ACIT, Central Circle - 4(3), Kolkata V. M/s. GRD Commodities Ltd., , Kolkata

ITA 2277/KOL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1587 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 05-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Document seized; Transactions in derivatives; Period of limitation; Source of fund; Tangible material; Difference of opinion; Corroborative evidences; Accommodation entries; Competent authority; Capital receipt; Reason to believe; Documents seized; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 142(1); 133A; 153A; 133(6); 201; 274; 143(2); 43; 72; 13; 153; 22; 147; 148; 132; 28; 139

Judgement Text

1 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 , C , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOL KATA () . . , .. !,' $) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT (KZ) &SHRI A. T. VARKEY, JM] IT(SS)A NOS.120 TO123/KOL/2018 ASSESSMENT YEARS: 2009-10 TO 2012-13 ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4(3), KOLKATA. VS. M/S. G R D COMMODITIES LTD. (PAN: AACCG1217C) APPELLANT RESPONDENT & C.O. NOS. 123 TO 126/KOL/2018 IN IT(SS)A NOS.120 TO 123/KOL/2018 ASSESSMENT YEARS: 2009-10 TO 2012-13 M/S. G R D COMMODITIES LTD. (PAN: AACCG1217C) VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4(3), KOLKATA. CROSS OBJECTOR RESPONDENT & ITA NO.2277/KOL/2018 ASSESSMENT YEAR: 2014-15 ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-4(3), KOLKATA. VS. M/S. G R D COMMODITIES LTD. (PAN: AACCG1217C) APPELLANT RESPONDENT DATE OF HEARING 26.10.2020 DATE OF PRONOUNCEMENT 04.12.2020 FOR THE REVENUE/APPELLANT SHRI VIJAY SHANKAR, CIT FOR THE ASSESSEE/CROSS OBJECTOR SHRI AKKAL DUDHEWELA, FCA 2 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ORDER PER A. T. VARKEY, JM: ALL THESE APPEALS PREFERRED BY THE REVENUE AND THE CROSS OBJECTIONS PREFERRED BY THE ASSESSEE ARE AGAINST THE SEPARATE ORDERS OF THELD.C IT(A)-21, KOLKATA, ALL DATED 30.08.2018 FOR AYS 2009-10 TO 2012-13& 2014-15. AND SINCE THE ISSUES INVOLVED ARE COMMON, ALL THE APPEALS AND CROSS OBJECTIONS HAVE BEEN HEARD TOGETH ER. BOTH THE PARTIES ALSO RAISED SIMILAR ARGUMENTS ON THESE ISSUES. ACCORDINGLY, WE DISPOSE OFF ALL THESE APPEALS AND CROSS OBJECTIONS BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN ALL THESE APPEALS THE SOLE ISSUE INVOLVED IS, THE DISALLOWANCE OF LOSS INCURRED BY THE ASSESSEE IN TRADING OF COMMODITIES ON THE NATIO NAL MULTI COMMODITY EXCHANGE (HEREINAFTER REFERRED TO AS THE NMCE) TREATING IT TO BE BOGUS. BRIEFLY STATED, THE FACTS OF THE PRESENT CASE ARE THAT, SEARCH U/S 132 OF THE IN COME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS CONDUCTED AGAINST THE DROLIA GR OUP ON 30-11-2012, TO WHICH THE ASSESSEE BELONGS. CONSEQUENT THERETO, NOTICES U/S 1 53A DATED 21-10-2013 WERE ISSUED UPON THE ASSESSEE FOR AYS 2007-08 TO 2012-13 AND THE ASS ESSMENTS FOR ALL THESE YEARS WERE COMPLETED U/S 153A/143(3) ON 31-03-2015. PRIOR TO C OMPLETION OF THE SAID ASSESSMENT, SURVEY ACTION U/S 133A WAS CONDUCTED UPON THE ASSES SEE ON 18-12-2014 BY THE INVESTIGATION WING AHMEDABAD, IN CONNECTION WITH TH E SEARCH CONDUCTED IN THE CASE OF COMMODITY TRADERS GROUP AT AHMEDABAD. THE LD. AR OF THE ASSESSEE SHRI AKKAL DUDHEWALA, FCA BROUGHT TO OUR NOTICE THAT, THE ASSE SSMENTS FOR AYS 2009-10 TO 2012-13 WHICH WERE COMPLETED U/S 153A/143(3) ON 31-03-2015, WERE REOPENED BY THE AO BY ISSUE OF NOTICE U/S 148 OF THE ACT AND THEREAFTER THE REA SSESSMENTS WERE COMPLETED U/S 147/153A/143(3) OF THE ACT. THE AY 2014-15 WAS SELE CTED FOR REGULAR SCRUTINY UNDER CASS AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. IN ALL THESE ASSESSMENT ORDERS FOR AYS 2009-10 TO 2012-13 AND 2014-15, THE AO DISALLOW ED THE LOSSES INCURRED BY THE ASSESSEE IN COMMODITY TRANSACTIONS CONDUCTED ON THE NMCE PLATFORM. INVITING OUR ATTENTION TO THE APPELLATE ORDERS IMPUGNED IN THESE APPEALS, THE LD. AR POINTED OUT THAT THE LD. CIT(A) HAD GIVEN RELIEF TO THE ASSESSEE ON MER ITS IN ALL THE ASSESSMENT YEARS AND AGGRIEVED BY THE SAME, THE REVENUE IS NOW IN APPEAL BEFORE THIS TRIBUNAL. HOWEVER, ACCORDING TO LD. AR, THE ASSESSEE HAD ALSO CHALLENG ED THE LEGAL VALIDITY OF REOPENING UNDER 3 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 SECTION 147/148 OF THE ACT IN AYS 2009-10 TO 2012-1 3WHICH WAS NOT ADJUDICATED BY THE LD. CIT(A) SINCE HE HAD DELETED THE ADDITIONS MADE BY T HE AO ON THE MERITS OF THE APPEALS. THE ASSESSEE HAS THEREFORE FILED CROSS OBJECTIONS (HERE INAFTER REFERRED TO AS THE CO) IN AYS 2009-10 TO 2012-13 WHEREIN THIS LEGAL ISSUE HAS BEE N RAISED. THE LD. AR SUBMITTED THAT THIS LEGAL ISSUE, IF FOUND VALID, GOES TO THE ROOT OF TH E RE-OPENING ITSELF, AND THEREFORE PLEADED THAT THE COS FILED BY THE ASSESSEE MAY BE ADJUDICA TED FIRST. PER CONTRA, THE LD. CIT, DR SHRI VIJAY SHANKAR DID NOT DISPUTE THE AFORESAID PL EA OF THE LD. AR. IN OUR VIEW AS WELL, THE LEGAL ISSUE RAISED BY THE ASSESSEE CHALLENGING THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT, IF FOUND VALID, GOES TO THE ROOT OF THE MATTER, AND THEREFORE WE DEEM IT FIT TO FIRST ADJUDICATE THE SAME. 3. WE FIRST TAKE UP THE CO FILED BY ASSESSEE FOR AY 2009-10. IT IS NOTED THAT FOR AY 2009-10, THE ASSESSEE HAD FILED ITS RETURN OF INCOM E DECLARING TOTAL INCOME OF RS. 5,32,000/-. CONSEQUENT TO THE SEARCH ACTION CONDUCTED U/S 132 O F THE ACT ON 30-11-2012, PROCEEDINGS U/S 153A WAS INITIATED BY THE AO ON 21-10-2013. IN THE ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICES U/S 143(2) & 142(1) CALLING FOR VARI OUS DOCUMENTS & INFORMATION INTER ALIA INCLUDING THE DETAILS OF TRANSACTIONS CONDUCTED IN COMMODITY DERIVATIVES ETC. AND THEREAFTER COMPLETED THE ASSESSMENT U/S 153A/143(3) OF THE ACT VIDE ORDER DATED 31-03-2015, ASSESSING THE TOTAL INCOME AT THE SAME SUM AS RETUR NED BY THE ASSESSEE. THERE IS NO DISPUTE THAT THE CASE OF THE ASSESSEE WAS REOPENED AFTER TH E EXPIRY OF FOUR YEARS , VIDE NOTICE U/S 148 OF THE ACT, DATED 31-03-2016. IN RESPONSE, THE ASSE SSEE FILED A LETTER DATED 08-04-2016 REQUIRING THE AO TO TREAT THE RETURN OF INCOME FILE D PURSUANT TO NOTICE U/S 153A OF THE ACT, AS THE RETURN IN RESPONSE TO NOTICE U/S 148 OF THE ACT. IN THE SAME LETTER IT IS NOTED THAT THE ASSESSEE REQUESTED THE AO TO SUPPLY THE REASONS REC ORDED PRIOR TO REOPENING OF THE ASSESSMENT. PURSUANT TO WHICH AO VIDE LETTER DATED 19-08-2016 SUPPLIED THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. DRAWING O UR ATTENTION TO THE RECORDED REASONS, THE LD. AR SUBMITTED THAT THE RECORDED REASONS PROCEEDE D ON THE BASIS OF THE INFORMATION CONTAINED IN THE APPRAISAL REPORT PREPARED BY INVESTIGATION DIRECTORATE, AHMEDABAD I N RELATION TO THE SURVEY CONDUCTED U/S 133A OF THE AC T ON 18-12-2014 IN THE CASE OF COMMODITY TRADERS GROUP [THIRD PARTY]. INVITING OUR ATTENTION TO THE ORDER SHEET ENTRIES MADE BY THE AO[PAGES 63 OF THE PAPER BOOK], THE LD. AR SHRI AKKAL POINTED OUT THAT THE 4 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 SAID ORDER SHEET CONTAINED ENTRY FOR ISSUE OF NOTIC E U/S 148 ON 31-03-2016 AND IN THE SAME ORDER SHEET THE FOLLOWING ENTRY WAS MADE ON 05-04-2 016. APPRAISAL REPORT IN THE SEARCH & SURVEY CASES OF COMMODITY TRADES GROUP OF AHMEDABAD (DATE OF SEARCH 18.12.2014) RECEIVED BY THE UNDER SIGNED. 4. REFERRING TO THE ABOVE CHRONOLOGY OF EVENTS, SHR I AKKAL DUDHEWALA POINTED OUT THAT WHEN THE APPRAISAL REPORT WHICH WAS THE FOUNDA TION ON WHICH THE AO HAS BASED HIS REASONS RECORDED WAS RECEIVED BY HIM ONLY ON 05-04- 2016, THEN HE (LD. AR) WONDERED AS TO HOW THE AO IN THE FIRST PLACE WAS ABLE TO RECORD IN HIS REASONS RECORDED ABOUT THE CONTENTS OF THE APPRAISAL REPORT FROM AHMEDABAD WHICH EVENT WAS PRIOR TO ISSUE OF NOTICE U/S. 148 ON 31.03.2016. IN SUCH A SCENARIO, ACCORDING TO LD. AR, WHEN THE A PPRAISAL REPORT WAS NOT AVAILABLE WITH HIM (AO) PRIOR TO THE DATE ON WHICH HE ISSUED NOTICE U/S 148 ON 31-03-2016 [ VIZ., THE LAST DATE FOR ISSUE OF NOTICE FOR AY 2009 -10 AS PER THE PERIOD OF LIMITATION PRESCRIBED IN SECTION 149 OF THE ACT ] THE AOS ACTION OF RECORDING REASON WITHOUT HAVIN G IN HIS POSSESSION INFORMATION IN THE FORM OF APPRAISAL REPORT IS PER SE BAD IN LAW. THEREFORE, SHRI AKKAL CONTENDED THAT SINCE THE AO HAD ISSUED T HE NOTICE U/S 148 ON 31-03-2016 WITHOUT THERE BEING ANY MATERIAL AVAILABLE TO HIM O N THE BASIS OF WHICH HE COULD HAVE REASONABLY FORMED A BELIEF THAT THE ASSESSEES INCO ME HAD ESCAPED ASSESSMENT, THE VERY INITIATION OF PROCEEDINGS U/S 148 OF THE ACT IS BAD IN LAW AND, THEREFORE, CONSEQUENT ORDER U/S 147/143(3) WAS NULL IN THE EYES OF LAW AND DESE RVES TO BE QUASHED. 5. MOREOVER, REFERRING TO THE FIRST PROVISO TO SECT ION 147 OF THE ACT, THE LD. AR SUBMITTED THAT, WHERE AN ASSESSEE HAD FILED A RETUR N OF INCOME AND THEREAFTER THE ASSESSMENT WAS COMPLETED EITHER UNDER SECTION 143(3) OR UNDER SECTION 147 OF THE ACT, THEN IN SUCH CASE NO NOTICE UNDER SECTION 147 OF THE ACT COULD H AVE BEEN ISSUED BEYOND FOUR YEARS FROM EXPIRY OF RELEVANT ASSESSMENT YEAR, UNLESS THE AO D EMONSTRATES IN THE RECORDED REASONS THAT INCOME HAD ESCAPED ASSESSMENT AS A CONSEQUENCE OF A SSESSEES FAILURE TO DISCLOSE TRULY AND FULLY ALL FACTS NECESSARY FOR HIS ASSESSMENT . ACCORDING TO THE LD. AR, IN THE PRESENT CASE, ALL THE RELEVANT INFORMATION AND DETAILS CONCERNING THE ASSESSEES TRADING IN COMMODITIES ON THE NMCE WERE MADE AVAILABLE AT THE TIME OF ORIGINAL AS SESSMENT AND THEREFORE IT WAS NOT A CASE THAT THE ASSESSEE HAD FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT YEAR AND IN THAT VIEW OF THE MA TTER, THE AO COULD NOT HAVE VALIDLY 5 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 REOPENED THE ASSESSMENT FOR AY 2009-10 AFTER THE EX PIRY OF FOUR YEARS. IN SUPPORT OF HIS CONTENTION, THE LD. AR RELIED ON THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF NEW DELHI TELEVISION LTD [NDTV] VS DCIT (116 TAXMAN N.COM 151). HE FURTHER SUBMITTED THAT EVEN THE REASONS AS RECORDED BY THE AO DID NOT CONTAIN ANY AVERMENT TO THE EFFECT THAT INCOME HAD ESCAPED ASSESSMENT AS A CONSEQUENCE OF A SSESSEES FAILURE TO DISCLOSE TRULY AND FULLY ALL FACTS NECESSARY FOR HIS ASSESSMENT . ACCORDING TO THE LD. AR THEREFORE, THE AOS ACTION OF RE-OPENING THE ASSESSMENT COMPLETED U/S. 143(3) AFTER FOUR YEARS, DESERVES TO BE STRUCK DOWN FOR NOT SATISFYING THE CONDITION PRECED ENT SET OUT IN THE FIRST PROVISO TO SECTION 147 OF THE ACT. 6. PER CONTRA, THE LD. CIT, DR SHRI VIJAY SHANKAR S UBMITTED THAT THE AO WAS IN POSSESSION OF EXTERNAL MATERIAL IN THE FORM OF APPRAISAL REPORT BASED ON WHICH HE HAD FORMED AN OPINION TO RE-OPEN THE ASSESSMENT. ACCORD ING TO LD. CIT, DR, THE AO WAS EXPECTED TO ONLY FORM A PRIMA FACIE VIEW AND CONSEQ UENT TENTATIVE BELIEF AT THE TIME OF RECORDING THE REASONS AND NOT PROVE THE SAME BEYOND DOUBT. HE SUBMITTED THAT THE SURVEY CONDUCTED BY THE INVESTIGATION WING, AHMEDABAD REVE ALED THAT THE ASSESSEE HAD CONTRIVED LOSSES AND THEREFORE THE AO HAD RIGHTLY RELIED ON T HE SAID INFORMATION TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. AC CORDING TO HIM, THERE IS NO REQUIREMENT IN LAW FOR THE AO TO EXPLICITLY DEMONST RATE IN HIS RECORDED REASONS THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISC LOSE TRULY AND FULLY ALL MATERIAL FACTS IN THE COURSE OF ASSESSMENT, BUT THE SAME WAS INFERABLE FR OM THE CONTENTS OF THE REASONS. HE THUS SUBMITTED THAT THE CROSS OBJECTIONS RAISED BY THE A SSESSEE DID NOT HAVE ANY MERITS AND SHOULD BE DISMISSED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES. BEFORE WE ADVERT TO THE FACTS IN THIS CASE, LET US FIRST LOOK INTO THE WELL SETTLED PRINCIPLES REGARDING REOPENING OF ASSESSMENTS COMPLETED U/S 143(3) OF THE ACT, BEYOND FOUR YEARS. IN THIS REGARD, IT IS FIRST PERTINENT TO EXAMINE THE RELEVANT PROVISION OF THE ACT I.E., SECTION 147 OF THE ACT WHICH READS AS UNDER: 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR , HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH 6 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTIC E SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE-COMPUTE THE L OSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESS MENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SH ALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR , 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 TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB- SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT Y EAR :[EMPHASIS GIVEN BY US] 8. WE NOTE THAT THE HONBLE SUPREME COURT IN THE CA SE OF M/S. CALCUTTA DISCOUNT CO LTD (41 ITR 191) HAS HELD THAT , BOTH THE CONDITIONS, (I) THE INCOME-TAX OFFICER H AVING REASON TO BELIEVE THAT THERE HAS BEEN UNDER-ASSESSM ENT AND (II) HIS HAVING REASON TO BELIEVE THAT SUCH UNDER- ASSESSMENT HAS RESULTED FROM NONDI SCLOSURE OF MATERIAL FACTS, MUST CO-EXIST BEFORE THE INCOME-TAX OFFICER HAS JURISDICTION TO S TART PROCEEDINGS AFTER THE EXPIRY OF FOUR YEARS. THE HONBLE SUPREME COURT IN THE CASE OF M/S. GANGA SARAN &SONS PVT. LTD VS. ITO REPORTED IN 131 ITR 1 (SC) FURTHER HELD THAT, THE E XPRESSION REASON TO BELIEVE OCCURRING IN SECTION 147 IS STRONGER THAN THE EXPRESSION IS SATISFIED AND THIS LEGAL REQUIREMENT HAS TO BE MET IN THE REASONS RECORDED BEFORE RE-OPENING. T HE HONBLE COURT HELD THAT IT HAS TO BE KEPT IN MIND THAT IF AN ASSESSMENT (ORIGINAL ASSESS MENT) HAS BEEN MADE U/S. 143(3), THE PROVISO TO SEC. 147 FURTHER MANDATES THAT NO ACTION SHALL BE TAKEN UNDER SECTION 147 AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. 9. IT IS WELL SETTLED THAT THE REASONS AS RECORDED FOR REOPENING THE ASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDE D TO THE REASONS RECORDED, NOR ANYTHING BE DELETED FROM THE REASONS RECORDED. THE HONBLE B OMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR [(2004) 268 IT R 332], HAS, INTER ALIA, OBSERVED THAT '..........IT IS NEEDLESS TO MENTION THAT THE REASO NS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. I T IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS FURTHER ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AN D SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND 7 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE EVIDENCE....' .THE COURT FURTHER HELD THAT, HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH VITAL L INK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPE NING OF THE CONCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEMENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE, THE REASONS WHIC H WERE LACKING IN THE MATERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY AS THEY WERE RECORDED BY THE COMPETEN T OFFICER BEFORE THE ISSUE OF THE NOTICE. 10. HENCE, IN ALL CASES WHERE ASSESSMENT IS COMPLET ED UNDER SECTION 143(3) OR UNDER SECTION 147 OF THE ACT AND SUCH CONCLUDED ASSESSMEN T IS BEING SOUGHT TO BE REOPENED BEYOND FOUR YEARS, IT IS NOT ONLY NECESSARY FOR THE AO TO FORM REASONABLE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT AS ENVISAGED IN SECTION 147 OF THE ACT BUT ADDITIONALLY HE HAS TO SHOW THAT SUCH ESCAPEMENT OCCURRED AS A RESULT OR C ONSEQUENCE OF ASSESSEES FAILURE TO DISCLOSE TRULY AND FULLY ALL FACTS NECESSARY FOR AS SESSMENT. THE AO AFTER OBTAINING INFORMATION AND DOCUMENTS FROM THE ASSESSEE CANNOT SUPPLEMENT HIS CONCLUSION ABOUT ASSESSEES FAILURE TO DISCLOSE TRULY AND FULLY MATE RIAL FACTS, IF THE RECORDED REASONS DO NOT REFER TO SUCH FAILURE. IN THE CIRCUMSTANCES, WHERE THE AO INITIATES THE REASSESSMENT PROCEEDINGS BEYOND FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR, THEN THE AO IS DUTY BOUND TO DEMONSTRATE IN HIS REASONS RECORDED P RIOR TO ISSUE OF NOTICE, THE FAILURE ON THE ASSESSEES PART TO TRULY AND FULLY DISCLOSE ALL MAT ERIAL FACTS IN THE COURSE OF ORIGINAL ASSESSMENT. 