAILABLE. IN THE ITA NOS. 2382, 2188 & 2371-AHD-2009 30 ORIGINAL ASSESSMENT ORDER THE AO DID NOT DISCUSS AB OUT THE GENUINENESS OF THE CREDITS. THE AO AFTER MAKING COMPLETE ENQUIR IES AT MUMBAI FORMED HIS OPINION FOR INITIATION OF THE REASSESSME NT PROCEEDINGS BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE TRULY AND CORRECTLY ALL NECESSARY FACTS FOR ASSESSMENT. EVEN, THE ASSESSEE WITHDREW THE PETITION BEFORE THE HON'BLE HIGH COURT . THE ASSESSEE FAILED TO PROVE GENUINE CREDITS IN THE MATTER. THEREFORE, ADDITION WAS RIGHTLY MADE. LD. DR RELIED ON ORDER OF SC IN CASE OF SRI K RISHNA P. LTD., 135 CTR 75. IN CONCLUSION, IT WAS PLEADED THAT THE STAN D OF THE AO HAS BEEN SUSTAINED BY THE LD. CIT (A) WITH JUDICIOUS BACKING WHICH REQUIRES NO INTERVENTION BY THIS BENCH AT THIS JUNCTURE. 6.4 THE LEARNED AR SUBMITTED THAT THE ORDER SHEETS ARE PART OF THE REVENUE RECORD. THE ASSESSEE DISCLOSED ALL THE RELE VANT FACTS BEFORE THE AO AT THE ORIGINAL ASSESSMENT STAGE. THE REPLY OF T HE ASSESSEE IS AVAILABLE ON RECORD OF THE AO; THEREFORE, ALL ENCLO SED DOCUMENTS SHOULD BE PART OF RECORD OF THE AO. IT IS NOT POSSIBLE THA T THE ORIGINAL ASSESSMENT IS COMPLETED WITHOUT FLING OF THE CONFIRMATIONS ETC . AND THE BALANCE SHEET. WITHOUT FILING OF THE BALANCE SHEET IT IS NO T POSSIBLE FOR AO TO VERIFY THE DEPOSIT OF INTEREST WHICH IS PART OF THE RETURN FILED BY THE ASSESSEE. NO MATERIAL OR EVIDENCE WAS SUPPLIED TO THE ASSESSE E WHICH COULD BE INCRIMINATING AGAINST THE ASSESSEE AND NO CROSS EXA MINATION HAS BEEN ALLOWED TO THE ASSESSEE TO THE STATEMENT OF SUCH PE RSONS WHO MIGHT HAVE GIVEN STATEMENT AGAINST THE ASSESSEE. NON PAYM ENT OF LOAN OR INTEREST IS NOT A VALID GROUND TO REOPEN THE ASSESS MENT OR TO PRESUME ESCAPEMENT OF INCOME. NOTHING IS STATED IN THE REAS ONS FOR REOPENING OF THE ASSESSMENT THAT NO CONFIRMATIONS OR REQUIRED DE TAILS WERE FILED AT THE ORIGINAL ASSESSMENT STAGE AND NOTHING IS MENTIONED IN THE REASONS THAT ITA NOS. 2382, 2188 & 2371-AHD-2009 31 THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL NECESSARY FACTS FOR ASSESSMENT AT THE ORI GINAL ASSESSMENT STAGE. 7. WE HAVE DULY CONSIDERED THE RIVAL SUBMISSIONS, D ILIGENTLY PERUSED THE RELEVANT CASE RECORDS, WRITTEN SUBMISSIONS FILE D BY BOTH PARTIES WITH DOCUMENTS AND ALSO VARIOUS JUDICIAL PRONOUNCEMENTS ON WHICH EITHER PARTIES HAVE PLEDGED THEIR UNSTINTED FAITH. 7.1. THE MAIN THRUST OF THE ASSESSEE IS ON THE ISSU E OF RE-ASSESSMENT PROCEEDINGS WHICH, ACCORDING TO THE ASSESSEE, WERE BAD IN LAW A ND WITH NO PROPER JURISDICTION. SECTION 147 OF THE ACT PRO VIDES AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SEC TION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. [ PROVIDED FURTHER THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVI NG MATTERS WHICH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERE NCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSME NT.] EXPLANATION 1 : PRODUCTION BEFORE THE ASSESSING OFF ICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEA NING OF THE FOREGOING PROVISO. EXPLANATION 2 : FOR THE PURPOSES OF THIS SECTION, T HE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY :- (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INC OME OF ANY ITA NOS. 2382, 2188 & 2371-AHD-2009 32 OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE U NDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM A MOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. [EXPLANATION 3. FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSES S OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAP ED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBS EQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, N OTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLU DED IN THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 1 48 .] 7.2 THE REASONS RECORDED BY THE AO FOR REOPENING RE ADS AS UNDER: 1. THE ASSESSMENT IN THIS CASE WAS SCRUTINIZED U/S 143(3) OF THE ACT ON 31.3.2000 AND THE ASSESSMENT WAS COMPLET ED ON A TOTAL INCOME OF RS.82,810/- AS AGAINST THE ORIGINAL RETURNED INCOME OF RS.3,42,112/- AND THE REVISED RETURNED IN COME OF RS.48,110/-. THE SOURCES OF INCOME OF THE ASSESSEE ARE SALARY, INTEREST AND REMUNERATION FROM PARTNERSHIP FIRM KNO WN AS R.S.BROTHERS, CAPITAL GAIN AND OTHER SOURCES. 2. INFORMATION WAS RECEIVED AFTER THE COMPLETION O F THE ASSESSMENT THAT THE ASSESSEE AND HIS TWO BROTHERS N AMELY SHRI RAKESH S MARDIA AND RAJIV S MARDIA HAVE INTRODUCED BOGUS LOANS IN THEIR BOOKS OF ACCOUNT DURING THE ACCOUNTI NG YEAR ITA NOS. 2382, 2188 & 2371-AHD-2009 33 RELEVANT TO AY 1997-98 BY PAYING CASH AND OBTAINING CHEQUES FROM THE PARTIES, AS PER LIST ANNEXED MARKED EXHIBI T-A. INTEREST CREDITED BY THE ASSESSEE FOR THE RELEVANT YEAR IS A LSO PROVIDED IN THE EXHIBIT-A. 3. ON GOING THROUGH THE RETURN OF INCOME FOR THE A Y 1997-98, IT IS SEEN THAT THE ASSESSEE HAS NOT FILED ANY BALANCE SHEET. HOWEVER, ON GOING THROUGH THE LIST OF INTEREST PAY MENT IT IS SEEN THAT THE ASSESSEE HAS CREDITED INTEREST TO THE PART IES APPEARING IN THE EXHIBIT-A REFERRED ABOVE. ON THE ABOVE BAC KGROUND VIDE THIS OFFICE LETTER DTD.9/6/03 THE ASSESSEE WAS ASKE D TO PRODUCE THE BOOKS OF ACCOUNT FOR THE AY 1997-98 U/S 133(6) TO VERIFY THE LOAN TRANSACTION AS THE ASSESSEE HAD NOT FILED ANY BALANCE SHEET ALONG WITH THE RETURN OF INCOME. IN REPLY TO THE A BOVE LETTER, THE ASSESSEE HAS STATED VIDE LETTER DTD. 1/9/2003 AS UN DER: AS EARLIER INFORMED TO YOUR HONOUR, I HAVE NOT MAI NTAINED/LOST OLD RECORDS OF ASSESSMENT SINCE MY ASSESSMENT WAS COMPLETED UNDER SCRUTINY ASSESSMENT PROVISIONS U/S 143(3) AND ALSO REASSESSMENT PROCEEDINGS U/S 147 WAS ALSO COMPLETED IN A WRIT PETITION BEFORE THE HONBLE GUJ ARAT HIGH COURT. LOOKING TO THE CERTIFIED COPIES OF ASSESSME NT RECORDS MADE AVAILABLE BY YOUR GOOD OFFICE, WE HAVE FOUND T HAT ALL NECESSARY DETAILS OF SUNDRY CREDITORS ARE MADE AVAI LABLE TO YOUR GOOD OFFICE DURING THE ASSESSMENT PROCEEDINGS AND ALONG WITH MY RETURN OF INCOME; I HUMBLY AND RESPECTFULL Y REQUEST YOUR GOOD HONOUR TO KINDLY LOOK INTO THE SAME AND T REAT THIS AS THE DETAILS IN COMPLIANCE WITH YOUR LETTER U/S 133( 6) AND OBLIGE. 4. AGAIN VIDE PARA 3 OF THIS OFFICE LETTER DTD. 3 /12/2003 THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS AS UNDER: YOU ARE ALSO REQUESTED TO SUBMIT THE DETAILS OF BA NK ACCOUNT THROUGH WHICH YOU RECEIVED THESE DEPOSITS DURING TH E A.Y 1997-98. YOU ARE ALSO REQUESTED TO FURNISH THE DE TAILS OF BANK A/C THROUGH WHICH INTEREST HAS BEEN PAID TO THE SUN DRY CREDITORS FOR THE ACCOUNTING YEAR RELEVANT TO A.Y. 1997-98 AN D SUBSEQUENT YEARS. YOU ARE ALSO REQUESTED TO CONFIR M WHETHER THE LOAN RECEIVED IS STILL OUTSTANDING OR HAS BEEN PAID. IN CASE THE SAME HAS BEEN PAID, THE DETAILS OF PAYMENTS VIZ ., CHEQUE NO. DATE OF ISSUE, AMOUNT AND THE BANK A/C FROM WHI CH THE CHEQUE HAS BEEN CLEARED SHOULD BE MENTIONED. ITA NOS. 2382, 2188 & 2371-AHD-2009 34 5. THE ASSESSEE HAS NOT SUBMITTED THE ABOVE INFORM ATION SO FAR. HOWEVER, FROM THE VERIFICATION OF THE RETURNS FILED BY THE ASSESSEE FOR THE A.Y 1997-98 AND SUBSEQUENT YEAR, IT IS NOTI CED THAT THE ASSESSEE HAS NOT PAID ANY INTEREST TO THE PARTIES M ENTIONED IN EXHIBIT A REFERRED ABOVE. FURTHER, THOUGH THE INTE REST WAS PROVIDED IN THE A.Y 1997-98 AND CLAIMED AS EXPENDITURE THE S AME WAS ALSO NOT PAID TO THE ALLEGED CREDITORS; 6. BASED ON THE INFORMATION, INQUIRIES WERE MADE A T MUMBAI AND IT IS ASCERTAINED THAT THE FIRMS/COMPANIES AS PER EXHI BIT A PERTAINED TO A GROUP KNOWN AS KHANDAR GROUP OF MUMBAI. IN TH E ABOVE GROUP SEARCH AND SEIZURE OPERATION WAS CARRIED OUT IN THE YEAR 1991 AND THESE FIRMS WERE HELD TO BE HAWALA OPERATORS. DURI NG THE ASSESSMENT YEAR 1997-98 ALSO THESE FIRMS WERE TREAT ED AS SUCH. TO CITE AN EXAMPLE COPIES OF ASSESSMENT ORDER FOR A .Y 1997-98 IN THE FOLLOWING CASES ARE ANNEXED AS EXHIBIT B-1 TOB- 6. 