11. THIS LEGAL PRINCIPLE HAS BEEN REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF NDTV VS. DCIT (SUPRA) WHEREIN IT WAS HELD THAT, THE REVENUE CAN TAKE THE BENEFIT OF EXTENDED PERIOD OF LIMITATION BEYOND FOUR YEARS AND UPTO SIX YEARS ONLY IF THE REVENUE CAN SHOW THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. IN THIS CASE (NDTV), WE NOTE THAT T HE ASSESSEE HAD ISSUED STEP-UP CONVERTIBLE BONDS TO ITS SUBSIDIARY BASED IN THE UN ITED KINGDOM (UK) NAMED NDTV NETWORK PLC. (HEREINAFTER REFERRED TO AS THE NNPLC ). AT THE TIME OF ORIGINAL ASSESSMENT, THE ASSESSEE HAD DISCLOSED THE ISSUE OF STEP-UP COU PON BONDS FOR US$ 100 MILLION TO 8 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 NNPLC. THE ASSESSEE HAD ALSO DISCLOSED THE DETAILS OF ENTITIES WHO SUBSCRIBED TO THIS ISSUE AND ALSO THE FACT THAT THE BONDS WERE DISCOUNTED AT A LOWER RATE, BEFORE THE ASSESSMENT WAS FINALIZED. SUBSEQUENT TO COMPLETION OF THE ORIGINAL ASSESSMENT, THE AO WAS IN RECEIPT OF INFORMATION THAT THE ASSESSEE HAD UNDERTAKEN ROUND TRIPPING OF FUNDS AND THAT THESE FUNDS RAISED BY WAY OF ISSUE OF BONDS TO GROUP ENTITIES A CTUALLY REPRESENTED THE UNACCOUNTED FUNDS BELONGING TO THE ASSESSEE. THE AO ACCORDINGLY REOPE NED THE CONCLUDED ASSESSMENT AFTER EXPIRY OF FOUR YEARS AND WITHIN SIX YEARS. ON THESE FACTS THE QUESTION POSED BY THE ASSESSEE BEFORE THE HONBLE APEX COURT WAS, WHETHER THE ASSESSEE DID NOT DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS DURING THE COURSE OF ORIGINAL ASSESS MENT WHICH LED TO THE FINALISATION OF THE ASSESSMENT ORDER AND UNDISCLOSED INCOME ESCAPING DE TECTION . ANSWERING THIS QUESTION IN FAVOUR OF THE ASSESSEE, THE HONBLE APEX COURT HELD AS UNDER: 24. COMING TO THE SECOND QUESTION AS TO WHETHER THERE W AS FAILURE ON THE PART OF THE ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF ALL THE RELEVANT FACTS . THE CASE OF THE ASSESSEE IS THAT IT HAD DISCLOSED ALL FACTS WHICH WERE REQUIRED TO BE DISCLOSED. 25. THE REVENUE HAS PLACED RELIANCE ON CERTAIN COMP LAINTS MADE BY THE MINORITY SHAREHOLDERS AND IT IS ALLEGED THAT THOSE COMPLAINTS REVEAL THAT THE ASSESSEE WAS INDULGING IN ROUND TRIPPING OF ITS FUNDS. ACCORDING TO THE REVENUE THE MATERIAL DISCLOSED IN THESE COMPLAINTS CLEARLY SHOWS THAT THE ASSESSEE IS GUILTY OF CREATING A NETWORK O F SHELL COMPANIES WITH A VIEW TO TRANSFER ITS UN-TAXED INCOME IN INDIA TO ENTITIES ABROAD AND THE N BRING IT BACK TO INDIA THEREBY AVOIDING TAXATION. WE MAKE IT CLEAR THAT WE ARE NOT GOING IN TO THIS ASPECT OF THE MATTER BECAUSE THOSE COMPLAINTS HAVE NOT SEEN LIGHT OF THE DAY EITHER BE FORE THE HIGH COURT OR THIS COURT AND, THEREFORE, IT WOULD BE UNFAIR TO THE ASSESSEE IF WE RELY UPON SUCH MATERIAL WHICH THE ASSESSEE HAS NOT BEEN CONFRONTED WITH . 26. EVEN BEFORE THE ASSESSMENT ORDER WAS PASSED ON 03.08.2012, THE ASSESSING OFFICER WAS AWARE OF THE ENTITIES WHICH HAD SUBSCRIBED TO THE C ONVERTIBLE BONDS. THIS IS APPARENT FROM THE COMMUNICATION DATED 8-4-2011. THE CASE OF THE REVEN UE IS THAT THE ASSESSEE DID NOT DISCLOSE THE AMOUNT SUBSCRIBED BY EACH OF THE ENTITIES AND FURTH ERMORE THE MANAGEMENT STRUCTURE OF THESE COMPANIES. WE ARE NOT IN AGREEMENT WITH THIS SUBMIS SION OF THE REVENUE. IT IS APPARENT FROM THE RECORDS OF THE CASE THAT THE REVENUE WAS AWARE OF T HE ENTITIES WHICH SUBSCRIBED TO THE CONVERTIBLE BONDS. IT HAS BEEN URGED THAT THESE ARE BOGUS COMPANIES, BUT WE ARE NOT CONCERNED WITH THAT AT THIS STAGE. THE ISSUE BEFORE US IS WHE THER THE REVENUE CAN TAKE THE BENEFIT OF THE EXTENDED PERIOD OF LIMITATION OF 6 YEARS FOR INITIA TING PROCEEDINGS UNDER THE FIRST PROVISO SECTION 147 OF THE ACT. THIS CAN ONLY BE DONE IF THE REVENU E CAN SHOW THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT. THE ASSESSEE, IN OUR VIEW HAD DISCLOSED ALL THE FACTS IT WAS BOUND TO DISCLOS E. IF THE REVENUE WANTED TO INVESTIGATE THE MATTER FURTHER AT THAT STAGE IT COULD HAVE EASILY D IRECTED THE ASSESSEE TO FURNISH MORE FACTS . 27. THE HIGH COURT HELD THAT THERE WAS NO 'TRUE AND FAIR DISCLOSURE' IN VIEW OF THE LAW LAID DOWN BY THIS COURT IN PHOOL CHAND BAJRANGLAL'S CASE (SUPRA), AND THE JUDGMENT OF THE DELHI HIGH COURT IN HONDA SIEL POWER PRODUCTS LTD. V. DY. CIT [2011] 110 TAXMANN 2/197 TAXMAN 415/[2012] 340 ITR 53 (DELHI). WE HAVE ALREADY REFE RRED TO THE JUDGMENT IN PHOOL CHAND'S CASE (SUPRA), WHEREIN IT WAS HELD THAT WHER E THE TRANSACTION OF A PARTICULAR ASSESSMENT YEAR IS FOUND TO BE A BOGUS TRANSACTION, THE DISCLO SURES MADE COULD NOT BE SAID TO BE ALL 'TRUE' AND 'FULL'. RELYING UPON THE SAID JUDGMENT THE HIGH COURT HELD THAT MERELY BECAUSE THE 9 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 TRANSACTION OF CONVERTIBLE BONDS WAS DISCLOSED AT T HE TIME OF ORIGINAL ASSESSMENT DOES NOT MEAN THAT THERE IS TRUE AND FULL DISCLOSURE OF FACTS. 28. WE ARE UNABLE TO AGREE WITH THIS REASONING GIVE N BY THE HIGH COURT. THE ASSESSEE AS MENTIONED ABOVE MADE A DISCLOSURE ABOUT HAVING AGRE ED TO STAND GUARANTEE FOR THE TRANSACTION BY NNPLC AND IT HAD ALSO DISCLOSED THE FACTUM OF TH E ISSUANCE OF CONVERTIBLE BONDS AND THEIR REDEMPTION. THE INCOME, IF ANY, AROSE BECAUSE OF TH E REDEMPTION AT A DISCOUNTED PRICE. THIS WAS AN EVENT WHICH TOOK PLACE SUBSEQUENT TO THE ASSESSM ENT YEAR IN QUESTION THOUGH IT MAY BE INCOME FOR THE ASSESSMENT YEAR. AS WE HAVE OBSERVED ABOVE, ALL RELEVANT FACTS WERE DULY WITHIN THE KNOWLEDGE OF THE ASSESSING OFFICER. THE ASSESSI NG OFFICER KNEW WHO WERE THE ENTITIES WHO HAD SUBSCRIBED TO OTHER CONVERTIBLE BONDS AND IN OT HER PROCEEDINGS RELATING TO THE SUBSIDIARIES THE SAME ASSESSING OFFICER HAD KNOWLEDGE OF ADDRESS ES AND THE CONSIDERATION PAID BY EACH OF THE BONDHOLDERS AS IS APPARENT FROM ASSESSMENT ORDE RS DATED 3-8-2012 PASSED IN THE CASES OF M/S. NDTV LABS LTD. AND M/S. NDTV LIFESTYLE LTD. TH EREFORE, IN OUR OPINION THERE WAS FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT BY THE ASSESSEE. [EMPHASIS GIVEN BY US] 12. BEFORE THE HONBLE APEX COURT, THE REVENUE HAD ARGUED THAT, IT WAS TO AVOID DETECTION OF THE ACTUAL SOURCE OF FUNDS OF ITS SUBS IDIARIES, THAT THE ASSESSEE DID NOT DISCLOSE THE COMPLETE DETAILS OF THE SUBSIDIARIES AT THE TIM E OF ORIGINAL ASSESSMENT. IT WAS FURTHER CONTENDED THAT CERTAIN DOCUMENTS CONCERNING THE BON D ISSUE WERE ALSO NOT FURNISHED AT THE TIME OF THE ORIGINAL ASSESSMENT WHICH AMOUNTED TO F AILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS. MOREOVER, CO MPLAINTS HAD BEEN FILED BY SHAREHOLDERS AGAINST THE ASSESSEE SUBSEQUENT TO COMPLETION OF AS SESSMENT, WHICH ACCORDING TO REVENUE, ALSO SHOWED THAT THERE WAS NON-DISCLOSURE OF FACTS. HOWEVER, THE HONBLE SUPREME COURT REJECTED ALL THESE CONTENTIONS RAISED BY THE REVENU E, BY OBSERVING AS UNDER: 29. THE FACT THAT STEP-UP COUPON BONDS FOR US$ 100 MILLION WERE ISSUED BY NNPLC WAS DISCLOSED; WHO WERE THE ENTITIES WHICH SUBSCRIBED T O THE BONDS WAS DISCLOSED; AND THE FACT THAT THE BONDS WERE DISCOUNTED AT A LOWER RATE WAS ALSO DISCLOSED BEFORE THE ASSESSMENT WAS FINALISED. THIS TRANSACTION WAS ACCEPTED BY THE ASS ESSING OFFICER AND IT WAS CLEARLY HELD THAT THE ASSESSEE WAS ONLY LIABLE TO RECEIVE A GUARANTEE FEE S ON THE SAME WHICH WAS ADDED TO ITS INCOME. WITHOUT SAYING ANYTHING FURTHER ON MERITS OF THE TR ANSACTION WE ARE OF THE VIEW THAT IT CANNOT BE SAID THAT THE ASSESSEE HAD WITHHELD ANY MATERIAL IN FORMATION FROM THE REVENUE. 30. ACCORDING TO THE REVENUE THE ASSESSEE TO AVOID DETECTION OF THE ACTUAL SOURCE OF FUNDS OF ITS SUBSIDIARIES DID NOT DISCLOSE THE DETAILS OF THE SU BSIDIARIES IN ITS FINAL ACCOUNTS, BALANCE SHEETS, AND PROFIT AND LOSS ACCOUNT FOR THE RELEVANT PERIOD AS WAS MANDATORY UNDER THE PROVISIONS OF THE INDIAN COMPANIES ACT,1956. IT IS NOT DISPUTED T HAT THE ASSESSEE HAD OBTAINED AN EXEMPTION FROM THE COMPETENT AUTHORITY UNDER THE COMPANIES AC T, 1956 FROM PROVIDING SUCH DETAILS IN ITS FINAL ACCOUNTS, BALANCE SHEETS, ETC. AS SUCH IT CAN NOT BE SAID THAT THE ASSESSEE WAS BOUND TO DISCLOSE THIS TO THE ASSESSING OFFICER. THE ASSESSI NG OFFICER BEFORE FINALISING THE ASSESSMENT OF 03.08.2012HAD NEVER ASKED THE ASSESSEE TO FURNISH T HE DETAILS. 31.THE REVENUE NOW HAS COME UP WITH THE PLEA THAT C ERTAIN DOCUMENTS WERE NOT SUPPLIED BUT ACCORDING TO US ALL THESE DOCUMENTS CANNOT BE SAID TO BE DOCUMENTS WHICH THE ASSESSEE WAS BOUND TO DISCLOSE AT THE TIME OF ASSESSMENT. THE MA IN GROUND RAISED BY THE REVENUE IS THAT THE ASSESSEE DID NOT DISCLOSE AS TO WHO HAD SUBSCRIBED WHAT AMOUNT AND WHAT WAS ITS RELATIONSHIP 10 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 WITH THE ASSESSEE. AS FAR AS THE FIRST PART IS CONC ERNED IT DOES NOT APPEAR TO BE CORRECT. THERE IS MATERIAL ON RECORD TO SHOW THAT ON 08.04.2011 NNPLC HAD SENT A COMMUNICATION TO THE DEPUTY DIRECTOR OF INCOME TAX(INVESTIGATION), WHEREIN IT H AD NOT ONLY DISCLOSED THE NAMES OF ALL THE BOND HOLDERS BUT ALSO THEIR ADDRESSES; NUMBER OF BO NDS ALONG WITH THE TOTAL CONSIDERATION RECEIVED. THIS CHART FORMS PART OF THE ASSESSMENT O RDERS DATED 3-8-2012 IN THE CASE OF M/S. NDTV LABS LTD. AND M/S. NDTV LIFESTYLE LTD. THE SAI D TWO ASSESSMENT ORDERS WERE PASSED BY THE SAME OFFICER WHO HAD PASSED THE ASSESSMENT ORDE R IN THE CASE OF THE ASSESSEE ON THE SAME DATE ITSELF. THEREFORE, THE ENTIRE MATERIAL WAS AVA ILABLE WITH THE REVENUE. 32. A NUMBER OF DECISIONS HAVE BEEN CITED AS TO WHA T IS MEANT BY TRUE AND FULL DISCLOSURE. IT IS NOT NECESSARY TO MULTIPLY DECISIONS, AS LAW IN THIS REGARD HAS BEEN SUCCINCTLY LAID DOWN BY A CONSTITUTION BENCH OF THIS COURT IN CALCUTTA DISCOUNT CO. LTD. V. ITO AIR 1961 SC 372, WHEREIN IT WAS HELD AS FOLLOWS: '(8)...THE WORDS USED ARE 'OMISSION OR FAILURE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR'. IT POSTULATES A DUTY ON EVERY ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR HIS ASSESSMENT. WHAT FACTS ARE MATERIAL, AND NECESSARY FOR ASSESSMENT WILL DIFFER FROM CASE TO CASE. IN EVERY ASSESSMENT PROCEEDING, THE ASSESSING AUTHORITY WILL , FOR THE PURPOSE OF COMPUTING OR DETERMINING THE PROPER TAX DUE FROM AN ASSESSEE, RE QUIRE TO KNOW ALL THE FACTS WHICH HELP HIM IN COMING TO THE CORRECT CONCLUSION. FROM THE PRIMARY FACTS IN HIS POSSESSION, WHETHER ON DISCLOSURE BY THE ASSESSEE, OR DISCOVERE D BY HIM ON THE BASIS OF THE FACTS DISCLOSED, OR OTHERWISE THE ASSESSING AUTHORITY H AS TO DRAW INFERENCES AS REGARDS CERTAIN OTHER FACTS; AND ULTIMATELY, FROM THE PRIMA RY FACTS AND THE FURTHER FACTS INFERRED FROM THEM, THE AUTHORITY HAS TO DRAW THE PROPER LEG AL INFERENCES, AND ASCERTAIN ON A CORRECT INTERPRETATION OF THE TAXING ENACTMENT, THE PROPER TAX LEVIABLE. THUS, WHEN A QUESTION ARISES WHETHER CERTAIN INCOME RECEIVED BY AN ASSESSEE IS CAPITAL RECEIPT, OR REVENUE RECEIPT, THE ASSESSING AUTHORITY HAS TO FIN D OUT WHAT PRIMARY FACTS HAVE BEEN PROVED, WHAT OTHER FACTS CAN BE INFERRED FROM THEM, AND TAKING ALL THESE TOGETHER, TO DECIDE WHAT THE LEGAL INFERENCE SHOULD BE. (9) THERE CAN BE NO DOUBT THAT THE DUTY OF DISCLOSI NG ALL THE PRIMARY FACTS RELEVANT TO THE DECISION OF THE QUESTION BEFORE THE ASSESSING A UTHORITY LIES ON THE ASSESSEE. TO MEET A POSSIBLE CONTENTION THAT WHEN SOME ACCOUNT BOOKS OR OTHER EVIDENCE HAS BEEN PRODUCED, THERE IS NO DUTY ON THE ASSESSEE TO DISCL OSE FURTHER FACTS, WHICH ON DUE DILIGENCE, THE INCOME- TAX OFFICER MIGHT HAVE DISCO VERED, THE LEGISLATURE HAS PUT IN THE EXPLANATION, WHICH HAS BEEN SET OUT ABOVE. IN VIEW OF THE EXPLANATION, IT WILL NOT BE OPEN TO THE ASSESSEE TO SAY, FOR EXAMPLE 'I HAVE PRODUCED THE ACCOUNT BOOKS AND THE DOCUMENTS: YOU, THE ASSESSING OFFICER EXAMINE THEM, AND FIND OUT THE FACTS NECESSARY FOR YOUR PURPOSE: MY DUTY IS DONE WITH DISCLOSING T HESE ACCOUNT-BOOKS AND THE DOCUMENTS.' HIS OMISSION TO BRING TO THE ASSESSING AUTHORITY'S ATTENTION THESE PARTICULAR ITEMS IN THE ACCOUNT BOOKS, OR THE PARTICULAR PORTI ONS OF THE DOCUMENTS, WHICH ARE RELEVANT, WILL AMOUNT TO 'OMISSION TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT.' NOR WILL HE BE ABLE TO CONTEND SUCCESSFULLY THAT BY DISCLOSING CERTAIN EVIDENCE, HE SHOULD BE DEEMED TO HAVE DISCLOSED OTHER EVIDENCE, WHICH MIGHT HAVE BEEN DISCOVERED BY THE ASSESSING A UTHORITY IF HE HAD PURSUED INVESTIGATION ON THE BASIS OF WHAT HAS BEEN DISCLOS ED. THE EXPLANATION TO THE SECTION, GIVES A QUIETUS TO ALL SUCH CONTENTIONS; AND THE PO SITION REMAINS THAT SO FAR AS PRIMARY FACTS ARE CONCERNED, IT IS THE ASSESSEE'S DUTY TO D ISCLOSE ALL OF THEM INCLUDING PARTICULAR ENTRIES IN ACCOUNT BOOKS, PARTICULAR POR TIONS OF DOCUMENTS AND DOCUMENTS, AND OTHER EVIDENCE, WHICH COULD HAVE BEEN DISCOVERE D BY THE ASSESSING AUTHORITY, FROM THE DOCUMENTS AND OTHER EVIDENCE DISCLOSED. (10) DOES THE DUTY HOWEVER EXTEND BEYOND THE FULL A ND TRUTHFUL DISCLOSURE OF ALL PRIMARY FACTS? IN OUR OPINION, THE ANSWER TO THIS QUESTION MUST BE IN THE NEGATIVE. ONCE ALL THE PRIMARY FACTS ARE BEFORE THE ASSESSING AUTHORITY, H E REQUIRES NO FURTHER ASSISTANCE BY WAY OF DISCLOSURE. IT IS FOR HIM TO DECIDE WHAT INF ERENCES OF FACTS CAN BE REASONABLY DRAWN AND WHAT LEGAL INFERENCES HAVE ULTIMATELY TO BE DRAWN. IT IS NOT FOR SOMEBODY 11 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ELSE FAR LESS THE ASSESSEE TO TELL THE ASSESSIN G AUTHORITY WHAT INFERENCES WHETHER OF FACTS OR LAW SHOULD BE DRAWN. INDEED, WHEN IT IS REMEMBERED THAT PEOPLE OFTEN DIFFER AS REGARDS WHAT INFERENCES SHOULD BE DRAWN FROM GIV EN FACTS, IT WILL BE MEANINGLESS TO DEMAND THAT THE ASSESSEE MUST DISCLOSE WHAT INFEREN CES WHETHER OF FACTS OR LAW HE WOULD DRAW FROM THE PRIMARY FACTS. (11) IF FROM PRIMARY FACTS MORE INFERENCES THAN ONE COULD BE DRAWN, IT WOULD NOT BE POSSIBLE TO SAY THAT THE ASSESSEE SHOULD HAVE DRAWN ANY PARTICULAR INFERENCE AND COMMUNICATED IT TO THE ASSESSING AUTHORITY. HOW COU LD AN ASSESSEE BE CHARGED WITH FAILURE TO COMMUNICATE AN INFERENCE, WHICH HE MIGHT OR MIGHT NOT HAVE DRAWN?' A CAREFUL ANALYSIS OF THIS JUDGMENT INDICATES THAT THE CONSTITUTION BENCH HELD THAT IT IS THE DUTY OF THE ASSESSEE TO DISCLOSE FULL AND TRULY ALL MATE RIAL FACTS WHICH IT TERMED AS PRIMARY FACTS. NONDISCLOSURE OF OTHER FACTS WHICH MAY BE TERMED AS SECONDARY FACTS IS NOT NECESSARY. IN LIGHT OF THE ABOVE LAW, WE SHALL DEAL WITH THE FACTS OF T HE PRESENT CASE . 33. IN OUR VIEW THE ASSESSEE DISCLOSED ALL THE PRIM ARY FACTS NECESSARY FOR ASSESSMENT OF ITS CASE TO THE ASSESSING OFFICER. WHAT THE REVENUE URGES IS THAT THE ASSESSEE DID NOT MAKE A FULL AND TRUE DISCLOSURE OF CERTAIN OTHER FACTS. WE ARE OF THE VI EW THAT THE ASSESSEE HAD DISCLOSED ALL PRIMARY FACTS BEFORE THE ASSESSING OFFICER AND IT WAS NOT R EQUIRED TO GIVE ANY FURTHER ASSISTANCE TO THE ASSESSING OFFICER BY DISCLOSURE OF OTHER FACTS. IT WAS FOR THE ASSESSING OFFICER AT THIS STAGE TO DECIDE WHAT INFERENCE SHOULD BE DRAWN FROM THE FACT S OF THE CASE. IN THE PRESENT CASE THE ASSESSING OFFICER ON THE BASIS OF THE FACTS DISCLOS ED TO HIM DID NOT DOUBT THE GENUINESS OF THE TRANSACTION SET UP BY THE ASSESSEE. THIS THE ASSESS ING OFFICER COULD HAVE DONE EVEN AT THAT STAGE ON THE BASIS OF THE FACTS WHICH HE ALREADY KNEW. TH E OTHER FACTS RELIED UPON BY THE REVENUE ARE THE PROCEEDINGS BEFORE THE DRP AND FACTS SUBSEQUENT TO THE ASSESSMENT ORDER, AND WE HAVE ALREADY DEALT WITH THE SAME WHILE DECIDING ISSUE NO .1. HOWEVER, THAT CANNOT LEAD TO THE CONCLUSION THAT THERE IS NON-DISCLOSURE OF TRUE AND MATERIAL FACTS BY THE ASSESSEE.[EMPHASIS GIVEN BY US] 13. FROM THE ABOVE BINDING RATIO OF DECISION OF THE HONBLE APEX COURT, THE PRINCIPLE WHICH THUS EMERGES IS THAT, THE REVENUE CAN TAKE TH E BENEFIT OF THE EXTENDED PERIOD OF LIMITATION OF 6 YEARS FOR INITIATING PROCEEDINGS UN DER THE FIRST PROVISO TO SECTION 147 OF THE ACT ONLY IF THE REVENUE CAN SHOW THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE REQUIREMENT OF LAW IN THIS REGARD IS THAT, THE ASSESSEE MUST DISCLOSE THE PRIMARY FACTS BEFORE THE AO AND THE ASSESSEE IS NOT REQUIRED TO GIVE ANY FURTHER ASSISTANCE TO THE AO BY DISCLOS URE OF OTHER FACTS. THEREAFTER, IT IS FOR THE AO TO DECIDE AS TO WHAT INFERENCE SHOULD BE DRAWN F ROM THE PRIMARY FACTS DISCLOSED AND, THE NON-DISCLOSURE OF OTHER FACTS WHICH MAY BE TERMED A S SECONDARY FACTS IS NOT NECESSARY, SO AS TO EMPOWER THE AO TO ASSUME JURISDICTION U/S 147/14 8 OF THE ACT TO REOPEN THE CONCLUDED ASSESSMENT IN TERMS OF THE FIRST PROVISO TO SECTION 147 OF THE ACT. 14. IN THE LIGHT OF THE LEGAL PRINCIPLES SET OUT AB OVE, LET US NOW EXAMINE THE REASONS RECORDED BY THE AO IN ORDER TO REOPEN THE ASSESSMEN T AFTER FOUR YEARS AND WITHIN SIX YEARS, WHICH IS FOUND PLACED AT PAGE 42 OF THE PAPER BOOK FOR AY 2009-10, WHICH READS AS UNDER: 12 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 A SEARCH AND SURVEY IN THE CASES OF COMMODITY TRA DERS GROUP OF AHMEDABAD WAS CONDUCTED BY INVESTIGATION DIRECTORATE, AHMEDABAD ON 18.12.20 14. SUBSEQUENTLY, CASES HAVING JURISDICTION OUTSIDE THE GUJARAT REGION WERE APPROV ED FOR CENTRALIZATION IN RESPECTIVE REGIONS. IT WAS COMMUNICATED BY THE DGIT (INVESTIGATION) KOLKAT A TO INVESTIGATION WING AHMEDABAD THAT VIDE HIS LETTER DATED 11.02.2016 THAT CASES PERTAIN ING TO KOLKATA REGION HAVE BEEN CENTRALIZED WITH THE UNDERSIGNED . AS PER RELEVANT OF APPRAISAL REPORT OF COMMODITY TR ADERS GROUP OF AHMEDABAD IT HAS BEEN FOUND THAT CONTRIVED LOSSES AMOUNTING TO RS.5, 82,07,948/- HAS BEEN OBTAINED DURING THE F. Y 2008.09 I .E. A. Y 2009-10 BY M/S. GRD COMMODIT IES LTD. (PAN AACCG1217C), ONE OF THE ASSESSEE COMPANY PERTAINING TO THIS GROUP UNDER THI S CHARGE. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME OF THE ASSESSEE AT LEAST TO THE EXTENT OF RS.5,82,07,948/- HAD ESCAPED ASSESSMENT I N TERMS OF SECTION 147 OF THE ACT. 15. PERUSAL OF THE AFORESAID RECORDED REASONS SHOWS THAT THE AO HAD INVOKED HIS REOPENING JURISDICTION U/S. 147 OF THE ACT BASED ON THE APPRAISAL REPORT RECEIVED FROM INVESTIGATION DIRECTORATE, AHMEDABAD IN RELATION TO THEIR SEARCH AND SURVEY ACTION CONDUCTED IN THE CASE OF COMMODITY TRADERS GROUP. A CCORDING TO THE AO, THE CONTENTS OF THE RELEVANT APPRAISAL REPORT SHOWED THAT CONTRIVED LOSSES IN COMMODITY TRANSACTIONS AMOUNTING TO RS.5,82,07,948/- HAS BEEN OBTAINED BY THE ASSESSEE DURING THE FINANCIAL YEAR CORRESPONDING TO AY 2009-10.THEREFORE, HE FORMED A BELIEF THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT IN TERMS OF SECTION 147 OF THE A CT. HERE, WE NOTE THAT THE ORIGINAL ASSESSMENT IN THE CASE OF THE ASSESSEE WAS COMPLETE D ON 31-03-2015 U/S 153A/143(3) OF THE ACT. IT WAS BROUGHT TO OUR NOTICE THAT THE ASSESSEE S PREMISE WAS SEARCHED ON 30-11-2012 AND CONSEQUENT THERETO, PROCEEDINGS U/S 153A WAS IN ITIATED FOR THE RELEVANT AY 2009-10 ON 21-10-2013. IN THE NOTICE ISSUED U/S 142(1) OF THE ACT, DATED 20-10-2014, [PAGES 15 TO 16 OF THE PAPER BOOK] THE AO HAD SPECIFICALLY ENQUIRED TH E DETAILS OF THE ASSESSEES TRANSACTION IN COMMODITY DERIVATIVES, EXTRACTS OF THE NOTICE IS AS UNDER: A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN TH E CASE OF DROLIA GROUP ON 30.11.2012. THE ASSESSEE NAMED GRD COMMODITIES LTD IS CONNECTED WIT H THIS GROUP. DURING THE COURSE OF SEARCH, SEVERAL BOOKS OF ACCOUNTS, DOCUMENTS AND HARD DISCS WERE FOUND AND SEIZED. ON PERUSAL OF THE SEIZED DOCUMENTS SEVERAL DOCUMENTS WERE FOUND WHICH ARE RE LATED TO THE ASSESSEE. 1. BANK ACCOUNTS BEARING NO. 00080340009059, 000803400 03059, 00990680017133, 00990690003832, 00990680002680, 00080340046627, 000 80340039805 AND 00990690003822 LYING WITH HDFC BANK, STEPHEN HOUSE BRANCH, KOLKATA WERE FOUND DURING THE SEARCH OPERATION. PLEASE FURNISH THE STATEMENTS OF ABOVE MENTIONED BANK ACCOUNTS FOR THE PERIOD 2006-07 TO 2012-13. 13 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 2. PAGE NO.4 OF GRD/3 SPEAKS ABOUT THE INVESTMENT MADE BY THE COMPANY IN THE FORM OF FDS AMOUNTING TO RS. 13.22 CR TO DIFFERENT SECTOR DURIN G THE F.Y. 2010-11 TO 2012-13. YOU ARE REQUESTED TO FURNISH THE YEAR WISE DETAILS OF FDS M ADE ALONG WITH THE SOURCE OF SUCH INVESTMENT. 3. DURING THE F.Y. 2010-11 THE COMPANY HAS ALLOTTED 1, 00,000 SHARES TO DIFFERENT PAPER COMPANIES LIKE M/S PRATUSH COMMERCIAL PVT. LTD., M/ S RAGHVAN DEALERS (P) LTD., DEERGOLD DEALERS (P) LTD. AND OTHER JAMAKHARCHI COMPANIES AT A HUGE PREMIUM OF RS. 490/- WHERE THE BASE PRICE OF THE SHARES WERE ONLY RS.10/- THOUGH T HE COMPANY WAS NOT A REPUTED COMPANY. SO, YOU ARE REQUESTED TO SHOW CAUSE AS TO WHY THE S HARE PREMIUM MONEY OF RS.4,90,000/- SHOULD NOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE COMPANY AS THE PURCHASER OF THE SHARE ARE ALSO THE SISTER CONCERN OF DROLIA GRO UP. AS PER RETURN (A.Y. 2009-10) 1. DETAILS OF UNSECURED LOAN FROM BODY CORPORATES OF R S.1,79,01,844/-, LOAN CONFIRMATION AND SOURCE OF SUCH MONEY, COPY OF BANK STATEMENT REFLEC TING THE LOAN TRANSACTION AND NAME, ADDRESS & PAN OF THE PERSON/COMPANY/FIRM WHO HAVE G IVEN THE LOAN TO THE COMPANY WITH SUPPORTING EVIDENCES. 2. DETAILS OF CASH IN HAND OF RS.1,37,869/- WITH SUPPO RTING EVIDENCES. 3. DETAILS OF BANK BALANCE OF RS.8,26,405/- AND NARRAT ION OF EACH ENTRY WITH SUPPORTING EVIDENCE. 4. DETAILS OF FIXED DEPOSIT IN BANK OF RS.2,90,00,000/ - AND SOURCE THEREOF AND INTEREST ACCRUED ON FIXED DEPOSIT OF RS.15,98,635/- ALONG WITH SUPPO RTING EVIDENCES. 5. DETAILS OF LOANS AND ADVANCES OF RS.1,12,86,387/- A ND SOURCE OF SUCH LOAN, LOAM CONFIRMATION, COPY OF BANK STATEMENT REFLECTING THE LOAN TRANSACTION AND NAME & COMPLETE ADDRESS OF THE PERSON/COMPANY/FIRM WHO HAVE TAKEN T HE LOAN FROM THE COMPANY. 6. DETAILS OF SUNDRY CREDITOR MCX (COMMODITIES) OF RS. 3,34,385/-. SUNDRY CREDITORS (CLIENT) OF RS.11,04,911/-. SUNDRY CREDITORS FOR EXPENSES OF R S.9,93,470/-. STATUTORY DUES OF RS.98,727/- AND CLIENT CASH MARGIN DEPOSIT OF RS.16 ,33,439/- ALONG WITH SUPPORTING EVIDENCES. 7. DETAILS OF INCOME FROM DERIVATIVE TRANSACTIONS OF R S.19,45,782/- ALONG WITH SUPPORTING EVIDENCES. 8. DETAILS OF BROKERAGE INCOME OF RS.12,18,020/- ALONG WITH SUPPORTING EVIDENCES. 9. DETAILS OF TRANSACTION CHARGES OF RS.23,99,420/- AL ONG WITH SUPPORTING EVIDENCES. 10. DETAILS OF NCDEX RELATED EXPENSES OF RS.1,93,685/- ALONG WITH SUPPORTING EVIDENCES. 11. DETAILS OF MCX RELATED CHARGES OF RS.2,89,811/- ALO NG WITH SUPPORTING EVIDENCES. 12. DETAILS OF INTEREST PAID OF RS.6,16,047/- ALONG WIT H SUPPORTING EVIDENCES. 13. DETAILS OF SALARY & BONUS OF RS.8,51,287/-, BANK GU ARANTEE CHARGES OF RS.1,59,135/-, FILING FEES OF RS.1,500/-, RENT OF RS.2,94,000/-, RATES AN D TAXES OF RS.4,350/-, FOODS & BEVERAGES OF RS. 90,009/-, STIPEND OF RS.99,709/- AND TRAVELL ING & CONVEYANCES OF RS.80,298/- ALONG WITH SUPPORTING EVIDENCES. 14. BOOKS OF ACCOUNTS ALONG WITH SUPPORTING EVIDENCES. OTHER SUPPORTING EVIDENCES. [EMPHASIS GIVEN BY US] 16. IT IS NOTED THAT THE ASSESSEE HAD REPLIED TO TH E ABOVE NOTICE VIDE LETTER DATED 19.02.2015 WHICH IS PLACED AT PAGES 17 AND 32 OF TH E PAPER BOOK. PERUSAL OF THE REPLY SHOWS THAT THE ASSESSEE HAD FURNISHED COMPLETE DETAILS OF THE COMMODITIES TRANSACTIONS CONDUCTED 14 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ON THE PLATFORM OF NMCE ALONG WITH BROKER-WISE LEDG ER OF THE DERIVATIVES CONTRACTS EXECUTED DURING THE YEARS AND THE PAYMENTS/RECEIPTS MADE IN RELATION THERETO. THE AO BY HIS ORDER SHEET ENTRIES DATED 11.03.2015 & 23.03.2015 [ PAGE 65 OF PAPER BOOK] ACKNOWLEDGED THAT THE ASSESSEE HAD FURNISHED ALL SUPPORTING DOCU MENTS AS DESIRED BY HIM IN RESPECT OF THE REPLY FURNISHED IN RESPONSE TO NOTICE U/S 142(1) OF THE ACT. ALL THESE FACTS CONSIDERED CUMULATIVELY SUPPORT THE ASSESSEES CONTENTION THAT IT HAD DISCLOSED ALL THE PRIMARY FACTS RELATING TO ITS TRANSACTIONS ON NMCE BEFORE THE AO INTER ALIA INCLUDING THE LOSSES INCURRED IN TRADING OF COMMODITIES. 17. ON THE OTHER HAND, THE REASONS AS RECORDED BY T HE AO SHOWS THAT, EXCEPT FOR MAKING BALD REFERENCE TO THE APPRAISAL REPORT OF THE INVES TIGATION DIRECTORATE AT AHMEDABAD, NEITHER DID HE SET OUT IN HIS REASONS THE RELEVANT CONTENTS OF THE REPORT BASED ON WHICH HE WAS ABLE TO FORM A REASONABLE BELIEF THAT THE LOSSES INCURRE D IN TRADING OF COMMODITIES ON NMCE PLATFORM WAS CONTRIVED NOR ANY CASE WAS MADE OUT BY THE AO THAT THE ALLEGED ESCAPEMENT OF INCOME WAS ON ACCOUNT OF ASSESSEES FAILURE TO DISC LOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR AY 2009-10. IN FAC T WE NOTE THAT IN THE REASONS RECORDED, THE AO HAD NOT SPOKEN OF ANY FACTS FROM WHICH ONE C AN INFER THAT THE PRIMARY FACTS OF THE COMMODITY TRANSACTIONS AS DISCLOSED IN THE ORIGINAL ASSESSMENT COULD BE TAKEN AS FALSE OR UNTRUE OR INCOMPLETE. HENCE, RESPECTFULLY FOLLOWING THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF NDTV LTD VS DCIT (SUPR A), WE THEREFORE HOLD THAT THE INITIATION OF REASSESSMENT PROCEEDINGS WAS BAD IN L AW AS IT DID NOT SATISFY THE CONDITION PRECEDENT IN THE FIRST PROVISO TO SECTION 147 OF TH E ACT. 18. WE ALSO FIND MERIT IN THE ALTERNATE CONTENTION MADE BY THE LD. AR THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 31-03-2016 WITHOUT FIR ST FORMING REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. AS NOTED IN THE RECORDED REASONS EARLIER, THE VERY PREMISE OF THE AO FOR REOPENING THE ASSESS MENT FOR AY 2009-10 WAS THE APPRAISAL REPORT OF THE SEARCH AND SURVEY CASES OF COMMODITY TRADERS GROUP OF AHMEDABAD. 19. ON EXAMINATION OF THE ENTRIES MADE BY THE AO IN THE ORDER SHEET [PAGE 63 OF THE PAPER BOOK], IT IS NOTED THAT THE AO HAD RECEIVED T HE APPRAISAL REPORT OF THE SEARCH AND SURVEY CASES OF COMMODITY TRADERS GROUP OF AHMEDABA D ONLY ON 05-04-2016. HOWEVER, 15 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE NOTICE FOR REOPENING, WHICH IS PLACED AT PAGE 4 0 OF THE PAPER BOOK, IS DATED 31-03-2016 (LAST DATE FOR ISSUE OF NOTICE IN RESPECT OF AY 200 9-10 ). THESE EVENTS SHOW THAT THE AO HAD RECEIVED THE APPRAISAL REPORT FIVE DAYS AFTER THE I SSUANCE OF NOTICE ON 31-03-2016. IN THIS CONTEXT, IT HAS TO BE KEPT IN MIND THE HONBLE APEX COURT HAS HELD IN 258 ITR 317 AND 253 ITR 86; THE CONDITION PRECEDENT FOR RE-OPENING U/S 147 OF THE ACT IS THAT THE AO SHOULD HAVE REASON TO BELIEVE ESCAPEMENT OF INCOME, AND THE REASON TO BELIEVE POSTULATE A FOUNDATION BASED ON INFORMATION AND A BELIEF BASED ON REASON. SO WE NOTE THAT IT IS A LEGAL NECESSITY THAT A FOUNDATION BASED ON INFORMATION IS A MUST BEFORE THE AO HAS REASON TO BELIEVE ESCAPEMENT OF INCOME. SO, HERE THE APPRAIS AL REPORT ON WHICH THE AO BUILDS THE REASON TO BELIEF WAS ABSENT WHEN HE RECORDED THE RE ASON BEFORE INVOKING THE REOPENING JURISDICTION U/S. 147 BY ISSUING NOTICE U/S. 148 OF THE ACT ON 31.03.2016. THEREFORE, ON THESE FACTS WE DISCUSSED, WE ARE INCLINED TO UPHOLD THE CONTENTION OF THE LD. AR THAT THE FOUNDATION ON WHICH THE AO BASED HIS BELIEF THAT IN COME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WAS ABSENT AT THE MATERIAL TIME WHEN HE ISSUED NOTICE U/S. 148 OF THE ACT ON 31- 03-2016, AND THEREFORE, THE BASIC LEGAL REQUIREMENT OF REOPENING U/S. 148 OF THE ACT I.E. AOS FORMATION OF REASONS TO BELIEVE ESCAPEMENT OF INCOM E PRIOR TO REOPENING OF ASSESSMENT WAS ABSENT IN THE GIVEN FACTS OF THE PRESENT CASE. 20. FOR THE REASONS SET OUT ABOVE, WE THUS HOLD THA T THE AO DID NOT COMPLY WITH THE REQUIREMENT OF LAW SET OUT IN SECTION 147/148 OF TH E ACT BEFORE REOPENING THE ASSESSMENT FOR AY 2009-10 ORIGINALLY COMPLETED U/S. 153A/143(3 ) OF THE ACT DATED 31.03.2015, AND AS A CONSEQUENCE THERETO, THE ORDER DATED 29-12-2016 P ASSED BY THE AO BEING WITHOUT JURISDICTION IS HELD TO BE A NULLITY IN THE EYES OF LAW. THE ASSESSEE THEREFORE, SUCCEEDS ON THIS LEGAL ISSUE. THE CROSS OBJECTIONS TAKEN BY THE ASSE SSEE FOR AY 2009-10, IS THUS ALLOWED. 21. COMING TO THE CROSS OBJECTIONS FOR AYS 2010-11 & 2011-12, IT IS NOTED THAT THE ASSESSMENTS IMPUGNED IN THE APPEALS, ARE THE ASSESS MENTS WHICH WERE ORIGINALLY COMPLETED U/S. 153A/143(3) OF THE ACT ON 31-03-2015 AND REOPE NED BEYOND FOUR YEARS. HENCE, IN THESE CASES ALSO, THE AO WAS MANDATORILY REQUIRED TO SATI SFY THE CONDITION PRECEDENT IN THE FIRST PROVISO TO SECTION 147 OF THE ACT. THE ARGUMENTS PUT FORTH BY THE LD. AR FOR THESE YEARS WERE SIMILAR TO THAT OF AY 2009-10. HOWEVER, ACCORD ING TO LD. CIT, DR SHRI VIJAY SHANKAR, IN THESE YEARS THE AO DID MAKE A STATEMENT IN HIS RECORDED REASONS THAT, THERE WAS 16 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 A FAILURE ON THE PART OF THE ASSESSEE TO TRULY AND FULLY DISCLOSE THE FACTS IN ITS ASSESSMENT AND TO THAT EXTENT THE FACTS OF AYS 2010-11 & 2011-12 W ERE DISTINGUISHABLE FROM AY 2009-10. SO, SHRI VIJAY SHANKAR, LD. CIT, DR DID NOT WANT US TO INTERFERE WITH THE LEGAL VALIDITY OF THE ASSESSMENT FRAMED U/S 147 FOR AYS 2010-11 & 201 1-12. IN HIS REJOINDER, THE LD. AR OF THE ASSESSEE SHRI AKKAL DUDHEWALA INVITED OUR ATTEN TION TO THE REQUISITIONS ISSUED BY THE AO IN THE ORIGINAL ASSESSMENT FOR THESE YEARS (PAGE S 12-13 OF THE PAPER BOOK FOR AY 2010- 11 AND PAGES 14-15 OF THE PAPER BOOK FOR AY 2011-12 ) AND THEN TOOK US THROUGH THE PRIMARY FACTS WHICH WERE DISCLOSED IN THE ORIGINAL ASSESSMENT. REFERRING TO THE FOREGOING, HE CONTENDED THAT ALL MATERIAL FACTS HAD BEEN TRULY AND FULLY DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE THE AO COULD NOT HAVE LEGA LLY REOPENED THESE COMPLETED ASSESSMENTS AFTER THE EXPIRY OF FOUR YEARS IN TERMS OF FIRST PROVISO TO SECTION 147 OF THE ACT. ACCORDING TO THE LD. AR, A BALD STATEMENT BY THE AO THAT, THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS WILL NOT MEET TH E REQUIREMENT OF PROVISO TO SECTION 147 OF THE ACT, WHEN THE FACTS BROUGHT ON RECORD SHOW THAT IT WAS AFTER DUE ENQUIRY/INVESTIGATION INTO THE SAME ISSUES THAT THE ORIGINAL ASSESSMENTS WERE COMPLETED U/S 153A/143(3) OF THE ACT ON 31-03-2015. THE LD. AR THUS SUBMITTED THAT, WITHOUT SPELLING OUT AS TO WHICH MATERIAL FACTS DID THE ASSESSEE FAIL TO DISCLOSE IN THE ASSESSMENT PROCEEDING, THE AO COULD NOT HAVE VALIDLY EXERCISED HIS JURISDICTION TO REOP EN THE ASSESSMENT U/S 147 OF THE ACT, READ WITH THE FIRST PROVISO. MOREOVER THE LD. AR POINTED OUT TO US THAT THE AO W AS FULLY AWARE THAT, IN THE ORIGINAL ASSESSMENTS, HIS PREDECESSOR HAD SPECIFICALLY ENQUIRED INTO THE COMMODITY TRANSACTIONS OF THE ASSESSEE AND THEREFOR E, WHILE RECORDING HIS REASONS TO BELIEVE, WHICH WAS THE FOUNDATION OF REOPENING, HE CONSCIOUSLY ALLEGED ONLY THAT THE ASSESSEE DID NOT DISCLOSE ALL MATERIAL FACTS TRULY AND CORRECTLY IN ITS RETURN OF INCOME RATHER THAN NECESSARY FOR THE ASSESSMENT, WHICH IS THE PRECISE REQUIREMENT OF LA W . THE LD. AR THUS CONTENDED THAT LIKE IN AY 2009-10, THE AO HAD FAILE D TO SATISFY THE CONDITION PRECEDENT IN THE FIRST PROVISO TO SECTION 147 OF THE ACT IN AYS 2010-11 AND 2011-12 AS WELL AND THEREFORE IN TERMS OF THE LAW LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF NDTV LTD VS DCIT (SUPRA), HE URGED THAT THE REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT FOR BOTH THESE YEARS BE HELD TO BE BAD IN LAW. 22. IN ORDER TO ADDRESS THIS LEGAL ISSUE, WE FIRST NEED TO EXAMINE THE REASONS RECORDED BY THE AO FOR REOPENING THE CONCLUDED ASSESSMENTS OF A Y 2010-11 AND 2011-12, WHICH IS 17 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 AVAILABLE AT PAGES 29 AND 43 OF THE RESPECTIVE PAPE R BOOKS FOR THOSE YEARS. THE RELEVANT EXTRACTS ARE AS FOLLOWS: AY 2010-11 A SEARCH U/S 132 OF THE I.T. ACT 1961 AND SURVEY U/ S 133A OF THE SAID ACT WAS CONDUCTED BY THE INVESTIGATION DIRECTORATE, AHMEDABAD ON 18.12.2014 IN THE CASE OF COMMODITY TRADERS GROUP OF AHMEDABAD. IN RELATION TO THE SAID ACTION THE ASSES SEE M/S GRD COMMODITIES LTD. OF 238A AJC BOSE ROAD, 6TH FLOOR, KOLKATA-700020 (PAN AACCG1217C) WA S COVERED BY SURVEY U/S 133A OF THE ACT. REPORT OF SURVEY HAS BEEN RECEIVED FROM THE INVESTI GATION DIRECTORATE, AHMEDABAD WHEREIN IT IS REPORTED THAT THE ASSESSEE HAD DONE TRADING ON NMCE PLATFORM PREDOMINANTLY IN THE F.Y. 2009-10 RELEVANT TO A.Y. 2010-11 WITH A DELIBERATE AND MALA FIDE INTENTION TO BOOK TOTAL LOSS OF RS. 1,50,78,769/- AND SUCH LOSS WAS NOT JUST A CO-INCID ENCE, IT WAS DONE SO AS TO MANAGE CONTRIVED LOSSES TO THE EXTENT OF PROFIT AVAILABLE IN THE BOOKS FOR THE PURPOSE OF REDUCE INCOME CHARGEABLE TO TAX AND THEREBY REDUCING LEGITIMATE TAX LIABILITIES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2010-1 1 ON 30.09.2010 SHOWING TOTAL INCOME OF RS.12,12,420/- AND WAS ASSESSED U/S 153A/143(3) ON 31.03.2015 FOR INCOME AMOUNTING TO RS.12,46,170/-. THE INCOME, SO RETURNED BY ASSESSEE FOR AY 2010-11, IS AFTER SETTING OFF OF LOSS OF RS. 1,50,78,769/- AND THIS LOSS WAS NOT GENUINELY INCURRED BY THE ASSESSE E DURING THE PREVIOUS YEAR 2009-10. INFORMATION IN MY POSSESSION REVEALS THAT SUCH IN GENUINE LOSS WAS SET OFF AGAINST AVAILABLE PROFIT WITH A MALAFIDE INTENTION TO REDUCE LEGITIMATE TAX LIABILITIES. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT, 1961 AND SUCH ESCAPEMENT HAS OCCURRED DUE TO ASSESSEES FAILURE TO DISCLOSE ALL MATERIAL FACT TRULY AND COR RECTLY IN ITS RETURN OF INCOME . IN ORDER TO ASSESS/RE-ASSESS THE SAID INCOME CHARGE ABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AS AFORESAID AND TO ASSESS/RE-ASSESS ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH MAY COME TO MY NOTICE DURING THIS PROCEED ING, A NOTICE U/S 148 OF THE SAID ACT IS REQUIRED TO BE ISSUED. AY 2011-12 A SEARCH U/S 132 OF THE I.T. ACT 1961 AND SURVEY U/ S 133A OF THE SAID ACT WAS CONDUCTED BY THE INVESTIGATION DIRECTORATE, AHMEDABAD ON 18.12.2014 IN THE CASE OF COMMODITY TRADERS GROUP OF AHMEDABAD. IN RELATION TO THE SAID ACTION THE ASSES SEE M/S GRD COMMODITIES LTD. OF 238A AJC BOSE ROAD, 6TH FLOOR, KOLKATA-700020 (PAN AACCG1217C) WA S COVERED BY SURVEY U/S 133A OF THE ACT. REPORT OF SURVEY HAS BEEN RECEIVED FROM THE INVESTI GATION DIRECTORATE, AHMEDABAD WHEREIN IT IS REPORTED THAT THE ASSESSEE HAD DONE TRADING ON NMCE PLATFORM PREDOMINANTLY IN THE F.Y. 2010-11 RELEVANT TO A.Y. 2011-12 WITH A DELIBERATE AND MALA FIDE INTENTION TO BOOK TOTAL LOSS OF RS. 1,64,99,732/- AND SUCH LOSS WAS NOT JUST A CO-INCID ENCE, IT WAS DONE SO AS TO MANAGE CONTRIVED LOSSES TO THE EXTENT OF PROFIT AVAILABLE IN THE BOOKS FOR THE PURPOSE OF REDUCE INCOME CHARGEABLE TO TAX AND THEREBY REDUCING LEGITIMATE TAX LIABILITIES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2011-1 2 ON 28.09.2011 SHOWING TOTAL INCOME OF RS.13,90,470/- AND WAS ASSESSED U/S 153A/143(3) ON 31.03.2015 FOR INCOME AMOUNTING TO RS.14,58,720/-. THE INCOME, SO RETURNED BY ASSESSEE FOR AY 2011-12, IS AFTER SETTING OFF OF LOSS OF RS.1,64,99,732/- A ND THIS LOSS WAS NOT GENUINELY INCURRED BY THE ASSESSE E DURING THE PREVIOUS YEAR 2010-11. INFORMATION IN 18 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 MY POSSESSION REVEALS THAT SUCH IN GENUINE LOSS WAS SET OFF AGAINST AVAILABLE PROFIT WITH A MALAFIDE INTENTION TO REDUCE LEGITIMATE TAX LIABILITIES. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT, 1961 AND SUCH ESCAPEMENT HAS OCCURRED DUE TO ASSESSEES FAILURE TO DISCLOSE ALL MATERIAL FACT TRULY AND COR RECTLY IN ITS RETURN OF INCOME . IN ORDER TO ASSESS/RE-ASSESS THE SAID INCOME CHARGE ABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AS AFORESAID AND TO ASSESS/RE-ASSESS ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH MAY COME TO MY NOTICE DURING THIS PROCEED ING, A NOTICE U/S 148 OF THE SAID ACT IS REQUIRED TO BE ISSUED.[EMPHASIS GIVEN BY US] 23. ON PERUSAL OF THE RECORDED REASONS FOR BOTH THE YEARS, IT IS NOTED THAT THEY ARE SIMILARLY WORDED AND LIKE IN AY 2009-10, THE AO HAD REOPENED THE ASSESSMENTS BASED ON THE INFORMATION CONTAINED IN THE APPRAISAL REPORT F ORWARDED BY THE INVESTIGATION DIRECTORATE AT AHMEDABAD, WHICH ACCORDING TO AO, STATED THAT TH E TRANSACTIONS CONDUCTED BY THE ASSESSEE ON NMCE PLATFORM WAS DONE WITH A DELIBERAT E AND MALAFIDE INTENTION TO BOOK LOSSES WITH A VIEW TO REDUCE ITS INCOME. ACCORDING TO THE AO THEREFORE, HE HAD REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAP ED ASSESSMENT AND SUCH ESCAPEMENT HAD OCCURRED DUE TO THE ASSESSEES FAILURE TO DISCLOSE ALL MATERIAL FACTS TRULY AND CORRECTLY IN THE RETURNS OF INCOME FILED FOR THESE YEARS. 24. ADMITTEDLY BOTH THE ASSESSMENTS FOR AYS 2010-11 & 2011-12, WERE REOPENED BY THE AO, BEYOND FOUR YEARS. THEREFORE, APART FROM THE RE QUIREMENT OF LAW TO FORM A REASONABLE BELIEF THAT INCOME OTHERWISE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IT WAS ALSO INCUMBENT UPON THE AO TO SATISFY THE CONDITION PREC EDENT SET OUT IN THE FIRST PROVISO TO SECTION 147 OF THE ACT. FROM THE FACTS AS AVAILABLE ON RECORD, WE NOTE THAT LIKE IN AY 2009- 10, THE AOS PREDECESSOR BEFORE FRAMING THE ORIGINA L ASSESSMENT U/S 153A/143(3) OF THE ACT HAD SPECIFICALLY REQUISITIONED THE DETAILS OF THE C OMMODITY DERIVATIVE TRANSACTIONS CONDUCTED BY THE ASSESSEE ON NMCE. THE SPECIFIC EN QUIRIES MADE BY THE AO INTO THE ASSESSEES TRANSACTIONS IN COMMODITIES VIDE HIS NOT ICES DATED 20-10-2014 [AVAILABLE AT PAGES 12-13&14-15 OF PAPER BOOKS FOR AYS 2010-11 & 2011-12] WERE AS FOLLOWS: NOTICE U/S 142(1) OF THE ACT AY 2010-11 A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF DROLIA GROUP ON 30.11.2012. THE ASSESSEE NAMED GRD COMMODITIES LTD IS CONNECTED WITH THIS GR OUP. DURING THE COURSE OF SEARCH, SEVERAL BOOKS OF ACCOUNTS, DOCUMENTS AND HARD DISCS WERE FOUND AND S EIZED. ON PERUSAL OF THE SEIZED DOCUMENTS SEVERAL DOCUMENTS WERE FOUND WHICH ARE RELATED TO THE ASSES SEE. 19 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 1. BANK ACCOUNTS BEARING NO. 00080340009059, 000803400 03059, 00990680017133, 00990690003832, 00990680002680, 00080340046627, 00080340039805 AND 00990690003822 LYING WITH HDFC BANK, STEPHEN HOUSE BRANCH, KOLKATA WERE FOUND DURING THE SEARCH OPERATION. PLEASE FURNISH THE STATEMENTS OF ABOVE MENTIONED BANK ACCOUNTS FOR THE PERIOD 200 6-07 TO 2012-13 . 2. PAGE NO.4 OF GRD/3 SPEAKS ABOUT THE INVESTMENT MADE BY THE COMPANY IN THE FORM OF FDS AMOUNTING TO RS. 13.22 CR TO DIFFERENT SECTORS DURING THE F.Y . 2010-11 TO 2012-13. YOU ARE REQUESTED TO FURNISH THE YEAR WISE DETAILS OF FDS MADE ALONG WITH THE SOURCE OF SUCH INVESTMENT. 3. DURING THE F.Y. 2010-11 THE COMPANY HAS ALLOTTED 1, 00,000 SHARES TO DIFFERENT PAPER COMPANIES LIKE M/S PRATUSH COMMERCIAL PVT. LTD., M/S RAGHVAN DEALE RS (P) LTD., DEERGOLD DEALERS (P) LTD. AND OTHER JAMAKHARCHI COMPANIES AT A HUGE PREMIUM OF RS. 490/ - WHERE THE BASE PRICE OF THE SHARES WERE ONLY RS.10/- THOUGH THE COMPANY WAS NOT A REPUTED COMPAN Y. SO, YOU ARE REQUESTED TO SHOW CAUSE AS TO WHY THE SHARE PREMIUM MONEY OF RS.4,90,000/- SHOULD NOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE COMPANY AS THE PURCHASER OF THE SHARE ARE ALSO THE SISTER CONCERN OF DROLIA GROUP. AS PER RETURN (A.Y. 2010-11) 1. DETAILS OF UNSECURED LOAN FROM BODY CORPORATE OF RS .2,51,87,498/-, LOAN CONFIRMATION AND SOURCE OF SUCH MONEY, COPY OF BANK STATEMENT REFLECTING TH E LOAN TRANSACTION AND NAME, ADDRESS & PAN OF THE PERSON/COMPANY/FIRM WHO HAVE GIVEN THE LOAN TO THE COMPANY WITH SUPPORTING EVIDENCES. 2. DETAILS OF ADDITION IN FIXED ASSETS OF RS.74,720/- AND SOURCE THEREOF ALONG WITH SUPPORTING EVIDENCE. 3. DETAILS OF SUNDRY DEBTORS OF RS.2,71,029/- ALONG WI TH SUPPORTING EVIDENCES. 4. DETAILS OF CASH IN HAND OF RS.3,12,642/- WITH SUPPO RTING EVIDENCES. 5. DETAILS OF BANK BALANCE OF RS.1,19,318/- AND NARRAT ION OF EACH ENTRY WITH SUPPORTING EVIDENCE. 6. DETAILS OF FIXED DEPOSIT IN BANK OF RS.1,45,00,000/ - AND SOURCE THEREOF AND INTEREST ACCRUED ON FIXED DEPOSIT OF RS.23,39,052/- ALONG WITH SUPPORTI NG EVIDENCES. 7. DETAILS OF LOANS AND ADVANCES OF RS.1,36,39,586/- A ND SOURCE OF SUCH LOAN, LOAM CONFIRMATION, COPY OF BANK STATEMENT REFLECTING THE LOAN TRANSACTION A ND NAME & COMPLETE ADDRESS OF THE PERSON/COMPANY/FIRM WHO HAVE TAKEN THE LOAN FROM TH E COMPANY. 8. DETAILS OF SUNDRY CREDITORS FOR EXPENSES OF RS.43,2 7,463/- STATUTORY DUES OF RS.8,30,847/- AND CLIENT CASH MARGIN DEPOSIT OF RS.37,83,439/- ALONG WITH THE SUPPORTING EVIDENCES. 9. DETAILS OF INCOME FROM DERIVATIVE TRANSACTIONS OF R S.2,32,10,119/- ALONG WITH SUPPORTING EVIDENCES. 10. DETAILS OF BROKERAGE INCOME OF RS.40,40,762/- ALONG WITH SUPPORTING EVIDENCES. 11. DETAILS OF INTEREST INCOME OF RS.45,27,975/- ALONG WITH THE SUPPORTING EVIDENCES. 12. DETAILS OF TRANSACTION CHARGES OF RS.2,07,57,010/- ALONG WITH SUPPORTING EVIDENCES. 13. DETAILS OF SHARING OF ARBITRAGER OF RS.13,02,137/- ALONG WITH SUPPORTING EVIDENCES. 14. DETAILS OF NCDEX RELATED EXPENSES OF RS.2,07,147/- ALONG WITH SUPPORTING EVIDENCES. 15. DETAILS OF MCX RELATED CHARGES OF RS.7,38,068/- ALO NG WITH SUPPORTING EVIDENCES. 16. DETAILS OF INTEREST PAID OF RS.6,16,047/- ALONG WIT H SUPPORTING EVIDENCES. 17. DETAILS OF SALARY & BONUS OF RS.44,27,390/-, BANK G UARANTEE CHARGES OF RS.5,09,254/-, FILING FEES OF RS.1,500/-, RENT OF RS.2,94,000/-, RATES AND TAX ES OF RS.6,850/-, FOODS & BEVERAGES OF RS. 84,654/-, SOFTWARE EXPENSES OF RS.1,63,126/-, STIPE ND OF RS.22,223/- AND TRAVELLING & CONVEYANCES OF RS.68,605/- ALONG WITH SUPPORTING EVIDENCES. 18. BOOKS OF ACCOUNTS ALONG WITH SUPPORTING EVIDENCES. 19. OTHER SUPPORTING EVIDENCES. NOTICE U/S 142(1) OF THE ACT AY 2011-12 A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN THE CASE OF DROLIA GROUP ON 30.11.2012. THE ASSESSEE NAMED GRD CAPITAL MARKET PVT. LTD. IS CONNECTED WIT H THIS GROUP. DURING THE COURSE OF SEARCH, SEVERAL BOOKS OF ACCOUNTS, DOCUMENTS AND HARD DISCS WERE FO UND AND SEIZED. ON PERUSAL OF THE SEIZED DOCUMENTS SEVERAL DOCUMENTS WERE FOUND WHICH ARE RELATED TO T HE ASSESSEE. 20 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 1. BANK ACCOUNTS BEARING NO. 00080340009059, 000803400 03059, 00990680017133, 00990690003837, 00990680002680, 00080340046627, 000 80340039805 AND 00990690003822 LYING WITH HDFC BANK, STEPHEN HOUSE BRANCH, KOLKATA WERE FOUND DURING THE SEARCH OPERATION. PLEASE FURNISH THE STATEMENTS OF ABOVE MENTIONED BA NK ACCOUNTS FOR THE PERIOD 2006-07 TO 2012-13. 2. PAGE NO.4 OF GRD/3 SPEAKS ABOUT THE INVESTMENT MADE BY THE COMPANY IN THE FORM OF FDS AMOUNTING TO RS. 13.22 CR TO DIFFERENT SECTORS DURI NG THE F.Y. 2010-11 TO 2012-13. YOU ARE REQUESTED TO FURNISH THE YEAR WISE DETAILS OF FDS M ADE ALONG WITH THE SOURCE OF SUCH INVESTMENT. 3. DURING THE F.Y. 2010-11 THE COMPANY HAS ALLOTTED 1, 00,000 SHARES TO DIFFERENT PAPER COMPANIES LIKE M/S PRATUSH COMMERCIAL PVT. LTD., M/S RAGHVAN DEALE RS (P) LTD., DEERGOLD DEALERS (P) LTD. AND OTHER JAMAKHARCHI COMPANIES AT A HUGE PREMIUM OF RS . 490/- WHERE THE BASE PRICE OF THE SHARES WERE ONLY RS.10/- THOUGH THE COMPANY WAS NOT A REPU TED COMPANY. SO, YOU ARE REQUESTED TO SHOW CAUSE AS TO WHY THE SHARE PREMIUM MONEY OF RS.4,90, 000/- SHOULD NOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE COMPANY AS THE PURCHASER OF THE SHARE ARE ALSO THE SISTER CONCERN OF DROLIA GROUP. 4. PLEASE FURNISH THE DETAILS OF TRANSACTION MADE THRO UGH NATIONAL MULTI COMMODITIES EXCHANGE (NMCE), AHMEDABAD INCLUDING ALL THE TRANSACTION MAD E WITH SAGUN DEALER PVT. LTD. IN THE F.Y. 2010-11. AS PER RETURN (A.Y. 2011-12) 1. DETAILS OF INTRODUCTION OF SHARE CAPITAL OF RS.1,00 ,00,000/- AND THE NAME AND COMPLETE ADDRESS OF THE SHARE APPLICANTS AND SOURCE OF SUCH INTRODUCTIO N OF SHARE CAPITAL ALONG WITH SUPPORTING EVIDENCES. 2. DETAILS OF SECURITY PREMIUM ACCOUNT OF RS. 4,90,00, 000/- AND NAME & COMPLETE ADDRESS OF THE SHARE APPLICANTS AND THE SOURCE OF SUCH SHARE CAPITAL ALO NG WITH SUPPORTING EVIDENCES. 3. DETAILS OF INVESTMENT IN SHARES OF RS.1,40,00,000/- ALONG WITH SOURCE OF INVESTMENT IN SHARES AND SUPPORTING EVIDENCES. 4. DETAILS OF SUNDRY DEBTORS OF RS.6,74,635/- ALONG WI TH SUPPORTING EVIDENCES. 5. DETAILS OF CASH IN HAND OF RS.1,29,338/- WITH SUPPO RTING EVIDENCES. 6. DETAILS OF BANK BALANCE OF RS.32,47,576/- AND NARRA TION OF EACH ENTRY WITH SUPPORTING EVIDENCE. 7. DETAILS OF FIXED DEPOSIT IN BANK OF RS.55,45,492/- AND SOURCE THEREOF AND INTEREST ACCRUED ON FIXED DEPOSIT OF RS.22,86,136/- ALONG WITH SUPPORTING EVI DENCES. 8. DETAILS OF LOANS AND ADVANCES OF RS.1,47,47,413/- A ND SOURCE OF SUCH LOAN, LOAM CONFIRMATION, COPY OF BANK STATEMENT REFLECTING THE LOAN TRANSACTION A ND NAME & COMPLETE ADDRESS OF THE PERSON/COMPANY/FIRM WHO HAVE TAKEN THE LOAN FROM TH E COMPANY. 9. DETAILS OF SUNDRY CREDITORS FOR EXPENSES OF RS.66,7 1,744/- STATUTORY DUES OF RS.7,78,024/- AND CLIENT CASH MARGIN DEPOSIT OF RS.27,89,439/- ALONG WITH THE SUPPORTING EVIDENCES. 10. DETAILS OF INCOME FROM DERIVATIVE TRANSACTIONS OF R S.3,26,24,607/- ALONG WITH SUPPORTING EVIDENCES. 11. DETAILS OF BROKERAGE INCOME OF RS.27,31,898/- ALONG WITH SUPPORTING EVIDENCES. 12. DETAILS OF INTEREST INCOME OF RS.40,89,318/- ALONG WITH THE SUPPORTING EVIDENCES. 13. DETAILS OF DELIVERY CHARGES OF RS.1,85,2,90/-, TRAN SACTION CHARGES OF RS.1,98,62,729/-, DEPOSITORY CHARGES OF RS.1,85,290, SHARING OF ARBITRAGER OF RS.53,64,105/-, NCDEX REL ATED EXPENSES OF RS.1,69,702/-, MCX RELATED CHARGES OF RS.15,29,618/ - AND NSEL RELATED CHARGES OF RS.4,30,000/- ALONG WITH SUPPORTING EVIDENCES. 14. DETAILS OF INTEREST PAID OF RS.8,86,517/- ALONG WIT H SUPPORTING EVIDENCES. 15. DETAILS OF SALARY & BONUS OF RS.63,86,458/-, BANK G UARANTEE CHARGES OF RS.5,93,904/-, BUSINESS PROMOTION EXPENSES OF RS.4,90,000/-, SOFTWARE & DAT A BASE ACCESSES CHARGES OF RS.8,93,970/-, FILING FEES OF RS.2,000/-, RENT RATES & TAXES OF RS .2,95,850/-, STAFF WELFARE OF RS.1,26,711/-, STIPEND OF RS.94,000/-, TELEPHONE & BROAD BAND CHAR GES OF RS.1,41,904/- AND TRAVELLING AND CONVEYANCES OF RS.93,474/- ALONG WITH SUPPORTING EV IDENCES. 16. BOOKS OF ACCOUNTS ALONG WITH SUPPORTING EVIDENCES. 