1) RAJ ENTERPRISE 2) SHEKHAKHA & CO., 3) PRABHAVEE 4) RAJ ELECTRICALS 5) HPS INTERNATIONAL 6) RAY ENGG. 7. IT IS NOTICED HERE THAT THE LOANS AND ADVANCES MADE BY THESE PARTIES DURING THE ACCOUNTING YEAR RELEVANT TO A.Y 1997-98 IS LESS THAN THE CUMULATIVE TOTAL OF THE LOANS GIVEN T O THE ASSESSEE AND HIS TWO BROTHERS. A STATEMENT SHOWING THE LOAN S AND ADVANCES AS PER BALANCE SHEET OF THE ABOVE SIX FIRM S AND THE ADVANCES ALLEGED TO HAVE BEEN GIVEN TO THE ASSESSEE AND HIS TWO BROTHERS IS ANNEXED MARKED EXHIBIT C. 8. FROM THE PERUSAL OF THE ASSESSMENT ORDER AND TH E POSITION OF LOANS AND ADVANCES AS PER THE BALANCE SHEET OF THES E FIRMS, THERE IS A REASON FOR STRONG BELIEF THAT THE LOANS SHOWN BY THE ASSESSEE FROM THE PARTIES AS PER EXHIBIT A ARE NOT GENUINE. THIS BELIEF IS FURTHER STRENGTHENED FROM THE FACT THAT T HOUGH INTEREST WAS CREDITED IN THEIR ACCOUNTS FOR THE RELEVANT ASS ESSMENT YEAR 1997-98 THE SAME WAS NOT PAID TILL DATE. THE ASSES SEE HAS NOT RETURNED THE PRINCIPAL LOAN AMOUNT TILL DATE. NO L EGAL ACTION APPEARS TO HAVE TAKEN BY THE LOAN CREDITORS SO FAR IN SPITE OF NON- PAYMENT OF INTEREST AS WELL AS PRINCIPAL. FURTHER, THIS BEING A LOAN TRANSACTION THE POSSIBILITY OF RECOVERY BY THE CREDITORS IS ITA NOS. 2382, 2188 & 2371-AHD-2009 35 DOUBTFUL DUE TO LIMITATION ACT. IT THEREFORE, BECO MES CRYSTAL CLEAR THAT THE ALLEGED LOANS ARE MANAGED WITH HIS OWN MON EY. 9. NOTWITHSTANDING THE FACT THAT THE ASSESSEE MIGH T HAVE FILED CONFIRMATIONS WITH PA NO. AT THE RELEVANT TIME THER E IS NOTHING ON RECORD TO SHOW THAT THE GENUINENESS OF THE TRANSACT ION WAS VERIFIED. THE FACTS REMAIN THAT THE ASSESSEE DID N OT FILE BALANCE SHEET, THEREFORE IT CANNOT BE VERIFIED FROM WHOM AS SESSEE RECEIVED LOANS AND IN RESPECT OF WHICH PERSONS, THE ASSESSEE FILED CONFIRMATION LETTER. THUS BECAUSE OF NON DIS CLOSURE OF PROPER DETAILS GENUINENESS OF LOANS TRANSACTION REM AIN TO BE UNVERIFIED WITHIN THE MEANING OF SECTION 68 OF THE I.T. ACT, 1961 AND THIS RESULTED IN UNDER-ASSESSMENT OF INCOME. T HE TOTAL AMOUNT OF LOAN INTRODUCED BY THE ASSESSEE IN RESPEC T OF THE ABOVE PARTY COMES TO RS.10,40,00,000/-. THE INTERE ST CLAIMED AND ALLOWED DURING THE ASSESSMENT YEAR 1997-98 COME S TO RS.1,03,78,302/-. THE TOTAL QUANTUM OF INCOME ESCA PED COMES TO RS.11,43,78,302/-. I HAVE, THEREFORE, REASON TO BELIEVE THAT THE INCOM E ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. ISSUE NOTICE U/S 14 8 OF THE ACT R.W.S. 147 OF THE ACT . 7.3 AS CONCEDED BY THE AO, THE ORIGINAL ASSESSMENT IN THE ASSESSEES CASE WAS CONCLUDED ON 31.3.2000 AFTER DULY SCRUTINI ZING ALL RELEVANT FACTS. AT THE ORIGINAL ASSESSMENT STAGE, THE AO I SSUED QUERY LETTER DATED 28/2/2000 (P.B 2) CALLING FOR CONFIRMATION FR OM DEPOSITORS INCLUDING BANK STATEMENT, ADDRESSES, PAN NOS. AND CIRCLE/WARD WHERE DEPOSITORS HAVE BEEN ASSESSED. THE ASSESSEE VIDE REPLY DATED 14.3.2000 (PB 7) ENCLOSED STATEMENT OF ACCOUNTS OF DEPOSITORS, THEIR CONFIRMATION ADDRESS, PANO. /GIR NO. ALONG WITH CIRCLE/WARD WHER E THE DEPOSITORS WERE ASSESSED TO TAX. THE LD. D R DID NOT DISPUTE DURING THE COURSE OF ARGUMENT THAT SUCH QUERY LETTER WAS ISSUED BY THE A O AT ORIGINAL ASSESSMENT STAGE AND REPLY FILED BY THE ASSESSEE AT THE ORIGINAL ASSESSMENT STAGE. THE LD. DR PRODUCED THE RECORD D URING THE COURSE OF HEARING AND STATED THAT THE ENCLOSURES WITH REPLY DATED 14.03.2000 ARE ITA NOS. 2382, 2188 & 2371-AHD-2009 36 NOT AVAILABLE ON RECORD. THE COUNSEL FOR THE ASSES SEE REFERRED TO THE REPLY DATED 14.3.2000 AND TOP OF IT WAS STAPLED TO SHOW THAT ENCLOSED DOCUMENTS WERE FILED AT THE ORIGINAL ASSESSMENT STA GE. THE SUBMISSION OF THE LD. A R COULD NOT BE DISPUTED BY THE LD. D.R . WE MAY NOTE THAT QUERY LETTER AND REPLY OF THE ASSESSEE ABOVE ARE AD MITTEDLY PART OF THE RECORD OF THE ORIGINAL ASSESSMENT RECORD AND AS SU CH IT IS HIGHLY UNBELIEVABLE THAT NO CONFIRMATIONS AND THE REQUIRED DETAILS WERE FILED AT THE ORIGINAL ASSESSMENT STAGE. THE BALANCE SHEETS WERE ALSO FILED ON THE RECORD OF THE AO AND THE AO AFTER VERIFYING AND SCRUTINIZING THE RECORD ACCEPTED THE CLAIM OF THE ASSESSEE OF RECEIV ING THE GENUINE LOAN FROM THE SAME DEPOSITORS UNDER REFERENCE AND PASSED THE ORDER U/S 143(3) OF THE ACT ON 31.3.2000. THE RECORD OF ORIGI NAL ASSESSMENT IS IN POSSESSION AND CONTROL OF AO AND REVENUE AUTHORITIE S. IF ENCLOSED DOCUMENTS FILED WITH REPLY OF ASSESSEE DATED 14.03. 2000 ARE DETACHED WITH SOME ULTERIOR MOTIVES TO JUSTIFY INITIATION OF REASSESSMENT PROCEEDINGS, IT IS FOR THE AO TO EXPLAIN THE SAME, BUT NO EXPLANATION IS GIVEN BY THE LD. D.R. DURING THE COURSE OF ARGUMENT S. IT IS THEREFORE CLEAR THAT THE ASSESSEE DISCLOSED ALL THE MATERIALS AND E VIDENCE AT THE ORIGINAL ASSESSMENT STAGE NECESSARY FOR THE COMPLETION OF RE GULAR ASSESSMENT. THE ASSESSEE THUS DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS AND EVIDENCES AT THE ORIGINAL ASSESSMENT STAGE AND THER E WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AT THE ASSESSMENT STAGE. 7.4 THE RECORDS PRODUCED BEFORE US CLEARLY PROVE TH AT THE AO AT THE ORIGINAL ASSESSMENT STAGE VERIFIED ALL THE FACTS AN D MATERIALS ON RECORD AND ACCEPTED THE CLAIM OF THE ASSESSEE FOR GENUINE CREDITS. THEREFORE, IT WAS NOT COMPETENT ON THE PART OF SUBSEQUENT AO TO M AKE ALLEGATION AGAINST THE ASSESSEE WITHOUT ANY REASONS. THE INFOR MATION IN KANDAHAR ITA NOS. 2382, 2188 & 2371-AHD-2009 37 CASE WAS RECEIVED AFTER COMPLETION OF THE ORIGINAL ASSESSMENT AND NOTHING IS BROUGHT ON RECORD IF THERE WAS ANY NEXUS BETWEEN KANDAHAR GROUP AND THE ASSESSEE. FOR DECIDING THE ISSUE U/S 68 OF THE IT ACT WHAT IS RELEVANT IS THE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS WHICH WAS ALREADY V ERIFIED AND EXAMINED BY THE AO AT THE ORIGINAL ASSESSMENT STAGE ON FILING OF DETAILS, CONFIRMATION AND EVIDENCES BY THE ASSESSEE AT THE O RIGINAL ASSESSMENT STAGE. THEREFORE, THE AO HAS NO RIGHT TO VERIFY AGA IN THE CONCLUDED RETURN U/S 147/ 143(3) OF THE IT ACT. THE HON'BLE SU PREME COURT IN THE CASE OF SUN ENGINEERING WORKS PVT. LTD, 198 ITR 297 HELD THAT 'THE JURISDICTION OF THE ITO U/S 147 IS CONFINED ONLY TO SUCH INCOME WHICH HAS ESCAPED TAX OR WHICH HAS BEEN UNDER-ASSES SED AND IT IS NOT EXTENDED TO REVISING, REOPENING OR RECONSIDERIN G THE WHOLE ASSESSMENT OR PERMITTING THE ASSESSEE TO RE-AGITATE QUESTION WHICH HAD BEEN DECIDED IN THE ORIGINAL ASSESSMENT PROCEED INGS.' NO EVIDENCE OR MATERIAL HAS BEEN PRODUCED IF NAME OF T HE ASSESSEE FIGURED IN ANY HAWALA TRANSACTION. IN THIS CASE, THERE IS N OTHING IN THE REASONS FOR REOPENING OF THE ASSESSMENT TO SHOW THAT NO CONFIRM ATIONS OF THE CREDITORS OR DETAILS NECESSARY FOR ASSESSMENT HAVE BEEN FILED AT THE ORIGINAL ASSESSMENT STAGE. NOTHING IS STATED IN THE REASONS FOR REOPENING THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSES SEE TO DISCLOSE ALL NECESSARY FACTS FOR ASSESSMENT. THE ORIGINAL ASSESS MENT WAS COMPLETED U/S 143(3) ON 31-03-2000 ACCEPTING THE CLAI M OF GENUINE CREDITS U/S 68 OF THE IT ACT. REOPENING IS, THEREFORE, MADE U/S 148 OF THE IT ACT ON 29-03-2004 I.E. AFTER EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THERE WAS NO FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT IN THE ASSESSMENT YEAR UNDER APPEAL, THEREFORE, PROVIS O OF SECTION 147 OF THE IT ACT CLEARLY APPLY IN THE CASE OF THE ASSESSE E AGAINST THE REVENUE. ITA NOS. 2382, 2188 & 2371-AHD-2009 38 ACCORDING TO THE AO, HE WAS IN RECEIPT OF INFORMATI ON AFTER COMPLETION OF THE ASSESSMENT THAT THE ASSESSEE AND HIS TWO BROTHE RS HAVE INTRODUCED BOGUS LOANS IN THEIR BOOKS OF ACCOUNT DURING THE AC COUNTING YEAR RELEVANT TO THE AY UNDER DISPUTE BY PAYING CASH AND OBTAINING CHEQUES FROM THE PARTIES CITED SUPRA AND ALSO THE INTEREST CREDITED BY THE ASSESSEE FOR THE RELEVANT YEAR AND SO ON AND SO FOR TH. TO ASCERTAIN THE VERACITY OF SUCH INFORMATION, THE AO, ON GOING THRO UGH THE RETURN OF INCOME OF THE APPELLANT, HAD NOTICED THAT THE APPEL LANT HAD NOT FILED ANY BALANCE SHEET, BUT, ON THE LIST OF INTEREST PAYMENT , IT WAS SEEN THAT THE APPELLANT HAD CREDITED INTEREST TO THE PARTIES APPE ARING IN THE SAID LIST. BASED ON THE ABOVE INFORMATION, THE AO HAD RESORTED TO MAKE INQUIRES AT MUMBAI AND APPEARS TO HAVE ASCERTAINED THAT THE FIRMS/COMPANIES PERTAINED TO A GROUP KNOWN AS KHANDAR GROUP WHICH WAS SUBJECTED TO SEARCH AND SEIZURE OPERATION WAY BACK IN THE YEAR 1 991 AND, ACCORDINGLY, THOSE FIRMS WERE BRANDED AS HAWALA OPERATORS . IT WAS, FURTHER, NOTICED THAT THE LOANS AND ADVANCES MADE B Y THESE PARTIES DURING THE ACCOUNTING YEAR RELEVANT TO THE AY UNDER CHALLENGE WAS LESS THAN THE CUMULATIVE TOTAL OF THE LOANS GIVEN TO THE APPELLANT AND TO HIS TWO BROTHERS. ON PERUSAL OF THE ASSESSMENT ORDERS, THE POSITION OF LOANS AND ADVANCES AS PER THE BALANCE SHEETS OF THOSE FIR MS, THE AO HAD A REASON FOR STRONG BELIEF THAT THE LOANS SHOWN BY TH E APPELLANT FROM THE ABOVE PARTIES WERE NOT GENUINE AND FOR THE REASONS RECORDED FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT, THE AO HAD REASON TO BELIEF THAT THE INCOME ASSESSABLE TO TAX HAD ESCAPE D ASSESSMENT. 7.5 THE REASONING OF THE AO HAS, HOWEVER, BEEN HOTL Y CONTESTED BY THE ASSESSEE [ AT THE COST OF REPETITION, MAINLY FOR APPRECIATION OF RELEVANT FACTS ] THAT ITA NOS. 2382, 2188 & 2371-AHD-2009 39 (I) THERE WAS NO SPECIFIC INFORMATION WITH THE AO FOR T HE REOPENING OF THE COMPLETED ASSESSMENT AND HE HAD TAKEN RECOUR SE OF S.133(6) AND INQUIRIES WERE MADE AT MUMBAI. IN OTH ER WORDS, THE AO WAS PROBING INTO THE MATTER FOR ASSUMING THE JURISDICTION OF REASSESSMENT; (II) THAT THE AO DID NOT HAVE ANY AUTHENTIC EVIDENCE OF ADMISSION OR THE ALLEGATION FOR THE INFORMATION RECEIVED OR O THERWISE THE AO WOULD HAVE SPECIFICALLY STATED IN THE REASONS RE CORDED, BUT, HE HAD NOT STATED THAT WHAT WAS THE SPECIFIC INFORM ATION AND FROM WHOM HAD BEEN RECEIVED AND IN WHICH PROCEEDIN GS IT HAS BEEN RECEIVED; (III) THAT THE INFORMATION GATHERED BY THE AO WAS VERY O LD AND CANNOT BE RELEVANT AS THE PROCEEDINGS U/S 132 OF TH E ACT WERE CONDUCTED DURING 1991 WHEREAS THE ASSESSMENT YEAR UNDER CONSIDERATION IS OF THE AY 1997-98 AND NO MAN CAN B E A HAWALA OPERATOR FOR EVER, IN PARTICULAR, WHEN THERE WERE P ROCEEDINGS U/S 132 OF THE ACT; THAT IT WAS ONLY ASSUMPTION OF THE DEPARTMENT FOR HAWALA OPERATOR ON THE BASIS OF PROCEEDINGS U/S 132 OF THE ACT INITIATED DURING THE YEAR 1991; (IV) THAT THE OBSERVATION OF THE AO THAT THE NAME OF T HE APPELLANT WAS NOT FOUND IN THE BALANCE SHEET OF CREDITOR CANN OT BE A VALID REASON TO PROCEED AGAINST THE APPELLANT AS THE APP ELLANT CANNOT HAVE CONTROL OVER THE METHOD OF MAINTAINING THEIR B OOKS OF ACCOUNT; THAT IT WAS POSSIBLE THAT THEY MIGHT HAVE NET OUT THEIR LOANS TAKEN AND THE LOANS ADVANCED OR FOR ANY OTHER REASONS, THEY HAVE NOT MENTIONED IN THEIR BALANCE SHEETS; (V) THAT THE NOTICE OF THE TRO U/S 226(3) OF THE ACT A LONG WITH THE LIST SHOWING THE NAMES OF THE LENDERS, DATES AND AM OUNTS GIVEN BY THE CREDITORS CONFIRMS THAT THE LENDER HAD ADVAN CED THE AMOUNTS AND IT WAS ON THE RECORD OF THE DEPARTMENT AND, THEREFORE, THE REASONS RECORDED BY THE AO WAS AGAIN ST THE FACTS OF THE CASE; (VI) THAT THE AO HAD UNAMBIGUOUSLY CONCEDED THAT THE AP PELLANT MIGHT HAVE FILED CONFIRMATION WITH PANS AT THE RELE VANT TIME, BUT, THERE WAS NOTHING ON RECORD THAT THE GENUINENE SS OF THE TRANSACTION WAS VERIFIED; ITA NOS. 2382, 2188 & 2371-AHD-2009 40 (VII) THAT NO INCRIMINATING DOCUMENTS DURING THE PROCEED INGS U/S 132 OF THE ACT AT THE APPELLANTS PREMISES ON 9.1.1997 WERE FOUND AS THOSE LOANS HAVE BEEN TAKEN BEFORE THE SEARCH DATE; THAT NO INCRIMINATING DOCUMENTS/STATEMENTS/ADMISSION DURING ANY PROCEEDINGS AGAINST THE LENDERS WERE FOUND AFTER TH E DATE OF THE GRANTING LOANS TO THE APPELLANT, BUT, ONLY ON THE B ASIS OF THE PROCEEDINGS U/S 132 OF THE ACT, THE REVENUE HAS BEE N TREATING THE SAID LOAN AS NON-GENUINE AND, THUS, IT WAS ONLY SUSPICION OF THE AO BUT, NOT A REASONED BELIEF OF THE AO; 7.6 WE FIND THERE IS STRONG FORCE AND REASONABLENES S IN THE ARGUMENT OF THE APPELLANT THAT THE ORIGINAL ASSESSMENT HAD, IN FACT, BEEN CONCLUDED AFTER SCRUTINIZING VARIOUS DETAILS FURNISHED BY THE APPELLANT WHICH HAS FAIRLY BEEN CONCEDED BY THE AO HIMSELF. FURTHERMOR E, THE AO IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT AT PA RA 9 PROCLAIMED THAT 9. NOTWITHSTANDING THE FACT THAT THE ASSESSEE MIGHT HAVE FILED CONFIRMATIONS WITH PA NO. AT THE RELEVANT TIME, THE RE IS NOTHING ON RECORD TO SHOW THAT THE GENUINENESS OF THE TRANSACTION WAS VERIFIED THIS AFFIRMATION OF THE AO GOES TO PROVE UNAMBIGUOUSLY T HAT THE APPELLANT HAS FURNISHED THE REQUIRED DETAILS, THE REVENUE FOR OBV IOUS REASON ALLEGED THAT AO AT ORIGINAL ASSESSMENT STAGE HAD FAILED OR RATHER OVERLOOKED TO VERIFY THE GENUINENESS OR OTHERWISE OF THE TRANSACT ION AT THAT RELEVANT TIME, BUT, NOW CONVENIENTLY TRYING TO PLACE THE ONU S AT THE APPELLANTS DOORSTEP WHICH IS QUITE CONTRARY TO ETHICS, WHICH A LLEGATION IS ALSO CONTRARY TO RECORDS. 