21 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 OTHER SUPPORTING EVIDENCES. [EMPHASIS GIVEN BY US] 25. WE NOTE THAT, IN RESPONSE TO THE ABOVE NOTICES, THE ASSESSEE HAD FILED THE RELEVANT DETAILS AND SUPPORTING BEFORE THE AO, WHICH ARE FOU ND PLACED AT PAGES 14 TO 21& PAGES 16 TO 35 OF THE PAPER BOOKS FOR AYS 2010-11 & 2011-12 RESPECTIVELY. THE LD. AR ALSO DREW OUR ATTENTION TO THE FACT THAT, BY ORDER SHEET ENTR IES DATED 20-02-2015, 11-03-2015 AND 23- 03-2015[PAGE 48&58 OF PAPER BOOKS FOR AYS 2010-11 & 2011-12], THE AOS PREDECESSOR HAD ACKNOWLEDGED THAT THE ASSESSEE HAD FURNISHED AL L THE SUPPORTING DOCUMENTS AS DESIRED BY HIM IN RELATION TO THE REPLY FURNISHED IN RESPON SE TO THE NOTICE U/S 142(1) OF THE ACT. HAVING REGARD TO THESE FACTS, WE FIND THAT THE ASSE SSEE HAD DISCLOSED ALL THE PRIMARY FACTS RELATING TO THE TRANSACTIONS CONDUCTED ON NMCE BEFO RE THE AO IN THE ORIGINAL ASSESSMENTS FOR BOTH THE YEARS. THE AOS PREDECESSOR, ON THE BA SIS OF THE FACTS DISCLOSED TO HIM DID NOT DOUBT THE GENUINENESS OF THE LOSSES INCURRED BY THE ASSESSEE IN THE COMMODITY TRANSACTIONS. ON PERUSAL OF THE REASONS RECORDED BY THE AO TO REO PEN SUCH CONCLUDED ASSESSMENTS, WE NOTE THAT THE AO WAS UNABLE TO DEMONSTRATE AS TO WH ICH RELEVANT MATERIAL FACT DID THE ASSESSEE FAIL TO DECLARE TRULY OR FULLY IN THE ASSE SSMENTS COMPLETED U/S 153A/143(3) OF THE ACT ON 31-03-2015, BASED ON WHICH THE AO HAD USURPE D JURISDICTION U/S 147 TO REOPEN THE ASSESSMENTS BEYOND FOUR YEARS. WE ARE THEREFORE INC LINED TO HOLD THAT THE AO DID NOT SATISFY THE CONDITION PRECEDENT IN THE FIRST PROVISO TO SEC TION 147 OF THE ACT FOR REOPENING OF THE ASSESSMENTS OF AYS 2010-11 & 2011-12 BEYOND FOUR YE ARS. 26. FURTHER A BARE PERUSAL OF THE REASONS RECORDED (SUPRA) ALSO DOES NOT REVEAL ANY STATEMENT BY THE AO TO THE EFFECT WHICH WOULD THROW LIGHT AS TO WHAT WAS FOUND BY THE AO WHICH CAN BE CONSTRUED TO BE A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY & TRULY THE MATERIAL FACTS NECESSARY FOR ASSESSMENT DURING THE ORIGINAL ASSESSMENT, RECORDING OF WHICH WAS SINE QUA NON AND HAD TO BE SPELT OUT BY THE AO IN THE REASONS R ECORDED TO VALIDLY ASSUME JURISDICTION U/S. 147 OF THE ACT. IN THIS CA SE, WE NOTE THAT THE AO HAD MADE AN AVERMENT THAT THE ASSESSEE DID NOT DISCLOSE ALL MAT ERIAL FACTS TRULY AND CORRECTLY IN ITS RETURN OF INCOME . IT WAS NOT THE AOS REMARK THAT THE MATERIAL FACT S RELATING TO THE TRANSACTIONS CONDUCTED ON NMCE PLATFORM WERE NOT DISCLOSED TRULY AND FULLY IN THE ASSESSMENTS COMPLETED U/S 153A/143(3) OF THE ACT, WHICH IS THE PRECISE REQUIREMENT OF LAW AS CAN BE DISCERNED ON READING OF FIRST PROVISO TO SECTION 14 7 OF THE ACT AND NOT AS RECORDED BY AO 22 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THAT ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY AL L MATERIALS IN THE RETURN. THEREFORE, WE ARE UNABLE TO AGREE WITH THE LD. CIT, DRS CONTENTION T HAT THE AO HAD OTHERWISE SATISFIED THE CONDITION PRECEDENT IN FIRST PROVISO TO SECTION 147 OF THE ACT BY MENTIONING THE SAME IN HIS RECORDED REASONS. THUS, IN OUR VIEW, THE USURPATION OF JURISDICTION U/S. 147 BY THE AO TO RE- OPEN THE ASSESSMENT COMPLETED U/S. 147 OF THE ACT A FTER FOUR YEARS IS BAD IN LAW AND, THEREFORE, HAS TO BE STRUCK DOWN FOR NOT SATISFYING THE JURISDICTIONAL FACT AND LAW WHICH IS A CONDITION PRECEDENT TO LEGALLY ASSUME JURISDICTION TO REOPEN ASSESSMENT AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 27. IN THIS REGARD, GAINFUL REFERENCE MAY BE MADE T O THE DECISION OF THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN THE CASE OF M /S. AMIYA SALES & INDUSTRIES LTD VS CIT, 274 ITR 25 (CAL) WHEREIN THE HONBLE HIGH COURT HEL D AS UNDER: IN THE INSTANT CASE, THE ASSESSMENTS FOR BOTH THE ASSESSMENT YEARS WERE MADE UNDER SECTION 143(3). THERE WAS NO DISPUTE THAT THE NOTICES UNDER SECTION 147 WERE ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS. THUS , IN ORDER TO INITIATE ACTION UNDER SECTION 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEARS, THERE SHOULD HAVE BEEN EITHER FAILURE OR NON-DISCLOSURE ON THE PART O F THE ASSESSEE. FROM THE RECORDED REASONS IT WAS FOUND THAT THE ASSESSING OFFICER WAS SEEKING TO REOPEN THE ASSESSMENTS SINCE THERE WAS AN INCORRECT INTERPRETATION OF ACCOUNTS BY THE ASSESS ING OFFICER AND FOR THAT THE ASSESSEE GOT THE BENEFIT OF LOSS FOR THE ASSESSMENT YEAR 1992-93 WH ICH WAS CARRIED FORWARD TO THE SUBSEQUENT YEARS. IN THE INSTANT CASE, IT HAD NOWHERE BEEN RECORDED T HAT THERE WAS FAILURE OR IMPROPER DISCLOSURE ON THE PART OF THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESSMENTS AS THERE WAS INCORRECT INTERPRETATION OF ACCOUNT BY TH E ASSESSING OFFICER. THE RECORDED REASONS DID NOT SPEAK OF ANY OMISSION OR FAILURE ON THE PAR T OF THE ASSESSEE. THUS, ADMITTEDLY THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE ASSESSMENT. INCORRECT INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER COULD NOT CONFER JURISDICTION ON THE ASSESSING OFFICER TO ISSUE NOTI CES UNDER SECTION 148 FOR REOPENING THE ASSESSMENTS AS SOUGHT TO BE MADE IN THE INSTANT CAS E. IF THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSURE FULLY AND TRULY THE MATERIAL FACTS, WRONG INTERPRETATION OF ACCOUNTS BY THE ASSESSING O FFICER LEADING TO EXCESSIVE RELIEF CANNOT BE A GROUND FOR REOPENING AND THUS CANNOT CONFER JURISDI CTION ON THE ASSESSING OFFICER. EXPLANATION 2 CANNOT BE READ IN ISOLATION OF SECTION 147. IT SH OULD BE READ IN CONJUNCTION WITH THE PROVISIONS IN THE SECTION. THE WORDS FOR THE PURPOSE OF THIS S ECTION APPEARING IN EXPLANATION 2 SHOW THAT THE CONDITIONS PRECEDENT FOR REOPENING ASSESSMENT A S LAID DOWN IN SECTION 147 HAVE TO BE COMPLIED WITH. IN INSTANT CASE, SINCE THE CONDITIONS FOR ASSUMING OF JURISDICTION UNDER SECTION 147 WERE NOT FULFILLED, THE NOTICES UNDER SECTION 148 WERE UNCAL LED FOR AND WARRANTED INTERFERENCE BY APPEARING ORDERS. IF AN AUTHORITY ASSUMES JURISDICT ION ILLEGALLY WHICH IS NOT VESTED UNDER THE LAW IT WOULD BE FIT AND PROPER FOR THE WRIT COURT T O INTERVENE. IN THE INSTANT CASE, AS THERE WAS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS IN THE RETURN, AS THE ASSESSING OFFICER SOUGHT TO REOP EN THE ASSESSMENTS DUE TO WRONG 23 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 INTERPRETATION OF ACCOUNTS BY THE ASSESSING OFFICER WHICH WAS NOT PERMISSIBLE UNDER SECTION 147 TO ASSUME JURISDICTION, THE ASSESSEE WAS JUSTIFIED IN INVOKING THE WRIT PETITION. THUS, THE INSTANT PETITION WAS TO BE ALLOWED AND, C ONSEQUENTLY IMPUGNED NOTICES UNDER SECTION 147/148 WERE TO BE QUASHED. 28. IN THE CASE OF ASSAM CO. LTD VS UNION OF INDIA (150 TAXMAN 571), THE HONBLE GAUHATI HIGH COURT HAS HELD AS UNDER: 43. AS NOTICED HEREINABOVE, EXCEPT IN W.P. (C) NO. 1163 AND W.P. (C) NO. 1258 OF 2003, THE IMPUGNED NOTICES HAD BEEN ISSUED BEFORE THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE ATTEMPT MADE ON THE PART OF TH E RESPONDENTS TO CONTEND THAT THE OMISSION ON THE PART OF THE ASSESSEES TO MENTION IN THEIR RE TURN THAT THE CESS ON GREEN TEA LEAVES WAS PAID UNDER THE 1990 ACT AMOUNTS TO FAILURE TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ASSESSMENTS HAS TO BE MENTIONED ONLY TO BE REJECTED. THERE IS NO DISPUTE THAT AT THE TIME OF ASSESSMENT, THE ASSESSEES WERE PERMITTE D DEDUCTION ON THE ABOVE COUNT AND THE COMPOSITE INCOME UNDER RULE 8(1) WAS ACCORDINGLY CO MPUTED. AT NO POINT OF TIME WAS ANY RESERVATION EXPRESSED BY THE RESPONDENT AUTHORITIES AS TO THE NATURE OF THE PAYMENT OR THE ENTITLEMENT OF THE ASSESSEES TO BE EXTENDED THE BEN EFIT OF DEDUCTION THEREOF ON THE BASIS OF THE DISCLOSURE MADE IN THE RETURNS. THE RESPONDENT AUTH ORITIES THUS HAVE TO BE FIRMLY HELD ONLY TO THE REASONS AND/ OR THE GROUNDS NARRATED IN THE IMP UGNED NOTICES. NOT ONLY IS THIS STAND ABSENT IN THE IMPUGNED NOTICES, THE SAME DO NOT INDICATE A S WELL AS TO WHAT MATERIAL FACTS HAD NOT BEEN FULLY AND TRULY DISCLOSED BY THE ASSESSEES. 44. THE APEX COURT WHILE DWELLING ON THE SCOPE OF T HE REQUIREMENT TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AS COMPREHENDED IN THE PROVISO TO SE CTION 147 HELD IN PARASHURAM POTTERY WORKS CO. LTD. V. ITO [1977] 106 ITR 1 (SC), THAT T HE DUTY OF THE ASSESSEE IN ANY CASE DOES NOT EXTEND BEYOND MAKING A TRUE AND FULL DISCLOSURE OF PRIMARY FACTS AND IT IS NOT ITS RESPONSIBILITY TO ADVISE THE ASSESSING OFFICER WITH REGARD TO THE INFERENCE WHICH HE SHOULD DRAW THEREFROM. IF SUCH OFFICER DRAWS ANY INFERENCE WHICH APPEARS TO B E SUBSEQUENTLY ERRONEOUS, A MERE CHANGE OF OPINION WOULD NOT JUSTIFY INITIATION OF ACTION FOR REOPENING THE ASSESSMENT, IT HELD. 45. THE SAME VIEW WAS EXPRESSED IN ASSOCIATED STONE INDUSTRIES (KOTAH) LTD. V. CIT [1997] 224 ITR 5601 (SC). THE BOMBAY HIGH COURT ON THE SAME IS SUE IN HINDUSTAN LEVER LTD. V. R.B. WADKAR, ASSTT. CIT (NO. 1) [2004] 268 ITR 3322, HEL D THAT THE REASONS IN SUPPORT OF THE PROPOSED ACTION UNDER SECTION 147 OF THE ACT MUST N ECESSARILY REVEAL ALL FACTS OR MATERIALS THAT HAD NOT BEEN DISCLOSED BY THE ASSESSEE FULLY AND TR ULY NECESSARY FOR ASSESSMENT SO AS TO ESTABLISH THE LINK BETWEEN THE REASONS AND EVIDENCE . IT WAS FURTHER HELD THAT THE REASONS SO RECORDED CANNOT BE SUPPLEMENTED BY ANY AFFIDAVIT OR ORAL SUBMISSIONS AS OTHERWISE THE REASONS WHICH WERE LACKING IN THE MATERIAL PARTICULARS WOUL D RECEIVE SUPPLEMENTATION BY THE TIME THOSE ARE SUBJECTED TO COURT S SCRUTINY. 46. THE NOTICES ADMITTEDLY DO NOT EXHIBIT AS TO WHA T MATERIAL FACTS WERE NOT TRULY AND FULLY DISCLOSED BY THE ASSESSEES NECESSARY FOR ASSESSMENT FOR THE ASSESSMENT YEARS IN QUESTION. THE RETURNS ADMITTEDLY MENTION ABOUT THE CESS ON GREEN LEAVES PAID AND DEDUCTIONS AS PERMISSIBLE WERE ALLOWED. IN VIEW OF THE EXPOSITION OF LAW ON T HE POINT MENTIONED HEREINABOVE, THE INESCAPABLE CONCLUSION IS THAT THE IMPUGNED NOTICES IN W.P. (C) NO. 1163 OF 2003 AND W.P. (C) NO. 1258 OF 2003 ARE ALSO NOT SUSTAINABLE BEING BAR RED BY TIME. 29. WE MAY ALSO REFER TO THE DECISION OF IN THE CAS E OF TAO PUBLISHING PVT. LTD. VS DCIT (370 ITR 115) WHEREIN THE HONBLE BOMBAY HIGH COURT HAS HELD THAT WHERE THE REASONS SUPPLIED BY THE AO DO NOT DISCLOSE THAT THE RE WAS ANY FAILURE ON THE PART OF THE 24 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ASSESSEE TO PROVIDE ALL THE MATERIAL FACTS, THEN IT WILL HAVE TO BE PRESUMED THAT THE ASSESSEE DID NOT FAIL TO MAKE FULL AND TRUE DISCLOSURE OF AL L MATERIAL FACTS AND HENCE THE JURISDICTIONAL REQUIREMENT SET OUT IN THE FIRST PROVISO TO SECTION 147 FOR INITIATING REASSESSMENT, AFTER THE EXPIRY OF PERIOD OF FOUR YEARS, SHALL BE HELD TO BE NOT FULFILLED. THE RELEVANT OBSERVATIONS OF THE HONBLE HIGH COURT IS EXTRACTED BELOW: 9. THE LEARNED COUNSEL FOR THE PETITIONER RIGHTLY POINTED OUT THAT THE GROUND THAT THE PETITIONER HAD FAILED TO DISCLOSE ALL THE RELEVANT MATERIAL WA S NOT INCORPORATED IN THE REASONS SUPPLIED TO THE PETITIONER. THE OBJECT OF FURNISHING REASONS FO R REOPENING, IS TO PUT THE ASSESSEE TO NOTICE AS TO WHY THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. APART FROM THIS POSITION, IN THE PRESENT CASE THE REASONS SUPPLIED DO NOT STATE THAT THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER TO PROVIDE MA TERIAL PARTICULARS. THAT AN ASSESSEE HAS NOT MADE A FULL AND TRUE DISCLOSURE OF FACTS, IS ONE OF THE JURISDICTIONAL REQUIREMENT FOR PROCEEDING WITH REASSESSMENT AFTER A PERIOD OF FOUR YEARS. IN THE CASE OF HINDUSTAN LEVERS V. R.B. WADKAR, [2004] 268 ITR 332/137 TAXMAN 479, THIS COURT HAD H ELD THAT THE NOTICES FOR REASSESSMENT WOULD STAND OR FALL ON THE BASIS OF REASONS AND THE REASONS CANNOT BE IMPROVED UPON, SUBSTITUTED OR SUPPLEMENTED. THIS VIEW HAS BEEN FOL LOWED BY THIS COURT IN SEVERAL OTHER CASES. 10. AS STATED ABOVE, THE REASONS SUPPLIED TO THE PE TITIONER DO NOT DISCLOSE THAT THERE WAS ANY FAILURE ON THE PART OF THE PETITIONER TO PROVIDE AL L THE MATERIAL FACTS. THAT BEING THE POSITION, THIS GROUND COULD NOT HAVE BEEN TAKEN UP AGAINST THE PET ITIONER AT THE TIME OF DISPOSING OF THE OBJECTIONS. ONCE THIS WAS NOT THE BASIS FOR ISSUANC E OF NOTICE FOR REASSESSMENT, IT CANNOT BE HELD AGAINST THE PETITIONER THAT THE PETITIONER HAD FAILED TO MAKE A TRUE AND FULL DISCLOSURE. IT WILL HAVE TO BE HELD THAT THE PETITIONER DID NOT FA IL TO MAKE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS. THE JURISDICTIONAL REQUIREMENT FOR CARRYING OUT THE REASSESSMENT, AFTER THE EXPIRY OF PERIOD OF FOUR YEARS, IS NOT FULFILLED IN THE PR ESENT CASE. 30. FOR THE ABOVE REASONS AND THOSE DISCUSSED IN PA RAS 7 TO 17 EARLIER AND FOLLOWING THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE C ASE OF NDTV LTD. VS DCIT (SUPRA), AND OTHER CASE LAWS, WE HOLD THAT THE REOPENING OF THE ASSESSMENTS FOR AYS 2010-11 & 2011-12 ARE BAD IN LAW IN AS MUCH AS THE AO DID NOT SATISFY THE CONDITION PRECEDENT IN FIRST PROVISO TO SECTION 147 OF THE ACT WHICH WAS SINE QU A NON FOR USURPING JURISDICTION U/S 147 OF THE ACT. AS A CONSEQUENCE THERETO, THE ORDERS PA SSED U/S 147/153A/143(3) DATED 29-12- 2017 FOR AYS 2010-11 & 2011-12 ARE HELD TO BE AB IN ITIO VOID AND ARE THEREFORE QUASHED. THE CROSS OBJECTIONS FOR AYS 2010-11 & 2011-12 HENC E STANDS ALLOWED. 31. NOW WE PROCEED TO DECIDE THE CROSS OBJECTIONS F OR AY 2012-13. IT WAS BROUGHT TO OUR NOTICE BY BOTH THE PARTIES THAT THE ORIGINAL AS SESSMENT FOR THIS YEAR WAS FRAMED BY THE AO U/S. 153A/143(3) OF THE ACT DATED 31-03-2015 AND IT WAS REOPENED BY THE AO U/S 147 OF THE ACT WITHIN FOUR YEARS . THE LD. AR SUBMITTED THAT ALTHOUGH THE FIRST PROV ISO TO SECTION 147 OF THE ACT WAS NOT APPLICABLE IN THIS YEAR BUT THE AO WAS STILL REQUIRED TO SHOW THAT HE 25 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 HAD REQUISITE REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT, BASED ON WH ICH HE HAD REOPENED THE ASSESSMENT, AND SUCH REASONABLE BELIEF WAS FORMED ON HIS OWN INDEPENDENT APPLICATION OF MIND AND NOT BORROWED SATISFACTION. ACCORDING TO LD. AR, PERUSAL OF THE RECORDED REASONS SHOWED THAT IT WAS BASED ON THE DICTATE OF THE INVESTIGATION DIRECTORATE, AHMEDABAD (APPRAISAL REPORT) AND THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE INFORMATION RECEIVED FROM THE INVESTIGATION DIRECTORATE AT AHMEDABAD. THE LD. AR THEREAFTER ALSO TOOK US THROU GH THE CONTENTS OF THE APPRAISAL REPORT AND THE ENQUIRIES CONDUCTED BY THE INVESTIGATION DI RECTORATE AT AHMEDABAD TO SHOW THAT THERE WAS NO TANGIBLE MATERIAL CONTAINED THEREIN, B ASED ON WHICH A PRUDENT PERSON COULD FORM A REASONABLE BELIEF THAT THE ASSESSEE HAD CONT RIVED LOSSES IN THE TRADES CONDUCTED ON NMCE PLATFORM RESULTING IN INCOME ESCAPING ASSESSME NT. ASSAILING THE ACTION OF THE AO, THE LD. AR SUBMITTED THAT THE REASONS WERE RECORDED BY HIM ON SURMISES AND CONJECTURES AND THEREFORE HIS ACTION OF REOPENING THE ASSESSMEN T WAS CLEARLY BAD IN LAW. PER CONTRA, THE LD. CIT, DR SUBMITTED THAT SINCE THE REOPENING FOR AY 2012-13 WAS WITHIN A PERIOD OF FOUR YEARS; IN ORDER TO REOPEN THE ASSESSMENT, THE AO WA S ONLY REQUIRED TO FORM A PRIMA FACIE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT AND THAT THE APPRAISAL REPORT OF INVESTIGATION DIRECTORATE AT AHMEDABAD CONSTITUTED SUFFICIENT TAN GIBLE MATERIAL TO FORM A REASONABLE BELIEF FOR REOPENING THE ASSESSMENT. ACCORDING TO L D. CIT, DR, WHETHER THE CONTENTS OF THE APPRAISAL REPORT WERE ULTIMATELY FOUND TO BE TENABL E OR NOT ON MERITS WERE A MATTER OF RE- ASSESSMENT AND THE SAME COULD NOT BE GONE INTO AT T HE TIME OF TESTING THE VALIDITY OF THE REASONS RECORDED BY THE AO. ACCORDING TO HIM, WHEN THE AO WAS IN RECEIPT OF INFORMATION FROM THE INVESTIGATION DIRECTORATE OF THE SAME DEPA RTMENT, THEN RATHER THAN QUESTIONING THE VERACITY OF THE REPORT, HE WAS DUTY BOUND TO FIRST REOPEN THE ASSESSMENT OF THE ASSESSEE AND SO HE DOES NOT WANT US TO INTERFERE WITH THE LEGAL ISSUE FOR AY 2012-13. 32. WE HAVE HEARD THE RIVAL CONTENTIONS. IT IS WELL SETTLED THAT, SECTION 147 OF THE ACT PERMITS THE AO TO REOPEN A CONCLUDED ASSESSMENT IF HE HAS REQUISITE REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX ESCAPED ASSESSMENT. T HE FUNDAMENTAL PRE-CONDITION FOR VALID INITIATION OF PROCEEDINGS U/S 147 IS THE FORMATION OF REASONS TO BELIEVE OF AN AO THAT INCOME OF ASSESSEE WHICH WAS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR. THE WORDS REASONS TO BELIEVE CONNOTE A POSITIVE ACT ON THE PART OF THE AO OF A PPLYING HIS MIND TO CERTAIN INFORMATION OR MATERIAL AND THEN COME TO A REASONABLE BELIEF THAT INCOME CHARGEABLE 26 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 TO TAX HAS ESCAPED ASSESSMENT. IN THE CIRCUMSTANCES , UNLESS THE AO HIMSELF GENUINELY ENTERTAINS REASON TO BELIEVE THAT INCOME HAS ESCAPE D ASSESSMENT, HE IS NOT PERMITTED TO RESORT TO REOPENING OF ASSESSMENT PROCEEDINGS. IT HAS BEEN OBSERVED BY THE CONSTITUTIONAL COURTS THAT THE EXPRESSION USED IN THE SECTION VIZ ., REASONS TO BELIEVE IS NOT A MERE EMPTY EXPRESSION. REASON TO BELIEVE DOES NOT MEAN REASON TO SUSPECT OR REASON TO RE-EXAMINE THE CONCLUDED ISSUES. THE REASONS RECORDED MUST BE BASED ON SOME TANGIBLE INFORMATION OR MATERIAL AND SUCH INFORMATION OR MATERIAL MUST HAVE LIVE AND DIRECT NEXUS WITH FORMATION OF AOS BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. THE RELATIONSHIP BETWEEN THE INFORMATION OR EVIDENCE WITH FORMATION OF BELIE F MUST BE LIVE, REAL AND PROXIMATE AND SHOULD NOT BE REMOTE, VAGUE OR ILLUSORY. FURTHER, THE REASON TO BELIEVE MUST BE FORMED BY THE AOS OWN OBJECTIVE APPRECIATION OF THE INFORMAT ION, MATERIAL AND EVIDENCE IN HIS POSSESSION WHICH HE HAS GATHERED AFTER COMPLETION O F THE ASSESSMENT. WE ARE AWARE THAT, AT THE TIME OF FORMATION OF AOS BELIEF, IT IS NOT NEC ESSARY FOR HIM TO SHOW WITH ABSOLUTE CERTAINTY THAT INCOME CHARGEABLE TO TAX ESCAPED ASS ESSMENT, BUT AT THE SAME TIME, THE AO IS REQUIRED TO DEMONSTRATE THROUGH HIS REASONS THAT HE WAS HAVING IN HIS POSSESSION ADEQUATE MATERIAL ON THE BASIS OF WHICH A MAN OF ORDINARY PR UDENCE WOULD PRIMA FACIE FORM A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAVE ESCAP ED ASSESSMENT. THE RELEVANT MATERIAL SHOULD CLEARLY INDICATE TO THE READER THAT IN FACT THERE EXISTED CORRELATION BETWEEN THE MATERIAL AND AOS FORMATION OF BELIEF. THE REASONS SHOULD NOT MERELY DISCLOSE NEED FOR AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. INSTEAD THERE MUST BE SOMETHING TANGIBLE WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEEN FACTORS WHICH INDICATE AN INCOM E ESCAPING THE ASSESSMENT AND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF EST ABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING TH E ASSESSMENT. THE LATTER CATEGORY CONSISTS OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS TO BE A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECOR DED AND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 27 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ITR 437] THAT, ......THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BE LIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN T HE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BEC AUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPI NION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING AS SESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT. 33. IN CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 256 ITR 1, THE FULL BENCH OF HONBLE DELHI HIGH COURT HELD AS UNDER :- 31. IN BAWA ABHAI SINGH'S CASE [2002] 253 ITR 83 ( DELHI), A DIVISION BENCH OF THIS COURT OF WHICH ONE OF US (D. K. JAIN J.) IS A MEMBER, CLE ARLY HELD (PAGE 88) : 'THE CRUCIAL EXPRESSION IS 'REASON TO BELIEVE'. THE EXPRESSION PREDICATES THAT THE ASSESSING OFFICER MUST HOLD A BELIEF . . . BY THE EXISTENCE O F REASONS FOR HOLDING SUCH A BELIEF. IN OTHER WORDS, IT CONTEMPLATES EXISTENCE OF REASONS ON WHIC H THE BELIEF IS FOUNDED AND NOT MERELY A BELIEF IN THE EXISTENCE OF REASONS INDUCING THE BEL IEF. SUCH A BELIEF MAY NOT BE BASED MERELY ON REASONS BUT IT MUST BE FOUNDED ON INFORMATION. AS W AS OBSERVED IN GANGA SARAN AND SONS P. LTD. V. ITO [1981] 130 ITR 1 (SC), THE EXPRESSION ' REASON TO BELIEVE' IS STRONGER THAN THE EXPRESSION 'IS SATISFIED'. THE BELIEF ENTERTAINED B Y THE ASSESSING OFFICER SHOULD NOT BE IRRATIONAL AND ARBITRARY. TO PUT IT DIFFERENTLY, IT MUST BE RE ASONABLE AND MUST BE BASED ON REASONS WHICH ARE MATERIAL. IN S.NARAYANAPPA V. CIT [1967] 63 ITR 219, IT WAS NOTED BY THE APEX COURT THAT THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 147 D OES NOT MEAN PURELY A SUBJECTIVE SATISFACTION ON THE PART OF THE ASSESSING OFFICER, THE BELIEF MU ST BE HELD IN GOOD FAITH ; IT CANNOT BE MERELY A PRETENCE. IT IS OPEN TO THE COURT TO EXAMINE WHETHE R THE REASONS FOR THE BELIEF HAVE A RATIONAL NEXUS OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SECTION. TO THAT LIMITED EXT ENT, THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS UNDER SECTION 147 CAN BE CHA LLENGED IN A COURT OF LAW.' IT WAS FURTHER HELD THAT, 40. . WE ARE THEREFORE OF THE OPINION THAT SECTIO N 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO I NITIATE REASSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPINION. IT WAS FURTHER OBSERVED AS UNDER :- 43. WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JO LLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RE CORDED AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDING UNDER SECTION 147 OF 28 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDE R OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB-SECTION (1) OF SECTION 143 OR SUB-SECTION (3 ) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB-SECTI ON (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLIC ATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT I N TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN T HE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORI TY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 34. THE HONBLE SUPREME COURT ENDORSING THE FULL BE NCH DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. KELVINATOR OF INDIA LTD. (SUP RA) HELD IN ITS ORDER REPORTED IN 320 ITR 561, .....THAT ASSESSING OFFICER HAS POWER TO REOPEN, P ROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE LINK WITH THE FORMATION OF BELIEF. THEREFORE, IF THE FRESH TANGIBLE MATERIAL WHICH THE AO HAS IN HIS POSSESSION IS RELEVANT TO HAVE NE XUS TO THE FORMATION OF BELIEF THEN, OF COURSE, THE AO WOULD HAVE THE NECESSARY JURISDICTIO N TO TAKE ACTION UNDER THE ACT. WHAT IS REQUIRED TO BE EXAMINED IS NOT THE ADEQUACY OR SUFF ICIENCY OF THE GROUNDS BUT THE EXISTENCE OF BELIEF. IN OUR VIEW, THEREFORE ALL THAT ONE HAS TO EXAMINE IS THAT WHETHER THERE WAS SOME MATERIAL WHICH, GAVE RISE TO PRIMA FACIE VIEW THAT INCOME HAS ESCAPED ASSESSMENT AND THE BELIEF WAS FORMED IN GOOD FAITH OR WAS IT MERE PRET ENCE FOR INITIATING ACTION U/S 147/148 OF THE ACT. 35. IN VIEW OF THE ABOVE, NOW LET US LOOK INTO THE FACTS INVOLVED IN THE PRESENT CASE TO DECIDE THE LEGAL GROUNDS RAISED IN THE CROSS OBJECT ION. FOR THIS, WE FIRST DEEM IT FIT TO EXAMINE THE REASONS AS RECORDED BY THE AO PRIOR TO REOPENING THE ASSESSMENT FOR AY 2012- 13, WHICH READ AS FOLLOWS: A SEARCH U/S 132 OF THE I.T. ACT 1961 AND SURVEY U /S 133A OF THE SAID ACT WAS CONDUCTED BY THE INVESTIGATION DIRECTORATE, AHMEDABAD ON 18.12.2014 IN THE CASE OF COMMODITY TRADERS GROUP OF AHMEDABAD. IN RELATION TO THE SAID ACTION THE AS SESSEE M/S GRD COMMODITIES LTD. OF 238A AJC BOSE ROAD, 6TH FLOOR, KOLKATA-700020 (PAN AACCG 1217C) WAS COVERED BY SURVEY U/S 133A OF THE ACT. REPORT OF SURVEY HAS BEEN RECEIVED FROM THE INVESTIGATION DIRECTORATE, AHMEDABAD WHEREIN IT IS REPORTED THAT THE ASSESSEE HAD DONE TRADING ON NMCE PLATFORM PREDOMINANTLY IN THE F.Y. 2011-12 RELEVANT TO A.Y. 2012-13 WITH A DELIBERATE AND MALAFIDE INTENTION TO BOOK TOTAL LOSS OF RS.14,00,19,151/- A ND SUCH LOSS WAS NOT JUST A CO-INCIDENCE, IT WAS DONE SO AS TO MANAGE CONTRIVED LOSSES TO THE EX TENT OF PROFIT AVAILABLE IN THE BOOKS FOR THE PURPOSE OF REDUCE INCOME CHARGEABLE TO TAX AND THER EBY REDUCING LEGITIMATE TAX LIABILITIES. THE ASSESSEE FILED RETURN OF INCOME FOR A.Y. 2012-1 3 ON 29.09.2012 SHOWING TOTAL INCOME OF RS.30,79,420/- AND WAS ASSESSED U/S 153A/143(3) ON 31.03.2015 ACCEPTING THE RETURN INCOME. 29 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE INCOME, SO RETURNED BY ASSESSEE FOR AY 2012-13, IS AFTER SETTING OFF OF LOSS OF RS.14,00,19,151/- AND THIS LOSS WAS NOT GENUINELY I NCURRED BY THE ASSESSEE DURING THE PREVIOUS YEAR 2011-12. INFORMATION IN MY POSSESSION REVEALS THAT SUCH IN GENUINE LOSS WAS SET OFF AGAINST AVAILABLE PROFIT WITH A MALAFIDE INTENTION TO REDUC E LEGITIMATE TAX LIABILITIES. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE IT ACT, 19 61 AND SUCH ESCAPEMENT HAS OCCURRED DUE TO ASSESSEES FAILURE TO DISCLOSE ALL MATERIAL FACT TR ULY AND CORRECTLY IN ITS RETURN OF INCOME. IN ORDER TO ASSESS/RE-ASSESS THE SAID INCOME CHARGE ABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AS AFORESAID AND TO ASSESS/RE-ASSESS ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH MAY COME TO MY NOTICE DURING T HIS PROCEEDING, A NOTICE U/S 148 OF THE SAID ACT IS REQUIRED TO BE ISSUED. 36. PERUSAL OF THE ABOVE SHOWS THAT THE ENTIRE EDIF ICE OF THE RECORDED REASONS IS THE APPRAISAL REPORT FORWARDED BY THE INVESTIGATION DIR ECTORATE AT AHMEDABAD WHICH HAD BEEN PREPARED AFTER CONDUCTING SEARCH AND SURVEY ACTION ON 18-12-2014 ON COMMODITY TRADERS GROUP, IN WHICH THE ASSESSEE WAS ALSO COVERED U/S 1 33A OF THE ACT. IN THE PRESENT CASE, WE NOTE THAT THE REGULAR ASSESSMENT U/S 153A/143(3) OF THE ACT, WAS COMPLETED POST THE SURVEY ACTION ON 30-03-2015. DURING THE RELEVANT YEAR, THE ASSESSEE HAD DERIVED PROFITS AS WELL AS INCURRED LOSSES IN TRADING OF COMMODITIES. IN THE C OURSE OF REGULAR ASSESSMENT PROCEEDINGS, THE AO HAD REQUIRED THE ASSESSEE TO FURNISH THE PAR TICULARS OF THE INCOME DERIVED IN COMMODITY TRANSACTIONS. IN RESPONSE, IT IS NOTED TH AT THE ASSESSEE HAD FURNISHED THE PARTICULARS AS REQUISITIONED INTER ALIA INCLUDING THE TRANSACTIONS CONDUCTED ON NMCE, MCX ETC. ALONG WITH THE RELEVANT SUPPORTING DOCUMENTS [ PAGE 17 TO 29 OF THE PAPER BOOK].WE NOTE THAT THIS FACT HAS BEEN ACKNOWLEDGED BY THE AO IN HIS ORDER SHEET ENTRIES DATED 20-2- 2015, 11-03-2015 & 23-03-2015, COPY OF WHICH IS AVA ILABLE AT PAGE 51 OF THE PAPER BOOK. WE THEREFORE NOTE THAT THE AO WAS AWARE ABOUT THE A SSESSEES TRANSACTIONS IN COMMODITY DERIVATIVES ON NMCE AND THE LOSSES INCURRED THEREIN . IN THE SURVEY PROCEEDINGS, AN EFFORT WAS MADE BY THE INVESTIGATING OFFICER TO FIND OUT T HE GENUINENESS OF THE TRADES CONDUCTED BY THE ASSESSEE ON NMCE. FROM THE STATEMENT OF THE DIRECTOR WHICH WAS RECORDED AT THE TIME OF SURVEY U/S 131 OF THE ACT, WE NOTE THAT HE HAD EXPLAINED THE MODUS OPERANDI OF THE COMPANYS BUSINESS. HE ALSO SUBSTANTIATED THE TRANS ACTIONS CONDUCTED ON NMCE THROUGH THEIR AUTHORIZED MEMBERS AND REPLIED TO ALL THE QUE RIES RAISED IN THAT REGARD BY HIS LETTER DATED 30-01-2015. FURTHER IN THE STATEMENT SO RECOR DED UNDER OATH ON 23-04-2015 U/S 131 OF THE ACT, EITHER THERE WAS ANY ADMISSION OF ANY WRON G-DOING OR WAS THERE ANY SELF- INCRIMINATING AVERMENT MADE BY THE DIRECTOR OF THE ASSESSEE COMPANY. ON THE CONTRARY, IT IS 30 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 NOTED THAT THE DIRECTOR HAD GIVEN STATEMENT TO THE EFFECT REITERATING THE GENUINENESS OF THE TRANSACTIONS CONDUCTED BY THE ASSESSEE ON NMCE. IT IS FURTHER OBSERVED THAT THE INVESTIGATING OFFICER HAD ALSO EXAMINED ONE OF THE BROKERS THROUGH WHOM THE ASSESSEE HAD TRANSACTED ON THE NMCE PLATFORM AND IN HIS STATEMEN T RECORDED U/S 131 OF THE ACT, WHEREIN THE BROKER HAD AFFIRMED THE TRANSACTIONS CONDUCTED ON NMCE. WE NOTE THAT THERE WAS NOTHING CONTAINED IN THE BROKERS STATEMENT FROM WH ICH ONE COULD EVEN REMOTELY INFER THAT THE COMMODITY TRANSACTIONS CONDUCTED BY THE ASSESSE E WERE IN-GENUINE OR FICTITIOUS. THE LD. AR ALSO DREW OUR ATTENTION TO THE INVESTIGATING OFF ICERS FINDINGS REGARDING THE ENQUIRIES CONDUCTED BY THE FORWARDS MARKETING COMMISSION (HER EINAFTER REFERRED TO AS FMC) AGAINST THE BROKERS, THROUGH WHOM THE ASSESSEE HAD TRANSACTED ON NMCE. REFERRING TO THE SAME, HE POINTED OUT THAT THE BROKER, M/S SAHAL COM MODITIES PRIVATE LIMITED, THROUGH WHOM THE ASSESSEE HAD TRANSACTED ON NMCE WAS NEITHE R FOUND GUILTY OF ANY SUSPICIOUS ACTIVITIES NOR WAS ANY FINE IMPOSED ON IT BY FMC WI TH REFERENCE TO THE ASSESSEES TRANSACTIONS FOR THE RELEVANT FINANCIAL YEAR 2011-1 2. IN THE SAID CIRCUMSTANCES, WE NOTE THAT, IN THE APPRAISAL REPORT, THE DDIT(INV) HAD ON LY EXPRESSED AN APPREHENSION REGARDING THE GENUINENESS OF THE LOSSES INCURRED. HOWEVER, WE NOTE THAT THERE WAS NO TANGIBLE EVIDENCE OR MATERIAL BROUGHT ON RECORD TO JUSTIFY T HE SAID APPREHENSION. INSTEAD, WE NOTE THAT THE REPORT OF THE DDIT(INV) RESTED ON PREPONDE RANCE OF PROBABILITIES AND HAD FORWARDED THIS TO THE AO FOR FURTHER INVESTIGATING THE SAME. SO, AT THE MOST THIS APPRAISAL REPORT CAN BE TERMED TO TRIGGER REASON TO SUSPECT ; AND UPON RECEIPT OF THIS APPRAISAL REPORT, THE A O OUGHT TO HAVE CONDUCTED PRELIMINARY ENQUIRIES AND TRIED T O COLLECT MATERIALS TO CONNECT ASSESSEE IN THIS ORCHESTRATED WRONG DOING AS SUGGESTED IN THE A PPRAISAL REPORT; AND IF HE HAD SUCCEEDED, IN THIS EXERCISE, THEN HE COULD HAVE SUMMARIZED HIS FINDING OF FACTS CONNECTING THE ASSESSEE TO THE ALLEGED WRONG DOING IN HIS REASONS RECORDED ALONG WITH THE MODUS-OPERANDI AS REPORTED IN THE APPRAISAL REPORT TO RE-OPEN, WHICH COULD HAVE EXPOSED THE LIVE NEXUS AND CONSEQUENT CAUSE AND EFFECT OF ESCAPEMENT OF INCOME , WHICH EXERCISE THE AO UN-FORTUNATELY DID NOT DO IN THE PRESENT CASE. HAVING REGARD TO TH E AFORESAID FACTS, WE FIND MERIT IN THE LD. ARS CONTENTION THAT THERE WAS NO TANGIBLE MATERIAL CONTAINED IN THE APPRAISAL REPORT BASED ON WHICH THE AO COULD HAVE VALIDLY FORMED REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WHICH WAS COMPLETED U/S 153A /143(3) OF THE ACT ON 30-03-2015. RELYING THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF CIT VS KELVINATORS OF INDIA LTD (SUPRA) AND OTHER CASE LAWS CITED (SUPRA) , WE ARE INCLINED TO HOLD THAT THE INITIATION 31 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 OF REASSESSMENT SUFFERED FROM LEGAL INFIRMITY SINCE THE AO IN THE ORIGINAL ASSESSMENT HAS ALREADY TAKEN A VIEW AFTER ENQUIRY AND THEREFORE, T HE IMPUGNED ACTION OF AO TO REOPEN WAS BASED UPON CHANGE OF OPINION BY THE PRESENT AO WITH OUT THERE BEING ANY TANGIBLE MATERIAL OR MATERIAL CHANGE IN THE UNDERLYING FACTS WHICH WE RE ALREADY KNOWN TO THE AO AT THE TIME OF PASSING OF THE REGULAR ASSESSMENT. 