7.7 FURTHER, WE WOULD LIKE TO REITERATE THAT EVEN T HE PROVISIONS OF S. 147 OF THE ACT CANNOT BE RESORTED TO IN THE INSTANT CAS E. TO ILLUSTRATE FURTHER, WE ARE INCLINED TO EXTRACT THE RELEVANT PORTION OF THE PROVISO TO SECTION 147 SECTION AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER ITA NOS. 2382, 2188 & 2371-AHD-2009 41 THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SEC TION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR THUS, THE PROVISIO OF S. 147 OF THE ACT MAKE IT ABU NDANTLY CLEAR THAT NO ACTION SHALL BE TAKEN AFTER THE EXPIRY OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR WHERE AN ASSESSMENT HAS BE EN CONCLUDED U/S 143(3) OF THE ACT UNLESS ANY INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 AND SO ON. IN THE INSTANT CASE, T HE ASSESSMENT HAS SINCE BEEN CONCLUDED BY THE AO U/S 143(3) OF THE AC T AFTER SCRUTINIZING THE PARTICULARS FURNISHED BY THE ASSESSEE AT THAT R ELEVANT PERIOD. AS RIGHTLY POINTED OUT BY THE APPELLANT, THE AO HAD NO SPECIFIC INFORMATION FOR REOPENING OF THE ASSESSMENT CONCLUDED U/S 143(3 ) OF THE ACT. 7.8 IT IS MORE RELEVANT TO HIGHLIGHT THE VERY ADMIS SION OF THE AO IN THE REASONS RECORDED THAT (QUOTE) ..THERE IS NOTHING ON RECORD TO SHOW THAT THE GENUINENESS OF THE TRANSACTION WAS VERIFIED(U NQUOTE) . AS RIGHTLY POINTED OUT BY THE ASSESSEE, THE AO DID NOT HAVE ANY AUTHENTIC EVIDENCE OF ADMISSION OR THE ALLEGATION FOR THE INFORMATION RECEIVED OR OTHERWISE THE AO WOULD HAVE EXPRESSLY MENTIONED IN HIS REASON S RECORDED . THESE REVELATIONS AMPLY PROVE THAT THERE WAS NO DEFAULT O N THE PART OF THE ASSESSEE, BUT, THE ONUS RESTED ON THE LAP OF THE RE VENUE. THEREFORE, THE ASSESSEE CANNOT BE SUBJECTED TO PENALIZATION FOR TH E LAPSE ON THE PART OF THE REVENUE FOR NON-VERIFICATION OF GENUINENESS OR OTHERWISE OF THE LOANS AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDING S AS ALLEGED NOW. ITA NOS. 2382, 2188 & 2371-AHD-2009 42 7.9 AT THIS JUNCTURE, WE RECALL THE OBSERVATIONS OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KRISHNA ME TAL INDUSTRIES V. H.M. ALGOTAR REPORTED IN (1997) 225 ITR 853 (GUJ) WHEREI N IT HAS BEEN RULED : THE PROVISO TO SECTION 147 LAYS DOWN THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL B E TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A R ETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 142(1) OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL M ATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. THE IMPUGNED NOTICE DOES NOT STATE THAT THE ASSESSEE HA D NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. THE CO NCERNED OFFICER HAS NOT RECORDED ANY SATISFACTION TO THAT E FFECT WHICH WAS A PRECONDITION TO THE EXERCISE OF HIS JURISDICTION FO R REOPENING THE ASSESSMENT, AS THE PERIOD OF FOUR YEARS ENDED ON MA RCH 31, 1994, AND THEREAFTER IT WAS NOT OPEN TO THE SAID AUTHORIT Y TO INITIATE ACTION UNLESS THE CASE FELL WITHIN THE TERMS OF THE PROVIS O. FROM THE IMPUGNED NOTICES THAT HAVE BEEN ISSUED IT APPEARS T HAT THE PRIMARY FACTS WERE DISCLOSED, BUT THE CONCERNED AUTHORITY H AS RESORTED TO INFERENCES THAT THE BALANCE AMOUNT OF RS. 79,131 FR OM THE TOTAL AMOUNT OF RS. 1,10,931 WAS NOT UTILIZED FOR THE PUR POSE FOR WHICH IT WAS WITHDRAWN AND FURTHER THAT THE MACHINERY WORTH RS. 31,800 WAS PURCHASED OUT OF THE AMOUNT OF RS. 1,10,931. AC CORDING TO US, THIS ENQUIRY COULD HAVE BEEN MADE ON THE BASIS OF T HE MATERIAL ALREADY DISCLOSED BEFORE THE ITO WHILE MAKING THE A SSESSMENT UNDER SECTION 143(3) OF THE ACT. IT IS A SETTLED LE GAL POSITION AS HELD BY THE SUPREME COURT IN CALCUTTA DISCOUNT CO. LTD. V. ITO [1961] 41 ITR 191 THAT FROM THE PRIMARY FACTS IN HIS POSSE SSION, WHETHER ON DISCLOSURE BY THE ASSESSEE OR DISCOVERED BY HIM ON THE BASIS OF THE FACTS DISCLOSED, OR OTHERWISE, THE ASSESSING AU THORITY HAD TO DRAW INFERENCES AS REGARDS CERTAIN OTHER FACTS ; AN D ULTIMATELY FROM THE PRIMARY FACTS AND THE FURTHER FACTS INFERRED TH ERE FROM, THE AUTHORITY HAD TO DRAW APPROPRIATE LEGAL INFERENCES, TO ASCERTAIN ON A CORRECT INTERPRETATION OF THE TAXING ENACTMENT TH E PROPER TAX TO BE LEVIED. IF THERE WERE IN FACT SOME REASONABLE GROUN DS FOR THE ITO TO BELIEVE THAT THERE HAD BEEN ANY NON-DISCLOSURE AS R EGARDS ANY PRIMARY FACT WHICH COULD HAVE A MATERIAL BEARING ON THE QUESTION OF ITA NOS. 2382, 2188 & 2371-AHD-2009 43 UNDERASSESSMENT THAT WOULD BE SUFFICIENT TO GIVE JU RISDICTION TO THE ITO TO ISSUE THE NOTICES FOR OPENING THE CASE. THE SUPREME COURT HELD THAT THE DUTY OF THE ASSESSEE DOES NOT EXTEND BEYOND THE FULL AND TRUTHFUL DISCLOSURE OF ALL PRIMARY FACTS AND ON CE THEY BEFORE THE ASSESSING AUTHORITY, HE REQUIRES NO FURTHER ASSISTA NCE BY WAY OF DISCLOSURE. IT IS FOR THE ASSESSING AUTHORITY TO DE CIDE WHAT INFERENCES OF FACTS CAN BE REASONABLY DRAWN AND WHA T LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN. APPLYING TH E RATIO OF THIS DECISION TO THE FACTS OF THE PRESENT CASE, WE ARE S ATISFIED THAT THERE WAS NO GROUND ON THE BASIS OF WHICH THE AUTHORITY C OULD HAVE ARRIVED AT THE CONCLUSION THAT THERE WAS A NON-DISC LOSURE OF MATERIAL FACTS. THERE ARE NO REASONS DISCLOSED WHIC H COULD WARRANT THE EXERCISE OF THE POWERS UNDER SECTION 147 OF THE ACT AFTER A LAPSE OF FOUR YEARS, FROM THE END OF THE RELEVANT A SSESSMENT YEAR. WE MAY ALSO REFER TO THE DECISION OF THE SUPREME CO URT IN PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977]106 ITR 1 IN WHICH THE SUPREME COURT FOLLOWING THE PRINCIPLES LA ID DOWN IN ITS EARLIER DECISION IN CALCUTTA DISCOUNT CO. LTD. V. I TO [1961]41 ITR 191 OBSERVED THAT ANY REMISSNESS ON THE PART OF THE ASSESSING AUTHORITY CAN ONLY BE AT THE COST OF THE NATIONAL E XCHEQUER AND THAT THERE MUST BE A POINT OF FINALITY IN ALL LEGAL PROC EEDINGS, SO THAT STALE ISSUES ARE NOT REACTIVATED BEYOND A PARTICULA R STAGE AND THE CONTROVERSIES ARE SET AT REST. UNDER THE ABOVE CIRCUMSTANCES, WE ARE OF THE VIEW T HAT THE IMPUGNED NOTICES COULD NOT HAVE BEEN ISSUED AFTER T HE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR HAD LAPSED SINCE THE CONDITIONS FOR EXERCISE OF THE POW ER BEYOND FOUR YEARS CONTEMPLATED BY THE PROVISO TO SECTION 147 DI D NOT EXIST. THE IMPUGNED NOTICES ARE, THEREFORE, QUASHED AS BEING I LLEGAL AND WITHOUT JURISDICTION. RULE IS MADE ABSOLUTE ACCORDI NGLY 7.10 YET AN IDENTICAL ISSUE, THE HONBLE COURT IN T HE CASE OF SHANKARLAL NAGJI & CO. & OTHERS V. ITO REPORTED IN (2009) 20 D TR (GUJ) 116 RULED THUS: THERE IS NO MATERIAL DISCERNIBLE FROM THE REASONS R ECORDED TO ESTABLISH AS TO WHICH INCOME HAS ESCAPED ASSESSMENT . IT IS NOT POSSIBLE TO ACCEPT THE CONTENTION ON BEHALF OF THE RESPONDENT AUTHORITY THAT IT IS FOR THE ASSESSEE TO LEAD EVIDE NCE TO SHOW THAT THE GROSS RECEIPTS ARE NOT EQUIVALENT TO INCOME CHA RGEABLE TO TAX. ITA NOS. 2382, 2188 & 2371-AHD-2009 44 RESPONDENT AUTHORITY HAS TO SHOW FROM THE REASONS R ECORDED THAT THERE IS MATERIAL TO TREAT THE GROSS RECEIPTS AS IN COME. A COMPLETED ASSESSMENT CANNOT BE REOPENED MERELY TO M AKE INQUIRIES. THUS, IMPUGNED NOTICES UNDER S. 148 ARE QUASHED AND SET ASIDE . 7.11 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE O F CIT VS GOYAL PRIVATE FAMILY SPECIFIC TRUST, 171 ITR 698 DECIDED THE RELEVANT QUESTION NO.5 AS UNDER: (5) WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, FAILURE ON THE PART OF THE INCOME-TAX OFFICER TO MAKE PROPER AND ADEQUATE ENQUIRIES IS BY ITSELF NOT SUFFICIENT TO MEET THE REQUIREMENT OF SECTION 263 W HICH CONFERS JURISDICTION IN RESPECT OF AN ORDER WHICH I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE? 7.12 IN THIS CASE BRIEFLY THE FACTS ARE THAT THAT T HE ASSESSEE A SPECIFIC TRUST WAS CREATED ON 24-1-1973 UNDER THE TRUST DEED FOR THE BENEFITS OF THE BENEFICIARIES. THE ASSESSEE FILED RETURNS FOR T HE FIRST TIME FOR ASSESSMENT YEARS 1979-80 AND 1980-81 ON 20-02-1982 SHOWING THE INCOME UNDER THE STATUS OF PRIVATE SPECIFIC TRUST. THE ITO COMPLETED THE ASSESSMENTS FOR BOTH THE YEARS ON A SPECIFIC DATE V IZ 25-11-1982. BOTH THE ORDERS ARE COUCHED IN IDENTICAL LANGUAGE. THE A O IN ONE OF THE ASSESSMENT ORDERS WHILE COMPLETING THE ASSESSMENT H ELD AFTER DISCUSSIONS AND SCRUTINY, INCOME RETURNED IS ACCEPT ED. THE LEARNED CIT ISSUED NOTICE U/S 263 OF THE ACT BECAUS E IN HIS OPINION THE ITO PASSED THE ASSESSMENT ORDERS IN HASTE / HURRY W ITHOUT PROPER AND WITHOUT PROPER ENQUIRY AND IT WAS FURTHER OBSERVED THAT THE ASSESSMENT ORDERS DO NOT SHOW, HOW AND IN WHAT MANNER AND WITH WHAT CAPITAL THE ITA NOS. 2382, 2188 & 2371-AHD-2009 45 TRUST CONDUCTED ITS BUSINESS RELATING TO HANDLOOM D ARIS AND IT IS NOT AT ALL CLEAR FROM THE PAPERS FILED. IT WAS ALSO ADDED THAT THE RECORD SHOWS THAT THE BOOKS OF ACCOUNTS OF THE TRUST WERE NEVER PRODU CED BEFORE THE ITO FOR SCRUTINY AND NO TICK MARKS WERE MADE ON THE PAP ERS FILED BY THE TRUST ALONG WITH THE RETURN OF INCOME. IT WAS, THEREFORE, FINALLY CONCLUDED BY THE LEARNED CIT THAT AN ASSESSMENT MADE IN HASTE/HURRY WITHOUT PROPER AND ADEQUATE ENQUIRY/INVESTIGATION IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ON FURTHER APPEAL, THE TRIBUNAL OBSERVED THAT THE ASSESSEE HAD FILED THE TRADING AND PROFIT & LOSS ACCOUNTS, BALANCE SHEET AND COPIES OF THE ACCOUNTS OF THE BEN EFICIARIES BEFORE THE ITO. HAVING SO OBSERVED, THE TRIBUNAL FOUND THAT TH E BOOKS OF ACCOUNTS HAD BEEN PRODUCED BEFORE THE ITO AND THAT HE PASSED THE ORDERS AFTER HAVING SEEN THEM IS A FINDING OF FACT AND NO QUESTI ON OF LAW ARISES THERE FROM. 7.13 THE HONBLE ALLAHABAD HIGH COURT CONSIDERING T HESE FACTS HELD AS UNDER: THE ASSESSEE, A PRIVATE TRUST, FILED ITS RETURNS A ND THE INCOME-TAX OFFICER ASSESSED THE BENEFICIARIES OF TH E TRUST AND HELD THAT THE TRUST WAS NOT ASSESSABLE. THE COMMISSIONER, ACTING UNDER SECTION 263 OF THE INCOM E- TAX ACT, 1961, SET ASIDE THE ORDER OF ASSESSMENT. T HE TRIBUNAL FOUND THAT THE NECESSARY BOOKS OF ACCOUNT HAD BEEN PRODUCED, THE INCOME-TAX OFFICER HAD EXAMINED THEM AND ALSO DISCUSSED THE CASE WITH THE REPRESENTATIVE OF THE ASSESSEE BEFORE PASSING THE O RDER OF ASSESSMENT. ON THE OTHER HAND, THERE WAS NO FIND ING BY THE COMMISSIONER OF INCOME-TAX THAT THE INCOME-T AX ITA NOS. 2382, 2188 & 2371-AHD-2009 46 OFFICER HAD REACHED AN ERRONEOUS CONCLUSION. THE TRIBUNAL SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX. ON AN APPLICATION TO DIRECT REFERENCE: HELD, DISMISSING THE APPLICATION, THAT IN THE ABSENCE OF A FINDING BY THE COMMISSIONER OF INCOME- TAX THAT THE ASSESSMENT ORDERS WERE ERRONEOUS, THE CANCELLATION OF ASSESSMENTS WAS NOT JUSTIFIED. THE TRIBUNAL WAS JUSTIFIED IN SETTING ASIDE THE ORDER O F THE COMMISSIONER AND NO QUESTION OF LAW AROSE FROM HIS ORDER. 7.14 THE HONBLE BOMBAY HIGH COURT IN THE CASE OF I PCA LABORATORIES LTD. VS DCIT AND OTHERS, 251 ITR 416 HELD AS UNDER: HELD, ALLOWING THE PETITION, THAT, ON THE FACTS, T HE PERIOD OF FOUR YEARS CAME TO AN END ON MARCH 31, 1997. THE AFFIDAVIT-IN-REPLY CLEARLY INDICATED THAT THE PREDE CESSOR OF RESPONDENT NO.1 HAD COMPLETED THE ASSESSMENT UNDER SECTION 143(3) ON MARCH 31, 1995, BY COMPUTING THE TOTAL INCOME AT RS.2.86 CRORES AND, SUBSEQUENTLY ON MARCH 16, 1999, ANOTHER PREDECESSOR IN OFFICE OF RESPONDENT N O.1 FORMED AN OPINION THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THIS SHOWED THAT REOPENING WAS SOUGHT ON THE BASIS OF CHANGE OF OPINION. THERE WAS NOTHING IN THE AFFIDAVIT-IN-REPLY TO INDICATE THAT THE RE- OPENING WAS SOUGHT ON THE GROUND OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS. IN THE CIRCUMSTANCES, THE PROVISION IN ITA NOS. 2382, 2188 & 2371-AHD-2009 47 EXPLANATION 2 TO SECTION 147 HAD NO APPLICATION. TH E NOTICE WAS LIABLE TO BE SET ASIDE. 7.15 THE HONBLE MADRAS HIGH COURT IN THE CASE OF T . S. SANTHANAM VS EXPENDITURE TAX OFFICER, 87 ITR 582 HELD AS UNDER: THE ESSENTIAL PRINCIPLE AS TO THE RULE OF FINALITY OF AN ASSESSMENT IS THAT THE ASSESSING OFFICER CANNOT CHA NGE HIS MOOD AND TRY TO REOPEN A CLOSED STATE OF AFFAIR S. 7.16 THE REVENUE HAS PLACED RELIANCE ON A NUMBER OF RULINGS OF VARIOUS JUDICIARY. LET US NOW PERUSE THE ISSUES PR EDOMINANTLY DEALT BY THE HONBLE SUPREME COURT IN THE FOLLOWING CASES: (A) SRI KRISHNA PVT. LTD V. ITO & ORS (1996) 135 CTR 75 (SC): IN THE REASONS RECORDED IN THIS CASE, THE AO HAD STATED CLEARLY THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR T HE SUCCEEDING AY, IT WAS FOUND THAT OUT OF THE UNSECURED HUNDI LO ANS PUT FORWARD BY THE ASSESSEE, A LARGE NUMBER WERE FOUND TO BE BO GUS AND THAT MANY OF THE SO CALLED LENDERS WERE FOUND TO BE NEAR RELATIONS OF THE DIRECTORS OR THE PRINCIPAL SHAREHOLDERS. HE HA D STATED THAT SIMILAR LOANS WERE ALSO NOTICED FOR THE AY 1959-60 AND, THEREFORE, HE HAS REASON TO BELIEVE THAT THERE HAS BEEN NO TRU E AND FULL DISCLOSURE OF ALL MATERIAL FACTS BY THE ASSESSEE FO R THE AY 1959-60 LEADING TO ESCAPEMENT OF INCOME. AFTER ANALYZING THE ISSUE IN DEPTH, THE HONBLE HIGHEST JUDICIARY OF THE LAND H AD, IN ITS CONCLUSION, RULED THAT THE ASSESSEE SHOWING HUNDI LOANS IN HIS BALANCE SHEET FOR THE AY 1959-60, SIMILAR HUNDI LOA NS ALSO SHOWN IN THE BALANCE SHEET OF AY 1960-61, ITO ON INVESTIGATION FINDING IN RESPECT OF AY 1960-61 THAT SOME OF THE HUNDI LOANS WERE NOT GENUINE AND AT LEAST TEN SUCH NON- GENUINE LENDERS WERE COMMON BOTH FOR AYS 1959-60 AN D 1960- 61; REOPENING OF ASSESSMENT BY ITO OF ASST. YEAR 19 59-60 ON THE GROUND THAT THERE WAS FAILURE ON THE PART OF TH E ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS WAS JUSTIFIED. ITA NOS. 2382, 2188 & 2371-AHD-2009 48 WE HAVE, WITH DUE RESPECTS, PERUSED THE RULING OF T HE HONBLE APEX COURT AND REITERATE THAT THE ISSUE BEFORE THE HONBLE COURT WAS ON A DIFFERENT FOOTING WHICH HAS NO RELEVANCE T O THE ISSUE ON HAND IN THE SENSE THAT THE PRESENT ASSESSEE HAD DIS CLOSED ALL THE MATERIALS FULLY AND TRULY WHICH HAVE BEEN CONSIDERE D BY THE AO AND CONCLUDED THE ASSESSMENT U/S 143(3) OF THE ACT. SUBSEQUENTLY, ACTED ON AN ANONYMOUS TAX EVASION PET ITION WHEREIN IT WAS ALLEGED THAT THE ASSESSEE AND HIS T WO BROTHERS INDULGED IN INTRODUCING BOGUS LOANS IN THEIR BOOKS OF ACCOUNTS DURING THE AY UNDER CONSIDERATION BY PAYING CASH AN D OBTAINING CHEQUES FROM THE PARTIES ETC., ADMITTEDLY, THE AO DID NOT HAVE ANY AUTHENTIC EVIDENCE OF ADMISSION OR THE ALLEGATION F OR THE INFORMATION RECEIVED THROUGH AN ANONYMOUS PETITION WHICH HAS NO SACROSANCT UNLESS IT CONTAINED DOCUMENTARY PROOF T O SUBSTANTIATE THE ALLEGED INFORMATION. AS A MATTER OF FACT, THE AO HAD NO ANY AUTHENTIC DOCUMENTARY EVIDENCE, BUT, ACTING ON AN ANONYMOUS TEP PRESUMED THAT THE ASSESSEE AND HIS TWO BROTHER S INDULGED IN INTRODUCING BOGUS LOANS IN THEIR BOOKS OF ACCOUNTS BY PAYING CASH AND OBTAINING CHEQUES FROM THE PARTIES ETC., WE A RE, THEREFORE, OF THE FIRM VIEW THAT THE REVENUE CANNOT TAKE REFUGE I N THE RULING OF THE HONBLE SUPREME COURT CITED SUPRA. (B) PHOOL CHAND BAJRANG LAL V. ITO (1993) 203 ITR 456 (SC): THE ISSUE, IN