37. FURTHER, AS DISCUSSED ABOVE, IT IS NOTED THAT T HE AO HIMSELF NEVER INDEPENDENTLY APPLIED HIS MIND TO THE INFORMATION RECEIVED FROM I NVESTIGATION DIRECTORATE AT AHMEDABAD. INSTEAD HE SIMPLY ADOPTED THE INFORMATION SO RECEIV ED AS GOSPEL TRUTH. WHILE THE REPORT OF THE INVESTIGATION WING MAY CONSTITUTE THE MATERIAL/ FOUNDATION, BUT THE AOS BELIEF CANNOT BE A MERE REFERENCE TO THE SAID REPORT. HERE, WHEN THE AO RECEIVED THIS REPORT FROM THE INVESTIGATION DIRECTORATE AT AHMEDABAD, THEN THIS R EPORT/INFORMATION WHICH IS ADVERSE AGAINST ASSESSEE MAY TRIGGER REASONS TO SUSPECT. THEREAFTER, HE WAS DUTY BOUND TO MAKE REASONABLE ENQUIRY AND COLLECT MATERIAL, WHICH COUL D MAKE HIM BELIEVE THAT THERE WAS IN FACT AN ESCAPEMENT OF INCOME IN THE RELEVANT YEAR. WE HO WEVER NOTE THAT POST RECEIPT OF THE REPORT FROM INVESTIGATION DIRECTORATE AT AHMEDABAD, THE AO DID NOT BOTHER TO VERIFY THE CORRECTNESS OR VERACITY OF THE INFORMATION BUT RECO RDED HIS REASONS IN THE MOST MECHANICAL MANNER. IN THIS CONTEXT IT WOULD BE GAINFUL TO REFE R TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ANIRUDHSINHJI KARANSINHJI JADE JA & ANR. VS. STATE OF GUJARAT (1995) 5 SCC 302, THAT IF A STATUTORY AUTHORITY HAS BEEN VESTED WITH JURI SDICTION, HE HAS TO EXERCISE IT ACCORDING TO ITS OWN DISCRETION. IF DISCRETION I S EXERCISED UNDER THE DIRECTION OR IN COMPLIANCE WITH SOME HIGHER AUTHORITYS INSTRUCTION S, THEN IT WILL BE A CASE OF FAILURE TO EXERCISE DISCRETION ALL TOGETHER. IT HAS TO BE KEPT IN MIND THAT SATISFACTION RECORD ED SHOULD BE INDEPENDENT AND NOT BORROWED OR DICTATED S ATISFACTION. IN THE PRESENT CASE, IT IS EVIDENT THAT THE AO DID NOT APPLY HIS OWN MIND TO E XAMINE THE INFORMATION RECEIVED FROM INVESTIGATION DIRECTORATE AT AHMEDABAD AND THEREFOR E THE REASON TO BELIEVE ESCAPEMENT OF INCOME CANNOT BE SAID TO BE THAT OF THE AO, BUT AT BEST IT CAN BE SAID TO BE AN ACTION MECHANICALLY CARRIED OUT BY THE AO ON RECEIPT OF RE PORT FROM INVESTIGATION DIRECTORATE AT AHMEDABAD. THUS, IN OUR VIEW, WITHOUT ANY REASONS B EING INDEPENDENTLY RECORDED BY THE AO BUT ON THE BASIS OF BORROWED SATISFACTION OF T HE DDIT (INV.) CANNOT BE THE BASIS FOR REOPENING OF ASSESSMENT U/S. 147 OF THE ACT. 32 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 38. WE FIND THAT ON SIMILAR FACTS AND CIRCUMSTANCES , THE B BENCH OF THIS TRIBUNAL IN THE CASE OF PROFICIENT COMMODITIES PVT LTD VS DCIT IN I TA NO. 2307 & 2308/KOL/2017 DATED 02.11.2018 QUASHED THE REASSESSMENTS FRAMED BY THE AO HOLDING THE REOPENING TO BE BAD IN LAW SINCE THE AO HAD NOT INDEPENDENTLY APPLIED HIS MIND TO THE INFORMATION RECEIVED FROM FMC REGARDING ASSESSEES COMMODITY TRANSACTIONS CON DUCTED ON NMCE BUT HAD SIMPLY RECORDED THE REASONS BASED ON BORROWED SATISFACTION . THE RELEVANT FINDINGS OF THIS TRIBUNAL ARE AS FOLLOWS: WE FIRST CONSIDER THE ISSUE AS TO WHETHER RE-OPENI NG OF ASSESSMENT IS BAD IN LAW. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR RE-OPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2010-11 IS AS FOLLOWS:- 'IN THIS CASE THE ASSESSEE HAD FILED ITS ITR FOR A. Y. 2010-11 ON 29.09.2010 DISCLOSING TOTAL INCOME OF RS.58,23,420/-. IN THE CASE OF THE ASSESS EE INFORMATION WAS RECEIVED FROM THE FORWARD MARKET COMMISSION (FMC), THE REGULATORY AUT HORITY OF COMMODITY EXCHANGE THAT THE ASSESSEE M/S. PROFICIENT COMMODITIES PRIVATE LIMITE D HAD TAKEN ACCOMMODATION ENTRIES INFORM OF BOGUS LOSSES THROUGH NATIONAL MULTI COMMODITY EX CHANGE (NMCE). THE TOTAL LOSS INCURRED BY THE ASSESSEE ON NATIONAL MULTI COMMODITY EXCHANG E (NMCE) WAS RS.8,28,02,646/- DURING THE F.Y. 2009-10. I HAVE THEREFORE, REASONS TO BELIEVE THAT THE INCOM E OF THE ASSESSEE TO THE EXTENT OF RS.8,28,02,646/- HAS ESCAPED ASSESSMENT. A NOTICE U /S 148 OF THE I.T. ACT, 1961 IS ISSUED.' A PERUSAL OF THE ABOVE REASONS DEMONSTRATE NON-APPL ICATION OF MIND BY THE ASSESSING OFFICER TO THE INFORMATION RECEIVED FROM FORWARD MARKET COMMIS SION. A PERUSAL OF THE ASSESSMENT ORDER DEMONSTRATES THAT IN THE REPORT OF THE FMC THERE IS NO ALLEGATION WHATSOEVER MADE THAT THE ASSESSEE HAD BOOKED BOGUS LOSSES. THE INFORMATION W AS GENERAL IN NATURE AND THE ASSESSEE COMPANY WAS NOT NAMED. THE ASSESSING OFFICER WAS DU TY BOUND TO APPLY HIS MIND TO THE INFORMATION RECEIVED PRIOR TO COMING TO THE CONCLUS ION THAT HE HAS REASON TO BELIEVE THAT INCOME SUBJECT TO TAX HAS ESCAPED ASSESSMENT. THIS INFORMA TION RECEIVED AND THE MATERIAL HAD TO BE PRIMA FACIE EXAMINED AND THE MATERIAL HAS TO HAVE L IVE LINK WITH THE FORMATION OF BELIEF THAT INCOME SUBJECT TO TAX HAS ESCAPED ASSESSMENT. THE A SSESSING OFFICER HAS DISCUSSED IN DETAIL THE SERIOUS IRREGULARITIES THAT HAVE TAKEN PLACE IN NMC E AND THE INVESTIGATION BY FMC, FROM PARA 3 TO 3.6 AT PAGES 2 TO 5 OF HIS ORDER. THERE IS NO MATERIAL OR ALLEGATION AGAINST THE ASSESSEE IN THESE PARAGRAPHS. THE ALLEGATIONS ARE AGAINST SOME OTHER PERSONS. PARA 3.7., WAS REGARDING SHRI MANOJ DESAI'S STATEMENT. NOTHING TURNS OUT ON THIS STATEMENT. IN FACT, NMCE HAS, IN ITS ACTION TAKEN REPORT, NOT FRAMED ANY CHARGES ON ACCO UNT OF THIS STATEMENT. A SMALL TOKEN FEE OF RS.10,000/- WAS LEVIED FOR NON-PRODUCTION OF BANK B OOKS OF HDFC. THERE IS NO ALLEGATION OF WRONG DOING ON THE PART OF THE ASSESSEE COMPANY IN THIS AUDIT REPORT. WHEN FMC AUDIT DOES NOT FIND FAULT WITH THE TRANSACTIONS OF THE ASSESSEE CO MPANY AND WHEN THE ASSESSEE COMPANY IS NOT NAMED IN THE FMC REPORT, TO BASE THE REASON ON SUCH INFORMATION WITHOUT VERIFICATION, IS BAD IN LAW. THE ASSESSEE HAS PRODUCED ALL EVIDENCE TO PROVE THA T THE TRANSACTIONS ARE GENUINE AND THAT HE HAD PARTICIPATED AS AN ARBITRAGER. THERE IS NO PROO F OF CASH CHANGING HANDS. THE FMC AUDIT HAD CLEARED THE TRANSACTIONS OF THE COMPANY. A PLAI N LOOK AT THE REASONS DEMONSTRATES THAT THE RE-OPENING WAS BASED ON THE INFORMATION WHICH WAS N EVER EXAMINED OR VERIFIED BY THE ASSESSING OFFICER BEFORE RECORDING REASONS FOR REOP ENING OF ASSESSMENT. ON THESE FACTS, WE EXAMINE THE LEGAL POSITION. 33 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 5.1. WE FIND THAT THIS BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. M/S. ADHUNIK CEMENT LTD. IN ITA NO. 1375/KOL/2017; ASSESSMENT YEAR 2009-10, UND ER IDENTICAL FACTS AND CIRCUMSTANCES HELD AS FOLLOWS:- .. 6. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN TH ESE CASE-LAW TO THE FACTS OF THIS CASE WE HOLD THAT THE RE-OPENING IS BAD IN LAW AS THE ASSESSING OFFICER HAS NOT INDEPENDENTLY APPLIED HIS MIND TO THE MATERIAL AND HAS RECORDED REASONS WHICH ARE VAGUE AND BASED ON BORROWED SATISFACTION. HENCE THIS GROUND OF THE ASSESSEE FOR BOTH THE ASSESSMENT YEARS ARE ALLOWED. 39. APPLYING THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF PROFICIENT COMMODITIES PVT LTD VS DCIT (SUPRA) TO THE FACTS O F THE PRESENT CASE, WE HOLD THAT THE USURPATION OF JURISDICTION U/S 147 OF THE ACT WAS B AD IN LAW AND VOID AB INITIO. THEREFORE, WE ARE INCLINED TO QUASH THE ORDER PASSED U/S 147/1 53A/143(3) DATED 29.12.2017. THE CROSS OBJECTIONS FOR AY 2012-13 THEREFORE STANDS ALLOWED. 40. FOR COMPLETENESS, WE WOULD LIKE TO LOOK INTO TH E MERITS OF THE DISALLOWANCE OF LOSSES, FOR THAT WE PROCEED TO DECIDE THE APPEALS FILED BY THE REVENUE FOR AYS 2009-10, 2010-11, 2011-12, 2012-13 & 2014-15 WHEREIN THE REVENUE ASSA ILS THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE OF LOSSES INCURRED BY THE ASSESSEE IN TRADING OF COMMODITIES ON NMCE PLATFORM. WE NOTE THAT THE ASSE SSMENT ORDERS PASSED BY THE AO AS WELL AS THE APPELLATE ORDERS OF THE LD. CIT(A) FOR ALL THESE YEARS ARE SIMILARLY WORDED. THE CONCLUSIONS DRAWN BY THE AO JUSTIFYING THE DISALLOW ANCE AND ALSO THE FINDINGS GIVEN BY THE LD. CIT(A) DELETING IT ARE THE SAME. HENCE, WE TAKE THE UP THE IMPUGNED APPELLATE ORDER PASSED FOR AY 2009-10 AS THE LEAD CASE AND OUR FINDINGS SHALL APPLY MUTATIS MUTANDIS TO ALL OTHER YEARS. IT IS NOTED THAT IN THE ORDERS IMPUGNE D, THE AO HAD JUSTIFIED THE DISALLOWANCE OF LOSSES ON THE FOLLOWING GROUNDS: HENCE, IN VIEW OF THE FACTS DISCUSSED AS ABOVE, IT CAN BE CONCLUDED THAT I. IN ORDER TO EXECUTE SYNCHRONIZED TRANSACTIONS M/S G RD COMMODITIES LTD. HAS DEALT IN ILLIQUID COMMODITIES ONLY. II. THE TRANSACTIONS EXECUTED BY M/S GRD COMMODITIES LT D. WERE SYNCHRONIZED CAN FURTHER PROVED BY THE FACT THAT ABOUT 97% TRANSACTIONS WERE EXECUTED WITHIN A MINUTE. III. THE FACT THAT ALMOST ALL THE TRANSACTIONS WERE SQUA RED OFF WITHIN THE SAME DAY ALSO PROVES THAT THE TRANSACTIONS WERE SYNCHRONIZED. IV. THE TRANSACTIONS WERE SYNCHRONIZED AND EXECUTED WIT H A CLEAR INTENTION TO BOOK THE CONTRIVED LOSSES CAN ALSO BE SEEN FROM THE FACT THAT ABOUT 95 % OF THE TOTAL LOSSES (22.01 CRORES OUT OF 22.98 CRORES) WERE INCURRED IN THE LAST FOUR MONTHS OF THE RESPECTIVE FINANCIAL YEARS. THUS, TILL 34 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE DECEMBER MONTH OF THE EVERY YEAR THE ASSESSEE H AS CRYSTALLIZED THE PROFITS AND BY BOOKING LOSSES IN THE LAST FOUR MONTHS OF THE YEAR, THE SAM E HAS BEEN SET OFF. V. M/S GRD COMMODITIES LTD. HAD INCURRED CONSISTENTLY LOSSES IN ALMOST EVERY TRANSACTION AND THE SAME TREND HAS BEEN OBSERVED IN INVARIABLE ALL THE SERIES CODES IN WHICH M/S GRD COMMODITIES LTD. HAS TRADED. VI. PRICES DISCOVERY WAS NOT FAIR AND RIGGED BY THE BRO KERS, THE SAME CAN BE OBSERVED FROM THE FOLLOWING POINTS: VII. AROUND 70% VOLUME OF THE TRADES HAS BEEN CREATED BY ONLY 25 BROKERS MEANS MOST OF THE VOLUME ACROSS THE NMCE PLATFORM WAS CREATED BY ONLY FEW BROKERS. VIII. IF WE ANALYZE A COMMODITY SERIES WISE TRADING PATTE RN ACROSS THE NMCE PLATFORM THEN IT IS SEEN EVERY YEAR AROUND 60% VOLUMES OF THE TRADES HAS BEE N CREATED BY ONLY 10 BROKERS. IX. EVEN ON DAY BASIS AROUND 60% VOLUMES OF THE TRADES HAS BEEN CREATED BY ONLY 10 BROKERS. X. EVEN ON CLIENT LEVEL MOST OF THE VOLUME WAS CREATED BY TOP 100 CLIENTS ONLY. THOUGH, MORE THAN 269000 CLIENTS WERE REGISTERED ON NMCE PLATFORM. XI. IF WE ANALYZE CLIENTS PARTICIPATION ON COMMODITY S ERIES CODE WISE THEN IT CAN BE OBSERVED THAT ONLY FEW CLIENTS WERE DEALING IN SPECIFIC SERIES CO DE. XII. IF WE ANALYZE THE CLIENTS PARTICIPATION ON DAY BAS IS THEN IT CAN BE SEEN THAT TOP 25 CLIENTS WERE CREATING ALMOST 60 % VOLUME OF THE ENTIRE NMCE EXCH ANGE. XIII. CLEAR CLUSTERING AMONG THE BROKERS WAS FOUND AND AS WE NARROW DOWN OUR ANALYSIS CRITERION THEN CLUSTERING PATTERN WILL BE MORE EVIDENT AND TH E NUMBERS OF THE CLUSTERING MEMBERS WILL ALSO DECREASE. XIV. IF WE ANALYZE ON DAY BASIS AND TOOK A SPECIFIC SERI ES CODE THEN IT CAN BE SEEN THAT 2-3 BROKERS WERE TRADES MUTUALLY TRADES. XV. ALL THE BROKERS OF M/S GRD COMMODITIES LTD. WERE PE NALIZED BY THE NMCE FOR THEIR INVOLVEMENT IN NON-GENUINE TRADE PRACTICES DUE TO O NE OR VARIOUS REASONS AND SOME OF THEM EVEN DONT AVAILABLE ON THE GIVEN ADDRESS. XVI. WHEN THE DIRECTOR OF THE ASSESSEE COMPANY WAS CONFR ONTED WITH THE ABOVE FACT VIDE Q. NO. 16 OF THE STATEMENT RECORDED U/S 131 OF THE IT ACT OF DAT ED 17.03.2015, AS IN VIEW OF THE ABOVE POINTS, IT IS CLEAR THAT THESE TRANSACTIONS ONE NMCE PLATFO RM WERE NOT EXECUTED AS PART OF NORMAL TRADE PRACTICE BUT, WITH, THE DELIBERATE INTENTION SO AS TO REDUCE BOOK PROFITS AND AVOID PAYMENT OF TAXES LEGITIMATELY PAYABLE BY THE ASSESSEE. IN RESP ONSE TO THE SAME THE ASSESSEE HAVE SUBMITTED ONLY MECHANICAL REPLY AND CONTESTED THAT ALL THE TR ANSACTION WERE DONE THROUGH AUTOMATED EXCHANGE AND BY THAT TIME THEY DONT KNOW THAT WHO THE COUNTERPARTY/BROKER WERE. HOWEVER, HE DID NOT GAVE ANY REASONABLE EXPLANATION AS WHY THIS HAS HAPPENED DID NOT MAKE ANY COMMENTS REGARDING THEIR MALAFIDE INTENTION. THE RELEVANT PO RTION OF THE STATEMENT OF THE DIRECTOR OF THE ASSESSEE COMPANY IS BEING REPRODUCED AS HEREUNDER: XVII. THE TRANSACTION ON NMCE PLATFORM WERE SYNCHRONIZED AND DONE WITH THE CLEAR INTENTION TO INCUR LOSSES ONLY CAN ALSO BE SEEN FORM THE FACT TH AT LOSSES INCURRED BY THE M/S GRD COMMODITIES LTD. WERE SET-OFF AGAINST THE BOOK PROF IT EARNED FROM BUSINESS ACTIVITIES OTHER TRADING ON NMCE. 41. THE LD. CIT(A) HOWEVER HELD THAT THE CONCLUSION S DRAWN BY THE AO WERE NOT BORNE OUT FROM THE FACTS ON RECORD AND THEREFORE DELETED THE IMPUGNED DISALLOWANCE. AT THE TIME OF HEARING OF APPEAL, THE LD. CIT, DR REITERATED T HE FINDINGS OF THE AO AND JUSTIFIED THE ACTION OF AO. PER CONTRA THE LD. AR OF THE ASSESSEE POINTED OUT TO US THAT , IN THE COURSE OF SURVEY PROCEEDINGS, THE DIRECTOR OF THE ASSESSEE WA S PERSONALLY EXAMINED BY THE INVESTIGATING OFFICER AND NOTHING CONTAINED IN THE STATEMENT REVEALED THAT THE ASSESSEE HAD ADMITTED OF ANY WRONG DOING OR HAD AGREED TO HAVE A VAILED CONTRIVED LOSSES. THE LD. AR OF 35 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 THE ASSESSEE ALSO DREW OUR ATTENTION TO THE SUBMISS IONS FURNISHED BY THE ASSESSEE ON 30.01.2015 IN RESPONSE TO THE REQUISITION ISSUED BY THE DDIT(INV), AHEMDABAD WHEREIN COMPLETE DETAILS OF COMMODITY TRANSACTIONS WITH REQ UISITE DOCUMENTARY EVIDENCES WAS PROVIDED. MOREOVER ON PERUSAL OF THE STATEMENT OF T HE DIRECTOR RECORDED U/S 131 BY THE INVESTIGATING OFFICER WHICH HAS BEEN EXTRACTED IN P ARTS IN THE ASSESSMENT ORDER, IT IS NOTED THAT NOT ONLY HAD HE NOT MADE ANY SELF-INCRIMINATIN G AVERMENT BUT INSTEAD HE HAD SUBSTANTIATED THE TRANSACTIONS CONDUCTED ON NMCE. T HE RELEVANT QUESTIONS POSED BY THE DDIT(INV) AND THE ANSWERS GIVEN BY THE DIRECTOR IN HIS STATEMENT DATED 23-04-2015 ARE AS FOLLOWS: Q.11 AFTER GOING THROUGH THE DETAILS OF THE MON THLY PROFIT/LOSS INCURRED BY THE M/S GRD COMMODITIES LIMITED ON NMCE PLATFORM, WHICH IS SUBM ITTED BY YOU IN YOUR WRITTEN SUBMISSION AND NMCE TRADE DATA WHICH HAVE BEEN COLLECTED FROM EXCHANGE ITSELF. IT HAS BEEN FOUND THAT ON NEARLY ALL THE TRANSACTIONS IN EVERY COMMODITY LOSS ES HAVE BEEN BOOKED BY THE COMPANY. Q. FROM ABOVE OBSERVATIONS IT CLEARLY EMERGES THAT ONLY LOSSES HAVE BEEN MADE ON NMCE CONSISTENTLY WITH A DELIBERATE INTENTION. PLEASE EX PLAIN THE REASON AS WHY THE M/S GRD COMMODITIES LIMITED HAS CONSISTENTLY MADE LOSSES ON NMCE PLATFORM. ANS: SIR, IN THIS REGARD I CAN ONLY STATE THAT TH ERE IS NO SPECIFIC INTENTION BEHIND THE SAME. PROFITS/LOSSES IS A PART OF BUSINESS ACTIVITIES AND EARNING PROFIT OF LOSS IN ANY TRANSACTION ON ANY EXCHANGE IS NOT IN OUR HAND AS ALL THE TRANSACTION HAVE BEEN EXECUTED THROUGH AUTOMATED EXCHANGE PLATFORM ONLY. FURTHER, THE TRANSACTIONS E XECUTED ON NMCE PLATFORM ARE THE PART OF REGULAR TRADING ACTIVITIES AND ABSOLUTELY THERE WAS NO ANY MALAFIDE INTENTION BEHIND SAME. Q 12 AFTER GOING THROUGH THE MONTHLY DETAILS OF TH E PROFIT/LOSSES MADE BY YOU ON NMCE PLATFORM AND OTHER THAN NMCE, IT CAN BE SEEN THAT O N OTHER EXCHANGES YOU HAVE INCURRED PROFIT/LOSSES, HOWEVER, ON NMCE PLATFORM YOU HAVE I NCURRED ONLY LOSSES AND THAT TOO CONSISTENTLY FOR YOUR YEAR I.E. FY 2008-09 TO 2011- 12. PLEASE OFFER YOUR COMMENT IN THIS REGARD. ANS: SIR, IN THIS REGARD I CAN ONLY STATE THAT THI S IS MERELY A COINCIDENCE THAT WERE HAVE INCURRED ONLY LOSSES ON NMCE PLATFORM AND THERE IS NO SPECIFIC REASONS FOR THE SAME. Q.13 ON PERUSAL OF THE DETAILS PROVIDED BY YOU IT IS SEEN THAT DURING THE FY 2008-09 TO 2011-12, TILL DECEMBER, SUBSTANTIAL PROFITS HAVE BE EN CRYSTALLIZED IN COMMODITY TRADING ON OTHER EXCHANGE I.E. MCX, NCDEX & ICEX. FURTHER, LO SSES MADE ON NMCE HAVE BEEN ONLY IN THE LAST FOUR MONTHS OF THE FINANCIAL YEAR I.E. DEC -MARCH MONTH. A COMPARISON THE PROFITS MADE TILL DECEMBER ON MCX, NCDEX & ICEX AND THE LOSSES M ADE ON NMCE DURING THE LAST QUARTER IS MADE HEREUNDER: MONTH 2008-09 2009-10 2010-11 2011-2012 TOTAL CUMULATIVE PROFITS MADE ON MCX, NCDEX & ICEX BY M/S GRD COMMODITIES LIMITED FROM APR-DEC 60053215 23003956 254038363 89247482 TOTAL LOSSES OBTAINED FROM NMCE DURING THE DEC-MARCH 48516583 15078769 16499732 140019151 36 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 Q. ON GOING THROUGH THE ABOVE TABLE, IT IS CLEAR T HAT TRADING IN COMMODITIES ON NCE AND BOOKING OF LOSSES THEREIN HAVE BEEN DONE CLEARLY AN D DELIBERATELY WITH THE INTENTION SO AS TO REDUCE THE BOOK CLEARLY AND DELIBERATELY WITH THE I NTENTION SO AS TO REDUCE THE BOOK PROFITS EARNED BY TRADING ON MCX NCDEX & ICEX AND CONSEQUEN T TAX PAYABLE BY M/S GRD COMMODITIES LIMITED. PLEASE OFFER YOUR COMMENTS IN THE REGARD. ANS: SIR, AS I HAVE ALREADY TOLD THAT NOTHING HAS BEEN DONE DELIBERATELY AND INTENTIONALLY. THE COMPANY HAS INCURRED LOSSES ON NMCE PLATFORM, WHICH IS AN AUTOMATIC EXCHANGE. FURTHER, I CAN ONLY SAY THAT WE TRY OUR LEVEL BEST TO EARN PRO FIT IN SPITE THAT WE INCURRED