BRIEF, WAS THAT FOR THE AY 1963-64, THE ASSESSEE CLAIMED THAT HE HAD BORROWED RS.50000/- FROM A CAL CUTTA COMPANY AND THE ASSESSEE WAS REQUIRED, DURING THE A SSESSMENT PROCEEDINGS, TO FILE A COPY OF THE ACCOUNT OF THE S AID COMPANY TO SUPPORT THE LOAN TRANSACTION. THE ASSESSEE PRODUCED A CONFIRMATORY LETTER FROM THE CALCUTTA COMPANY, CONF IRMING THE ITA NOS. 2382, 2188 & 2371-AHD-2009 49 PAYMENT OF LOAN TO THE ASSESSEE. THE AO HAD ALLOW ED DEDUCTION OF INTEREST CLAIMED TO HAVE BEEN PAID FOR THE BORR OWED AMOUNT FOR THE AYS 63-64 TO 68-69. TO ASCERTAIN THE GENUINENE SS OF THE LOAN TRANSACTION OF THE ASSESSEE, THE AO SOUNDED HIS CO UNTER-PART AT CALCUTTA TO GATHER CERTAIN INFORMATION FROM THE CAS E RECORDS OF THE SAID CALCUTTA COMPANY. THE ITO FROM CALCUTTA CONVEY ED THAT THE MANAGING DIRECTOR OF THE SAID COMPANY HAD CONFESSED THAT HE WAS ONLY A NAME-LENDER, BUT, HAD NOT ADVANCED ANY LOAN TO ANY PARTY AND, ACCORDINGLY, THE AO FORMED THE BELIEF THAT THE ASSESSEE HAD NOT STATED THE PRIMARY FACTS WITH REGARD TO LOAN TR ANSACTION FULLY AND TRULY DURING THE ASSESSMENT PROCEEDINGS, AND S OUGHT TO REOPEN THE ASSESSMENT BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT. AFTER DELIBERATING THE RIVAL SUBMISSIONS, THE HON BLE COURT HAD, IN ITS WISDOM, RULED THAT THE ARGUMENT THAT THE QUESTION REGARDING TRUTHFULNE SS OR FALSEHOOD OF THE TRANSACTIONS REFLECTED IN THE RETU RN CAN ONLY BE EXAMINED DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND NOT AT ANY STAGE SUBSEQUENT THERETO IS NOT ACCEPTABLE. TH E ARGUMENT IS TOO BROAD AND GENERAL IN NATURE AND DOES VIOLENCE T O THE PLAIN PHRASEOLOGY OF SECTIONS 147(1) AND 148 AND IS AGAIN ST THE SETTLED LAW. ONE HAS TO TOOK TO THE PURPOSE AND INTENT OF THE PROVISIONS. ONE OF THE PURPOSES OF SECTION 147 APPEARS TO BE TO ENSURE THAT A PARTY CANNOT GET AWAY BY WILLFULLY MAKING A FALSE O R UNTRUE STATEMENT AT THE TIME OF ORIGINAL ASSESSMENT AND WH EN THAT FALSITY COMES TO NOTICE, TO TURN AROUND AND SAY YOU ACCEP TED MY LIE, NOW YOUR HANDS ARE TIED AND YOU CAN DO NOTHING. IT WO ULD, BE TRAVESTY OF JUSTICE TO ALLOW THE ASSESSEE THAT LATITUDE. THEREFORE, IN THE FACTS OF THE PRESENT CASE THE ITO , AZAMGARH RIGHTLY INITIATED THE REASSESSMENT PROCEEDINGS ON T HE BASIS OF SUBSEQUENT INFORMATION, WHICH WAS SPECIFIC, RELEVAN T AND RELIABLE, AND AFTER RECORDING THE REASONS FOR FORMATION OF HI S BELIEF THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD N OT DISCLOSED THE MATERIAL FACTS TRULY AND FULLY AND, THEREFORE, INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HE THEREFORE, CORRE CTLY INVOKED THE PROVISIONS OF SECTIONS 147(A) AND 148. ITA NOS. 2382, 2188 & 2371-AHD-2009 50 WITH DUE REGARDS, WE HAVE ATTENTIVELY PERUSED THE R ULING OF THE HONBLE SUPREME COURT REFERRED ABOVE. IN THIS REGA RD, WE WOULD LIKE REITERATE THAT THAT ASSESSEE HAD MADE A FALSE CLAIM AND TO SUBSTANTIATE HIS FALSEHOOD, HE HAD PRODUCED A CONFI RMATORY LETTER FROM HIS ALLEGED LENDER AND ON THE BASIS OF WHICH HIS CLAIM FOR DEDUCTION WAS ALLOWED. THE AO HAD, AFTER ASCERTAI NING THE ACTUAL FACT FROM HIS COUNTER-PART AT CALCUTTA THAT THE AL LEGED LENDER HAD NOT ADVANCED ANY LOAN, BUT, ONLY LENT HIS NAME TO THE ASSESSEE TO CLAIM DEDUCTION OF PAYMENT OF INTEREST ETC., FO RMED THE BELIEF THAT THE ASSESSEE HAD NOT STATED THE PRIMARY FACTS REGARDING THE LOAN TRANSACTION FULLY AND TRULY DURING THE ASSES SMENT PROCEEDINGS AND, ACCORDINGLY, SOUGHT TO REOPEN THE ASSESSMENT B Y ISSUANCE OF NOTICE U/S 148 OF THE ACT. HOWEVER, IN THE PRESENT CASE, THE ASSESSMENT WAS CONCLUDED ON THE BASIS OF THE MATER IALS FURNISHED BY THE ASSESSEE HOWEVER, ON A TIP OFF FROM TEP THE AO PRESUMED THAT THE ASSESSEE AND HIS TWO BROTHERS IN DULGED IN INTRODUCING BOGUS LOANS IN THEIR BOOKS OF ACCOUNTS BY PAYING CASH AND OBTAINING CHEQUES FROM THE PARTIES ETC., WHICH , IN OUR CONSIDERED VIEW, CANNOT BE TERMED THAT THE AO HAD FORMED THE BELIEF THAT THE ASSESSEE HAD NOT STATED THE PRIMARY FACTS WITH REGARD TO LOAN TRANSACTION FULLY AND TRULY DURING THE ASSESSMENT PROCEEDINGS. WE ARE, THEREFORE, OF THE FIRM VIEW THAT THE CASE LAW RELIED ON BY THE REVENUE CANNOT COME TO ITS RESCUE. (C) ESS KAY ENGINEERING CO. (P) LTD V. ITO (1993) 247 ITR 818 (SC): ITA NOS. 2382, 2188 & 2371-AHD-2009 51 THE HONBLE SUPREME COURT IN ITS BRIEF RULING CONCL UDED THAT MERELY BECAUSE THE CASE OF THE ASSESSEE WAS ACCEPT ED AS CORRECT IN THE ORIGINAL ASSESSMENT, ITO IS NOT PREC LUDED FROM OPENING THE ASSESSMENT ON THE BASIS OF HIS FINDINGS OF FACTS MADE ON THE BASIS OF FRESH MATERIALS IN THE COURSE OF ASSESSMENT NEXT YEAR. WITH RESPECTS, WE WOULD LIKE TO POINT OUT THAT THE RULING OF THE HONBLE COURT CITED SUPRA IS CLEARLY DISTINGUISHABL E SINCE IN THE PRESENT CASE THE AO HAD NOT BROUGHT ANY SUSTAINABLE FRESH MATERIAL TO FACILITATE HIM TO REASON TO BELIEVE TH AT THAT THE ASSESSEE HAD NOT STATED THE PRIMARY FACTS WITH REGA RD TO LOAN TRANSACTIONS FULLY AND TRULY DURING THE ASSESSMEN T PROCEEDINGS. (D) ITO V. PURUSHOTTAM DAS BANGUR & ANR. (1997) 224 I TR 362 (SC): THE HONBLE SUPREME COURT RULED THAT THE ITO WAS JUSTIFIED IN REOPENING ASSESSMENT UNDER S.147(B) ON THE BASIS OF LETTER WRITTEN BY DDI (INV) TO THE JURISDICTIONAL IAC CONTAINING R ELEVANT FACTS AND INFORMATION WITHOUT ANY FURTHER INVESTIGATION. HOWEVER, IN THE PRESENT CASE, THE AO , AS SAID EARL IER, HAD ACTED ONLY ON THE BASIS OF TEP, BUT NO AUTHENTIC EVIDE NCE OF INFORMATION RECEIVED TO JUSTIFY THE REOPENING OF T HE ASSESSMENT. NO INCRIMINATING DOCUMENTS/STATEMENTS WERE UNEARTHE D DURING ANY PROCEEDINGS AGAINST THE LENDERS AFTER THE DATE OF G RANTING OF LOANS TO THE APPELLANT. THE REOPENING OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE AND HIS TWO BROTHERS, PRESUMABLY, ON T HE BASIS OF PROCEEDINGS INITIATED U/S 132 OF THE ACT WAY BACK I N THE YEAR 1991 IN THE CASE OF KHANDHAR GROUP WHICH APPEARS TO HAVE PROMPTED ITA NOS. 2382, 2188 & 2371-AHD-2009 52 THE REVENUE TO COME A CONCLUSION THAT THE LOAN TRAN SACTION WAS NON-GENUINE. THE REASONABLE BELIEF OF THE AO APPEA RS TO BE MERELY BASED ONLY ON SUSPICION AND PRESUMPTION. 7.17 WITH REGARD TO INITIATION OF REASSESSMENT PRO CEEDINGS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR AS LAID DOWN U/S 149(1)(B) OF THE ACT, VARIOUS JUDICIARY H AVE RULED THAT (A) DR. H.S.BAWA V. CIT & ANOTHER (2010) 325 ITR 340 (P & H) THE HONBLE HIGH COURT HAS HELD THAT REASSESSMENT PROCEEDINGS COULD BE INITIATED ONLY WITHIN FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS LAID DOWN U/S 149(1) (B) OF THE ACT. ALLOWING THE PETITION, IT WAS, FURTHER, HELD THAT THE NOTICE U/S 148 DATED MARCH 29, 1989, FOR REOPENING THE ASSESSMENT FOR TH E ASSESSMENT YEAR 1980-81 WAS BARRED BY LIMITATION. (B) THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF SADBHAV ENGINEERING LTD V. DCIT (2011) 333 ITR 483 (GUJ) HA S OBSERVED THAT ON A PLAIN READING OF THE REASONS RECORDED, IT WAS APPARENT THAT THEY WERE TOTALLY SILENT AS REGARDS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT, WAS A MATTER OF FACT THAT THERE COU LD BE NO DEEMED FAILURE AS WAS SOUGHT TO BE CONTENDED ON BEH ALF OF THE INCOME-TAX AUTHORITIES. THEREFORE, IN THE ABSENCE OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEA RS 2003-04 AND 2004-05, THE NOTICES UNDER SECTION 148 HAVING B EEN ISSUED AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS, THEY VERY INITIATION OF PROCEEDINGS UNDER SECTION 147 STOOD VITIATED AND COULD NOT BE S USTAINED. (C) YET ANOTHER RULING, THE HONBLE JURISDICTIONAL HIGH COURT, IN THE CASE OF GUJARAT STATE CO. OP. AGRI. AND RURAL DEVEL OPMENT BANK ITA NOS. 2382, 2188 & 2371-AHD-2009 53 LIMITED V. DCIT REPORTED IN (2011) 337 ITR 447 (GUJ ) HAS OBSERVED THAT THE SOLE BASIS FOR REOPENING THE ASSESSMENT WAS THE SUBSEQUENT DECISION OF THE HIGH COURT. THE BELIEF AS TO ESCAP EMENT OF INCOME CHARGEABLE TO TAX FROM ASSESSMENT WAS NOT ENTERTAIN ED BY THE ASSESSING OFFICER ON THE GROUND THAT THERE HAD BEEN FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND NO PROCEEDINGS COU LD HAVE BEEN INITIATED UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, AFTER THE EXPIRY OF A PERIOD OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR. THUS, THE INITIATION OF REASSESSM ENT PROCEEDINGS WAS BARRED BY LIMITATION AND THE ASSUMP TION OF JURISDICTION BY THE ASSESSING OFFICER WAS INVALID. THE NOTICE UNDER SECTION 148, THEREFORE, COULD NOT BE SUSTAINED. (D) IN THE CASE OF CIT V. 1. PRADEEP KUMAR GUPTA AN D 2.VIJAY GUPTA REPORTED IN [2008] 303 ITR 95 (DEL), THE ISSU E BEFORE THE HONBLE COURT WAS THAT THE AO RECEIVED INFORMATION WHILE CARRYING OUT POST SEARCH ENQUIRIES RELATING TO A THIRD PARTY . A, SOLE PROPRIETOR OF J, THAT A WAS PROVIDING BOGUS TRANSAC TIONS PURPORTING TO BE SALE OR PURCHASE OF FOOD GRAIN ITEMS AND THAT THE CASH DEPOSITS WITH HIM WERE FROM PARTIES WHO HAD APPROAC HED HIM FOR ACCOMMODATION ENTRIES IN THE FORM OF AGRICULTURAL RECEIPTS. ENQUIRIES SHOWED THAT THE ASSESSEE WERE THE BENEFIC IARIES OF SUCH ILLEGAL TRANSACTIONS. THEREFORE BASED ON THE SWOR N STATEMENT OF A, REASSESSMENT PROCEEDINGS AGAINST THE ASSESSEES U/SS . 147 AND 148 OF THE ACT WERE INITIATED. THE ASSESSEES CONTE NDED THAT THEY HAD TAKEN AGRICULTURAL LAND ON LEASE FROM ONE M AND THE RENT HAD BEEN PAID IN CASH. THE ASSESSEES DEMAND AN OPPORTU NITY TO CROSS EXAMINE A BUT THIS WAS DENIED ON THE GROUND THAT TH E STATEMENT OF THIS PERSON WAS RECORDED BY DDIT (INV). THE ASSESS EES CONTENDED THAT SALES TO J WERE GENUINE AND SUBMITTE D COPIES OF THE BILLS. THE TRIBUNAL DELETED THE AGRICULTURAL I NCOME IN THE SUM ITA NOS. 2382, 2188 & 2371-AHD-2009 54 DECLARED BY THE ASSESSEE. ON APPEAL, IT WAS RULED BY THE HONBLE COURT THAT: THE ASSESSMENT HAD NOT BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT. THERE WERE BANKING TRANSACTIONS BETWEEN T HE ASSESSEE AND A. THE REASSESSMENT PROCEEDINGS HAD BEEN INITI ATED AFTER SEVERAL YEARS OF ACCEPTANCE OF THE RETURN UNDER SEC TION 143(1) OF THE ACT. THE ASSESSEES FAILURE TO BRING THE PERSO N TILLING THE LAND ON THEIR BEHALF COULD NOT INEXORABLY LEAD TO THE CO NCLUSION THAT NO AGRICULTURAL INCOME HAD BEEN GENERATED BY THE ASSES SEES. SUCH AN INFERENCE COULD ONLY BE DRAWN FROM THE STATEMENT OF A TO THE EFFECT THAT THE TRANSACTIONS BETWEEN HIM AND THE AS SESSEES WERE BOGUS. THEREFORE, IT WAS MANDATORY FOR THE REVENUE TO PRODUCE A FOR CROSS EXAMINATION BY THE ASSESSEES ON THEIR SPE CIFIC DEMAND. ONCE SECTION 147 OR 148 WAS RESORTED TO, THE ASSESS ING OFFICER MUST FIRST DISCHARGE THE BURDEN OF SHOWING THAT INC OME HAD ESCAPED ASSESSMENT. IT WAS ONLY THEREAFTER THAT TH E ASSESSEE HAD TO PROVIDE ALL THE ANSWERS. THE TRIBUNAL ARRIVED A T THE CORRECT CONCLUSION . (E) THE HONBLE HIGH COURT OF DELHI IN THE CASE OF SIGNATURE HOTELS P. LTD V. ITO & ANOTHER [(2011) 338 ITR 51 (DEL)] H AS OBSERVED THUS: THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TA X (INV) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 L AKHS DURING THE FY 2002-03 AS STATED IN THE ANNEXURE. ACCORDIN G TO THE INFORMATION, THE AMOUNT RECEIVED FROM AS COMPANY S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUI REMENTS OF S.147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REG ARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR EST ABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF IN COME. FURTHER, THE AO DID NOT APPLY HIS OWN MIND TO THE INFORMATIO N AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE W AS NO DISPUTE THAT THE COMPANY S HAD A PAID UP CAPITAL OF RS.90 L AKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOT TED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER, 2001. THUS, IT COULD NOT ITA NOS. 2382, 2188 & 2371-AHD-2009 55 BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMEN T PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO BE QUASHED. (F) YET ANOTHER RULING, THE HONBLE HIGH COURT IN T HE CASE OF HARYANA ACRYLIC MANUFACTURING CO. V. CIT & ANOTHER REPORTED IN (2009) 308 ITR 38 (DEL) HAD PROCLAIMED THUS: ACTION UNDER SECTION 147 OF THE INCOME-TAX ACT, 196 1, CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR ONLY IF ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE (A) TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE UNDER SUB-SECTION (1) OF SE CTION 142 OR SECTION 148, OR (II) TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT Y EAR. THE PROVISO TO SECTION 147 CARVED OUT AN EXCEPTION FROM THE MAIN PROVISIONS OF SECTION 147. IF A CASE WERE TO FALL WITHIN THE PROVISO, WHETHER OR NOT IT WAS COVERED UNDER THE MAIN PROVIS IONS OF SECTION 147 WOULD NOT BE MATERIAL. ONCE THE EXCEPTION CARV ED OUT BY THE PROVISO CAME TO PLAY, THE CASE WOULD FALL OUTSIDE T HE AMBIT OF SECTION 147. HOWEVER, NO ACTION CAN BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE CONDITIONS THAT (A) AN ASSES SMENT UNDER SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, AND (B) UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT Y EAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE: (I) TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148, TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT ASSESSMENT YEAR, ARE SATISFIED. MERELY HAVING A RE ASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IS NOT SUFFICIEN T TO REOPEN ASSESSMENTS BEYOND THE PERIOD OF FOUR YEARS. THE E SCAPEMENT OF INCOME MUST ALSO BE OCCASIONED BY FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY . IT IS A NECESSARY CONDITION FOR OVERCOMING THE BAR SET BY T HE PROVISO TO SECTION 147. IF THIS CONDITION IS NOT SATISFIED, T HE BAR WOULD OPERATE AND NO ACTION UNDER SECTION COULD BE TAKEN. (G) THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SAYAJI INDUSTRIES LTD. V. JCIT (ASST.) REPORTED IN [(2011) 336 ITR 360 ITA NOS. 2382, 2188 & 2371-AHD-2009 56 (GUJ)] HAS RULED, ALLOWING THE PETITION, THAT EXCEPT FOR THE STATEMEN T THAT THERE WAS OMISSION ON THE PART OF THE ASSESSEE TO FURNISH THE TRUE AND CORRECT AFFAIRS OF THE COMPANY, THERE WAS NOTHING WHATSOEVER IN THE REASONS RECORDED TO INDICATE THE NATURE OF THE OMISSION AND AS TO WHICH FACTS HAD NOT BEEN TRULY A ND FULLY DISCLOSED. HENCE, ON A PLAIN READING OF THE REASON S RECORDED, IT WAS APPARENT THAT THERE WAS NO MATERIAL ON RECORD O N THE BASIS OF WHICH THE ASSESSING OFFICER COULD HAVE RECORDED THE SATISFACTION AS REGARDS INCOME HAVING ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO FURNISH TRUE AND COR RECT AFFAIRS OF THE COMPANY. THE NOTICE UNDER SECTION 148 WAS NOT VALI D. 7.18 IN VIEW OF THE ABOVE LEGAL POSITIONS, WE ARE O F THE OPINION THAT THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS FOR T HE PURPOSE OF ASSESSMENT ORIGINALLY CONCLUDED U/S 143(3) OF THE A CT FOR THE SAID LOANS AND, THEREFORE, THE AO WAS NOT WITHIN HIS REALM TO REOPEN THE ASSESSMENT AFTER THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT IN VIEW OF EXPRESS PROVISO TO S. 147 OF THE ACT BY ASSUMING THE JURISDICTION OF INITIATION OF REASSESSMENT PROC EEDINGS MERELY ON PRESUMPTION AND ASSUMPTION. 7.19 BEFORE CONCLUDING, WE WOULD LIKE TO HIGHLIGHT THAT THE LD. D R HIMSELF ADMITTED IN HIS WRITTEN SUBMISSION [SOURCE: P 3 OF HIS LETTER DT: 8.11.2011) THAT THE LD. AO HAD PROCEEDED ONLY ON TA X EVASION PETITION- PRESUMABLY AN ANONYMOUS PETITION WHICH HAS NO SAN CTITY UNLESS IT HAS BEEN ESTABLISHED WITH IMPECCABLE EVIDENCE THAT THE ASSESSEE HAD, IN FACT, INDULGED IN INTRODUCING BOGUS LOANS IN HIS BO OKS OF ACCOUNT AS ALLEGED IN THE SAID PETITION. IT IS NOT UNCOMMON I N THE TRADING COMMUNITY THAT DUE TO RIVALRY IN THE BUSINESS PUSHING THROUGH ANONYMOUS PETITIONS, ITA NOS. 2382, 2188 & 2371-AHD-2009 57 LEVELING VARIOUS ALLEGATIONS, UNLAWFUL ACTIVITIES B EING PRACTICED BY THEIR RIVALS IN THE TRADE ETC., UNLESS CREDIBLE DOCUMENTA RY EVIDENCES HAVE BEEN PRODUCED/ANNEXED WHICH SHOULD ALSO STAND THE T ESTIMONY OF LAW TO PIN DOWN THE OFFENDERS, SUCH ANONYMOUS PETITIONS, I N OUR CONSIDERED VIEW, HAVE NO LEGAL SANCTITY. IT SHOULD ALSO BE EN SURED THAT NO INNOCENT PERSON SHOULD BE SUBJECTED TO PENALIZATION MERELY O N PRESUMPTION AND ASSUMPTION UNLESS CREDIBLE PROOF HAS BEEN BROUGHT T O FORE. FOR INSTANCE, IN THE PRESENT CASE, THE LD. D R VOUCHED THAT THE LD. AO HAD MADE ENQUIRIES AT MUMBAI AND TRACED THE INCOME-TAX RECORDS OF SIX CONCERNS (CITED SUPRA) FROM WHOM THE ASSESSEE APPEA RED TO HAVE RECEIVED LOANS AND ON PERUSAL OF BALANCE- SHEETS OF THOSE CONCERNS REVEALED THAT THE TOTAL LOANS AND ADVANCES PURPORTE D TO HAVE ADVANCED BY THEM WERE FAR LESS COMPARED TO THE LOANS RECEIVE D BY THE ASSESSEE AND HIS TWO BROTHERS. AT THIS JUNCTURE, IT WOULD N OT BE INAPPROPRIATE TO MENTION HERE THAT (1) THE LD. AO HAD NOT BROUGHT AN Y DOCUMENTARY EVIDENCE ON RECORD TO EVEN REMOTELY SUGGEST THAT TH E ASSESSEE AND HIS TWO BROTHERS HAVE, IN FACT, RECEIVED ONLY LESS AMOU NT OF LOANS; (2) ON PERUSAL OF THE ASSESSMENT ORDERS OF THOSE CONCERNS REVEAL THAT THE RESPECTIVE AOS HAVE NOT MADE ANY ADVERSE REMARKS AG AINST THE ASSESSEE OR HIS TWO BROTHERS. IT IS RATHER STRANGE THE ASSERTION OF THE REVENUE THAT THOSE CONCERNS CITED SUPRA PERTAIN TO A GROUP KNOWN AS KHANDHAR GROUP OF MUMBAI AND ALSO ASCERTAINED DURI NG THE COURSE OF SEARCH AND SEIZURE OPERATION WAY BACK IN 1991 ON TH IS GROUP, THESE CONCERNS WERE FOUND TO BE INVOLVED IN HAWALA TRANSA CTION I.E., PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PARTIES IN THE FOR M OF LOANS AND ADVANCES BY ACCEPTING CASH FOR THE RESPECTIVE AMOUN T OF CHEQUES AND CHARGING THEIR COMMISSIONS FOR SUCH ENTRIES AND SO ON AND SO FORTH. THE DEALING OF THE SO CALLED GROUP KHANDHAR GROUP HAS N O RELEVANCE TO THE ASSESSEES CASE SINCE NO INCRIMINATING PAPERS/DOCUM ENTS PERTAIN TO THE ITA NOS. 2382, 2188 & 2371-AHD-2009 58 ASSESSEE APPEARS TO HAVE BEEN UNEARTHED IN THE PREM ISES OF KHANDHAR GROUP (THAT TOO IN THE YEAR 1991) SO AS TO IMPLICAT E THE ASSESSEE. WE HAVE ALSO DULY TAKEN NOTE OF THE LD. D RS SUBMISSI ON (P 8 OF HIS WRITTEN SUBMISSION). THE CASE LAWS CITED BY LD. D.R. WOULD NOT ADVANCE THE CASE OF REVENUE AND ARE NOT APPLICABLE TO FACTS OF THE C ASE. 7.20 THUS, THE LD. AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD THE NEXUS BETWEEN THE ASSESSEE AND HIS BROTHERS WITH KHANDHA R GROUP. NO EVIDENCE OR MATERIAL HAS BEEN BROUGHT ON RECORD TO PROVE IF ANY RIGHT TO CROSS-EXAMINATION HAS BEEN GIVEN TO THE ASSESSEE IN RESPECT OF PERSONS WHO MIGHT HAVE MADE SOME STATEMENTS AGAINST THE INT EREST OF THE ASSESSEE. FOR GIVING CREDIT UNDER SECTION 68 OF TH E I.T. ACT, THE ASSESSEE HAS TO PROVE IDENTITY OF CREDITORS, THEIR CAPACITY AND GENUINENESS OF TRANSACTIONS WHICH HAVE BEEN PROVED AT THE TIME OF ORIGINAL ASSESSMENT STAGE. NON PAYMENT OF LOAN OR INTEREST WOULD NOT BE A VALID GROUND TO REOPEN THE CONCLUDED ASSESSMENT. THE LETTER OF THE TRO U/S 226(3) OF THE ACT CLEARLY SUPPORTS THE SUBM ISSION OF THE ASSESSEE THAT THE ASSESSEE RECEIVED GENUINE CREDITS . IN THE REASON FOR REOPENING OF THE ASSESSMENT, THE AO HAS NOWHERE REC ORDED IF THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE TRUE AND CORRECT FACTS NECESSARY FOR ASSESSMENT. 8. IN AN ALL OVER CONSIDERATION OF THE FACTS AND CI RCUMSTANCES OF THE ISSUE AS DELIBERATED UPON IN THE FOREGOING PARAGRAP HS, WE ARE OF THE CONSIDERED VIEW THAT INITIATION OF REASSESSMENT PRO CEEDINGS BY THE AO WAS NEITHER WITH ANY SOUND BASE NOR JURISDICTION AND, THEREFORE, THE IMPUGNED ORDER PASSED BY THE AO ON THE BASIS OF SU CH PRESUMPTION AND ASSUMPTION WITH NO CLINCHING DOCUMENTARY EVIDEN CE DESERVES ANNULMENT. ACCORDINGLY, THE ORDERS OF AUTHORITIES B ELOW ARE SET ASIDE AND ITA NOS. 2382, 2188 & 2371-AHD-2009 59 QUASHED. RESULTANTLY, ALL ADDITIONS STAND DELETED. 9. WE HAVE SINCE ANNULLED THE ASSESSMENT ORDER PASS ED U/S 143(3) R.W.S.147 OF THE ACT ITSELF, THE OTHER GRIEVANCES R AISED BY THE ASSESSEE HAVE BECOME SUPERFLUOUS AND, THEREFORE, THEY HAVE NOT BEEN ADDRESSED TO. GROUND NOS. 1 TO 3 OF THE APPEAL OF THE ASSESSE E ARE ALLOWED. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.2188/AHD/2009 SHRI RAJIV MARDIA: 10. AS THE ISSUES RAISED BY THE ASSESSEE ARE SIMILA R TO THAT OF THE ISSUES DEALT WITH IN THE CASE OF SHRI RASIKLAL MARDIA (SUPRA), WE ARE OF THE FIRM VIEW THAT THE FINDINGS RECORDED IN THE CAS E OF SHIR RASIKLAL MARDIA HOLD GOOD FOR THIS ASSESSEE TOO. ACCORDINGL Y, REASSESSMENT PROCEEDINGS ARE SET ASIDE AND QUASHED. THEREFORE, A LL ADDITIONS STAND DELETED. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO.2371/AHD/2009 SHRI RAKESH MARDIA: 11. AS THE ISSUES RAISED BY THIS ASSESSEE ARE IDEN TICAL TO THAT OF THE ISSUES DEALT WITH IN THE CASE OF SHRI RASIKLAL MARD IA, WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS RECORDED IN SHIR RASIKLAL MARDIAS APPEAL CITED SUPRA HOLD GOOD FOR THIS ASSESSEE ALS O. ACCORDINGLY, REASSESSMENT PROCEEDINGS ARE SET ASIDE AND QUASHED. THEREFORE, ALL ADDITIONS STAND DELETED. THUS, THE APPEAL OF THE AS SESSEE IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEALS OF (I) SHRI RASIKLAL MARDIA (ITA NO.2382/AHD/2009), (II) SHRI RAJIV MARDIA (ITA NO.2 188/AHD/2009) AND ITA NOS. 2382, 2188 & 2371-AHD-2009 60 (III) SHRI RAKESH MARDIA (ITA NO.2371/AHD/2009) FOR THE ASSESSMENT YEAR 1997-98 ARE PARTLY ALLOWED. 2 + 1'% 3 & 23 / 12 /2011 ' 4 + 5. SD/- SD/- (BHAVNESH SAINI) (A.MOHAN AL ANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23/12/2011 + ++ + )/ )/ )/ )/6 66 6 76%/& 76%/& 76%/& 76%/& - 1. '( 2. )*'( 3. / -8 4. -8 - - 5. 65 )/ , , 9 6. 5: ;2 , < / = , 9 TALUKDAR/ SR. P.S.