LOSSES ONLY, THIS IS NOTHING BUT OUR HARD LUCK ONLY. 42. IT IS NOTED THAT THE LD. CIT(A) AFTER GIVING DU E CONSIDERATION TO THE ABOVE FACTS FOUND THAT THERE WAS NO MATERIAL DISCERNIBLE FROM THE STA TEMENT OF THE DIRECTOR RECORDED U/S 131 BASED ON WHICH THE AO COULD HAVE INFERRED THAT THE LOSSES INCURRED IN COMMODITY TRANSACTIONS WERE CONTRIVED. THE RELEVANT FINDINGS RECORDED BY THE LD. CIT(A) IN THIS REGARD ARE AS FOLLOWS: 4. FROM THE MATERIAL ON RECORD, I FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS AS WELL AS THE APPELLATE PROCEEDINGS, THE APPELLANT HAD PLA CED BEFORE THE AUTHORITIES ALL THE PRIMARY EVIDENCES AND DOCUMENTS IN SUPPORT OF COMMODITY TRA NSACTIONS CONDUCTED ON NMCE THROUGH ITS REGISTERED MEMBERS. IT APPEARED FROM THE LD. ARS S UBMISSIONS AS WELL AS THE IMPUGNED ORDER THAT A SURVEY U/S 133A WAS CONDUCTED BY THE INVESTI GATION WING AT AHMEDABAD AGAINST FEW MEMBERS OF NMCE WHO WERE ACTING AS THE BROKERS FOR THIRD PARTIES FOR THEIR COMMODITY TRANSACTIONS CONDUCTED ON NMCE. ON VERIFICATION OF THE DATA ACCESSED FROM THE MEMBERS RECORDS AND CROSS VERIFIED FROM NMCE, IT WAS GATHER ED THAT THESE MEMBERS HAD CONDUCTED SUBSTANTIAL NUMBER OF COMMODITY TRANSACTIONS FOR AN D ON ACCOUNT OF THE APPELLANT IN WHICH THE LOSS WAS INCURRED BY THE APPELLANT. SUSPECTING SUCH TRANSACTIONS TO BE FICTITIOUS, THE AUTHORIZED OFFICER AT AHMEDABAD HAD REQUIRED THE APPELLANT TO FURNISH PARTICULARS OF ITS COMMODITY TRANSACTIONS CONDUCTED ON NMCE. IN RESPONSE THE REQ UISITE INFORMATION WAS PROVIDED BY THE APPELLANT ON 30.01.2015. FROM COPY OF THE SUBMISSIO NS MADE BEFORE THE SAID ADIT, IT APPEARED THAT THE APPELLANT HAD FURNISHED BEFORE THE SAID OF FICER COMPLETE DETAILS OF ITS TRANSACTIONS AS REQUISITIONED TOGETHER WITH COPIES OF THE RELEVANT DOCUMENTARY EVIDENCES SUPPORTING SUCH TRANSACTIONS. THEREAFTER ON 17.03.2015, SHRIBIMALDR OLIA, THE DIRECTOR OF THE APPELLANT, PERSONALLY APPEARED BEFORE THE ADIT(INV), AHMEDABAD IN COMPLIANCE TO THE SUMMONS U/S 131 AND HIS STATEMENT ON OATH WAS RECORDED. IN THE IMPU GNED ORDER THE LD. AO HAS EXTRACTED PART OF THE RECORDED STATEMENT FROM WHICH I FIND THAT NOWHE RE THE DIRECTOR HAD ADMITTED OF ANY WRONG DOING OR AGREED TO HAVE AVAILED CONTRIVED LOSSES. I THEREFORE FIND THAT NO INCRIMINATING INFORMATION OR EVIDENCES WERE GATHERED BY THE INVES TIGATION WING AT AHMEDABAD WHEN THE DIRECTOR OF THE APPELLANT WAS EXAMINED. 43. FROM THE ASSESSMENT ORDER, IT IS NOTED THAT THE AO HAS ALSO REFERRED TO STATEMENT RECORDED U/S 131 OF THE ACT OF SHRI DHIRENDRA AGARW AL, DIRECTOR OF ONE OF THE BROKER ENTITIES THROUGH WHOM THE ASSESSEE HAD CONDUCTED TRANSACTION S ON NMCE. ON PERUSAL OF THE STATEMENT, WHICH HAS BEEN EXTRACTED AT PAGE 15OF TH E ASSESSMENT ORDER, IT IS NOTED THAT NOT ONLY DID THE BROKER AFFIRM THE TRANSACTIONS CONDUCT ED BY THE ASSESSEE BUT HE ALSO CONFIRMED THE ANONYMITY OF THE COUNTER PARTY BROKER AND THE S ELLER/PURCHASER. THIS FACTUAL ASPECT WAS 37 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ALSO TAKEN NOTE BY THE LD. CIT(A) IN HIS IMPUGNED A PPELLATE ORDER, AND HIS RELEVANT FINDINGS IN THIS REGARD ARE AS FOLLOWS: 4 I ALSO NOTE THAT IN THE COURSE OF SURVEY CONDU CTED AGAINST THE BROKERS, STATEMENTS ON OATH WERE RECORDED AND IN THE IMPUGNED ORDER THE LD . AO HAS EXTRACTED PORTION OF THE STATEMENT WHICH SHRI DHIRENDRA AGARWAL HAD GIVEN BE FORE THE ADIT(INV). ON CAREFUL PERUSAL OF THE EXTRACTED PORTION OF THE STATEMENT, I FIND THAT NOWHERE THE SAID BROKER HAD EVER ADMITTED THAT HE HAD PROVIDED CONTRIVED LOSSES OR PROVIDED A CCOMMODATION ENTRIES OR THAT THE TRANSACTIONS CARRIED OUT BY HIM ON NMCE ON BEHALF O F THE APPELLANT WERE FICTITIOUS OR BOGUS OR IN-GENUINE. FOR EXAMPLE, IN Q NO. 17 THE BROKER WAS REQUIRED TO EXPLAIN AS TO HOW COME IT IS POSSIBLE THAT PURCHASE & SALE OF THE COMMODITY HAPP ENED WITH THE CLIENTS OF THE SAME BROKER, TO WHICH HE EXPLAINED THAT THE TRANSACTIONS ARE CONDUC TED ON THE FLOOR OF THE EXCHANGE AND THEREFORE THEY DO NOT KNOW WHO THE BUYER AND SELLER IS. SIMILARLY IN Q NO. 18, THE BROKER WAS REQUIRED TO EXPLAIN WHY A PECULIAR PATTERN WAS NOTE D IN TRANSACTIONS OF THE ASSESSEE WHEREIN LOSS WAS INCURRED, TO WHICH HE EXPLAINED THAT THE T RANSACTIONS WAS CONDUCTED ON THE PLATFORM OF THE EXCHANGE AND THAT HE HAD NOTHING TO DO WITH THE SAME. 5. FROM THE FOREGOING ANSWERS IT IS APPARENT THAT NOWH ERE SHRI DHIRENDRA AGARWAL BEING THE BROKER THROUGH WHOM THE APPELLANT HAD CONDUCTED ITS COMMODITY TRANSACTIONS HAD ADMITTED THAT THE TRANSACTIONS WERE INGENUINE OR FICTITIOUS. I ALSO FIND THAT BOTH THE QUESTIONS AS WELL AS THE ANSWERS THERETO BY THE BROKERS WERE QUITE SPECI FIC AND THERE WAS NO AMBIGUITY OR VAGUENESS IN THE ANSWERS PROVIDED. IN THE CIRCUMSTANCES THERE FORE I DO NOT FIND MERIT IN THE LD. AOS FINDING THAT THE ANSWERS GIVEN BY THE BROKERS WERE EITHER EVASIVE OR VAGUE OR UN-SPECIFIC. 44. ANOTHER REASON GIVEN BY THE AO FOR MAKING THE I MPUGNED DISALLOWANCE WAS THAT SOME OF THE BROKERS WERE NOT FOUND AT THEIR GIVEN A DDRESS BY THE INVESTIGATION DIRECTORATE AT AHMEDABAD AT THE TIME WHEN THE SURVEY WAS CONDUCTED UPON THE COMMODITY TRADERS GROUP. THIS ACCORDING TO THE AO RAISED DOUBT IN HIS MIND REGARDING THE IDENTITY OF THE BROKERS. IN THIS REGARD, THE LD. AR INVITED OUR ATT ENTION TO THE ENQUIRIES MADE BY THE AO FROM THESE VERY BROKERS U/S 133(6) OF THE ACT IN TH E COURSE OF RE-ASSESSMENT PROCEEDINGS, COPIES OF WHICH WERE PLACED AT PAGES 57-61 OF THE P APE RBOOK FOR AY 2009-10 AND PAGES 46 OF THE PAPER BOOK FOR AY 2014-15. IT IS THUS NOT ED THAT NOT ONLY THE IDENTITY OF THE BROKERS STOOD ESTABLISHED BUT ON PERUSAL OF THEIR R EPLIES, WE NOTE THAT THEY HAD ALSO FURNISHED REQUISITE INFORMATION TO SUBSTANTIATE THE ASSESSEE S COMMODITY TRANSACTIONS ON NMCE. HAVING REGARD TO THESE MATERIAL FACTS WE FIND THE A OS DOUBT REGARDING THE EXISTENCE OF BROKERS WAS FACTUALLY MISPLACED. 45. AT THE TIME OF HEARING THE LD. CIT, DR INVITED OUR ATTENTION TO PARA 7.2.3 OF THE ASSESSMENT ORDER WHEREIN THE AO HAD NOTED THAT THE BROKERS THROUGH WHOM THE ASSESSEE HAD TRANSACTED, HAD BEEN PENALIZED FOR UNDERTAKING SUSP ICIOUS ACTIVITIES ON THE NMCE PLATFORM, WHICH ACCORDING TO HIM, PROVED THAT THE LOSSES WERE IN-GENUINE. COUNTERING THE LD. DRS SUBMISSIONS THE LD. AR POINTED OUT THAT, THE FMC HA D LEVIED TOKEN FINES ON THESE BROKERS 38 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 FOR PROCEDURAL IRREGULARITIES AND THERE WAS NO ALLE GATION OF WRONG DOING NOR WAS SUCH FINE LEVIED BY THE FMC WITH REFERENCE TO THE TRANSACTION S IN RESPECT OF THE ASSESSEE. HE FURTHER BROUGHT TO OUR NOTICE THE TOKEN FINES LEVIED BY THE FMC ON THE BROKERS DID NOT PERTAIN TO THE YEARS IN WHICH THE ASSESSEE HAD CONDUCTED TRANSACTI ONS THROUGH THEM. FOR THE SAKE OF CONVENIENCE, THE RELEVANT DATA HAS BEEN TABULATED B ELOW:- NAME OF BROKER YEAR OF TRANSACTION WITH ASSESSEE YEAR IN WHICH FINE LEVIED AMOUNT OF FINE IMPOSED M/S. FAST TRACK MERCHANTS PVT. LTD. FY 2008-09 FY 2009-10 FY 2013-14 FY 2010-11 FY 2011-12 RS.50,000 RS.1,25,000 M/S. QUEST COMMODITIES INDIA PVT. LTD. FY 2008-09 NO FINE LEVIED NA M/S. SAHAL COMMODITIES PVT. LTD. FY 2008-09 FY 2009-10 FY 2011-12 FY 2013-14 FY 2010-11 RS.25,000 M/S.SAGUN DEALER PVT. LTD. FY 2008-09 FY 2009-10 FY 2010-11 FY 2010-11 RS.80,000 46. FROM THE AFORESAID TABLE, WE FIND MERIT IN THE ASSESSEES PLEA THAT BARRING THE ASSESSEES TRANSACTION THROUGH M/S SAGUN DEALER PVT . LTD. IN FY 2010-11, THE FINES IMPOSED BY THE FMC ON THE BROKERS WERE WITH REFERENCE TO SP ECIFIC PERIODS WHICH WERE DIFFERENT AND DISTINCT FROM THE PERIOD IN WHICH THE ASSESSEE TRAN SACTED THROUGH THESE BROKERS. HENCE, THESE FINES LEVIED BY FMC, AS REFERRED TO BY THE LD. CIT, DR, DID NOT HAVE ANY BEARING ON THE FACTS OF THE PRESENT CASE. WE FURTHER NOTE THAT, NE ITHER THE AO NOR THE LD. CIT, DR WERE ABLE TO BRING ON RECORD THE NATURE OF FINE IMPOSED ON THE BROKER, M/S. SAGUN DEALERS PVT. LTD. FOR FY 2010-11 OR FOR THAT MATTER ANY OF THE O THER BROKERS, AND AS TO WHETHER THESE FINES WERE IMPOSED WITH REFERENCE TO THE ASSESSEES TRANS ACTIONS WITH THESE BROKERS. WE THEREFORE HOLD THAT, WHEN THE ASSESSEE ITSELF WAS NEVER HELD GUILTY OF COMMITTING ANY WRONG DOING BY THE FMC, NOR WAS THE AO ABLE TO BRING ON RECORD ANY MATERIAL THAT THE REGULATORY AUTHORITY HAD FOUND THE ASSESSEES TRANSACTION THROUGH SUCH B ROKERS TO BE IN-GENUINE REQUIRING ANY PENAL ACTION, THEN THE LOSSES INCURRED BY THE ASSES SEE ON THE NMCE PLATFORM COULD NOT HAVE BEEN DOUBTED ON THIS COUNT. 39 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 47. AS FAR AS THE REVENUES GRIEVANCE VIZ., THE ASS ESSEE HAD OBTAINED LOSS THROUGH SYNCHRONIZED TRADING WITH A SET OF COUNTER-PARTY BR OKERS IS CONCERNED, WE NOTE THAT EXCEPT FOR MAKING UNSUBSTANTIATED AVERMENTS, THE AO DID NO T BRING ON RECORD ANY EVIDENCE/MATERIAL WHICH COULD HAVE SUPPORTED HIS CO NCLUSION THAT THE COMMODITY TRANSACTIONS CONDUCTED BY THE ASSESSEE WERE BOGUS. IT IS NOTED THAT THE AO DID NOT EVEN SPELL OUT THE NAMES OF THESE COUNTER-PARTY BROKERS NOR DI D HE BRING ON RECORD ANY MATERIAL WHICH COULD GO ON TO SHOW THAT THESE COUNTER PARTY BROKER S WERE ENGAGED IN SYNCHRONIZED TRADING. ON THE OTHER HAND, IT IS NOTED THAT THE DOCUMENTARY EVIDENCES SUBSTANTIATING THE COMMODITY TRANSACTIONS, AS SUBMITTED BY THE ASSESSEE, WERE NE ITHER CONTROVERTED BY THE AO OR THE LD. CIT, DR. EACH AND EVERY COMMODITY TRANSACTION, WHIC H THE ASSESSEE CONDUCTED THROUGH NMCE MEMBERS WAS SUPPORTED BY TIME STAMPED CONTRACT NOTES WHICH WERE ISSUED IN CONFORMITY WITH THE REGULATIONS FORMULATED BY NMCE. THE CONTRACT NOTES PROVIDED THE SPECIFIC PARTICULARS AS REQUIRED TO BE SPELT OUT AS PER NMCE REGULATIONS. IT IS NOTED THAT EACH TRANSACTION WAS FOLLOWED BY THE PAYMENT IN DUE COUR SE AND IN THE MANNER REQUIRED BY THE EXCHANGE REGULATIONS. WE THEREFORE FIND THAT ALL TH E PRIMARY DOCUMENTS AND EVIDENCES, WHICH THE ASSESSEE IN ITS CAPACITY AS REGULAR DEALE R IN SECURITIES WAS EXPECTED TO MAINTAIN, HAD BEEN MAINTAINED AND THE SAME WAS FURNISHED BEFO RE THE AO. WE FIND THAT THERE IS NOTHING BROUGHT ON RECORD BY THE REVENUE WHICH ESTA BLISHES THAT THE ASSESSEE WAS ACQUAINTED WITH ANY COUNTER PARTY BROKERS WHICH IND ULGED IN ORCHESTRATED WRONG DOING FOR THE PURPOSE OF CLAIMING BOGUS LOSSES, INSTEAD WE NO TE THAT THE ONUS CASTED UPON ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTIONS HAS BEEN DISCHARGED BY IT AND NEITHER THE AO/LD. CIT, DR COULD POINT OUT ANY INFIRMITY IN THE DOCUME NT PRODUCED NOR COULD ADDUCE ANY ADVERSE MATERIAL TO SHIFT THE BURDEN/ONUS BACK ON A SSESSEE OR COULD DISPROVE THE EVIDENCE ADDUCED BY THE ASSESSEE TO SUBSTANTIATE THE TRANSAC TION. SO, THE ASSESSEE HAS DISCHARGED THE PRIMARY ONUS ON IT TO PROVE THE GENUINENESS OF THE TRANSACTION. 48. THE LD. AR FURTHER INVITED OUR ATTENTION TO THE FACT THAT, SIMILAR DOCUMENTATION WAS MAINTAINED BY THE ASSESSEE IN RESPECT OF ITS COMMOD ITY TRANSACTIONS ON OTHER EXCHANGES AS WELL. IT IS INTERESTING TO FIND THAT, ALL THESE TRA NSACTIONS WHICH WERE SUPPORTED BY SIMILAR DOCUMENTATION, WERE CONSIDERED TO BE GENUINE AND BO NAFIDE BY THE AO BECAUSE THE ASSESSEE HAD REPORTED NET GAINS THEREIN. WE THUS NOTE THAT T HE SOLE REASON FOR WHICH THE AO QUESTIONED THE GENUINENESS OF THE TRANSACTIONS COND UCTED ON NMCE WAS ONLY BECAUSE THE 40 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ASSESSEE REPORTED OVERALL LOSS. IN OUR VIEW, THIS A PPROACH OF THE AO WAS CLEARLY UNTENABLE ON THE FACTS AS WELL AS IN LAW. WE ARE OF THE OPINI ON THAT AO COULD NOT HAVE BLOWN HOT AND COLD AT THE SAME TIME. ON ONE HAND, HE ON SIMILAR SET OF DOCUMENTATION ACCEPTS THE TRANSACTION WHICH YIELDED GAINS, WHEREAS ON SIMILAR SET OF DOCUMENT CARRIED OUT IN ELECTRONIC PLATFORM, WHEN LOSS OCCURRED, HE DID NOT ACCEPT. IN SUCH A SCENARIO, THE AO IS STOPPED FROM PICKING AND CHOOSING WITHOUT HAVING IN HIS POSSESSION MATERIAL OR EVIDENCE TO TAKE A DIFFERENT/ADVERSE VIEW. SUCH ACTION OF AO C ANNOT BE COUNTENANCED UNLESS THE AO WAS ABLE TO ESTABLISH ANY LINK BETWEEN THE ASSESSEE AND THE COUNTER PARTY BROKERS AND BRING ON RECORD SOME EVIDENCE/MATERIAL TO SHOW THAT THE A SSESSEE WAS PARTY TO SYNCHRONIZED TRADING WHICH THE AO FAILED TO DO SO, SO WE ARE OF THE OPINION THAT THE AO COULD NOT HAVE DISPUTED THE GENUINENESS OF THE LOSS. 49. WE NOTE THAT THE LD. CIT(A) HAD EXAMINED THE RE LEVANT DATA REFERRED TO BY THE AO IN THE IMPUGNED ORDER TO INFER THE ACT OF SYNCHRONIZED TRADING AND FOUND THAT THIS INFORMATION REFERRED TO BY THE AO WAS A SMOKE SCREEN AND THAT I T DID NOT IN ANY MANNER SUGGEST THAT THE ASSESSEE OR ANY OF THE COUNTER-PARTY BROKERS WERE G UILTY OF SYNCHRONIZED TRADING. THE RELEVANT FINDINGS RECORDED BY THE LD. CIT(A) IN THI S REGARD IS AS FOLLOWS: 10. IN THE ENTIRE ORDER THE LD. AO HAS MADE GENE RAL AND SWEEPING REMARKS BASED ON CERTAIN IRRELEVANT MATERIALS. E.G. THE LD. AO HAS D OUBTED THE GENUINENESS BECAUSE THE TRANSACTIONS WERE SQUARED OFF AT SHORT DURATIONS. H OWEVER THE MERE FACT THAT THE TRANSACTIONS WERE SQUARED OFF IN SHORT DURATION RESULTING IN LOS S CANNOT BY ITSELF BE THE REASON TO QUESTION THE GENUINENESS OF THE LOSS, IF THE FACTS ON RECORD PRO VED THAT SUCH TRANSACTIONS HAD IN FACT BEEN CARRIED OUT ON THE EXCHANGE AND THESE WERE REFLECTE D IN THE RECORDS OF THE EXCHANGE AT THE MATERIAL TIME AND NO FALSITY OR INFIRMITY IS SHOWN THEREIN. THE MERE FACT THAT THE ASSESSEE SQUARED OFF THE TRANSACTIONS WITHIN A SHORT PERIOD RESULTING IN LOSS MAY RAISE THE QUESTION ABOUT THE ASSESSEES PRUDENCE BUT FOR SUCH REASON ONE CAN NOT HOLD THAT THE LOSS WAS NOT GENUINE OR BOGUS. IN THE IMPUGNED ORDER THE LD. AO ALSO EMPHAS IZED ON THE FACT THAT THE ASSESSEE HAD CONDUCTED ITS COMMODITY TRANSACTIONS DURING THE PER IOD FY 2008-09 TO FY 2013-14 PRINCIPALLY THROUGH FOUR BROKERS AND THE ANALYSIS OF TRADES SHO WED THAT THE COUNTER PARTY BROKERS INVOLVED IN THESE TRANSACTIONS NUMBERED TWENTY. BY REFERRING TO THIS STATISTIC THE LD. AO CONCLUDED THAT THESE TWENTY-FOUR PARTIES HAD FORMED A CARTEL AND T HROUGH SYNCHRONIZED TRADING THE CARTEL MEMBERS HAD CREATED CONTRIVED LOSSES TO BENEFIT THE APPELLANT. I HOWEVER FIND THAT IN THE SAME ORDER THE LD. AO HIMSELF HAS ADMITTED THAT SEVENTY PERCENT OF THE ENTIRE TRADE VOLUME DURING THIS PERIOD ON NMCE WAS CONDUCTED BY TWENTY FIVE ME MBERS. IF THAT BE THE CASE, THEN THERE WAS EMPIRICAL DATA AVAILABLE ON RECORD THAT SUBSTANTIAL LY MAJOR PART OF THE TRADING ON NMCE WAS CONDUCTED BY THESE TWENTY FIVE MEMBERS AND THEREFOR E ANY MEMBER OF PUBLIC WHO CONDUCTED THE COMMODITY TRANSACTIONS ON THIS EXCHANGE NECESSARILY TRANSACTED THROUGH ANY ONE OF THEM AND THEREFORE NO ADVERSE INFERENCE COULD BE DRAWN ONLY AGAINST THE APPELLANT ON THE GROUND THAT THE ASSESSEE ENGAGED ONE OF SUCH MEMBERS FOR CONDUCTING ITS COMMODITY TRANSACTIONS. RATHER THIS INFORMATION SHOWS THAT THE APPELLANT CHOSE TO CONDU CT ITS COMMODITY TRANSACTIONS ON NMCE THROUGH ITS MEMBERS WHO WERE ACTIVELY INVOLVED IN C ONDUCTING TRADES AND IN A POSITION TO PROVIDE BETTER SERVICE BEING WELL CONVERSANT WITH T HE MARKET. THE MERE FACT THAT THE APPELLANTS 41 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 TRANSACTIONS INVOLVED 24 ACTIVE MEMBERS DOES NOT LE AD TO CONCLUSION THAT THESE ACTIVE MEMBERS BY THEMSELVES HAD FORMED A CARTEL. 50. THE LD. CIT, DR APPEARING ON BEHALF OF THE REVE NUE WAS UNABLE TO CONTROVERT THE ABOVE FINDINGS OF THE LD. CIT(A). 51. THE SETTLED PROPOSITION OF LAW IS THAT, SUSPICI ON HOWSOEVER STRONG CANNOT PARTAKE THE CHARACTER OF EVIDENCE. AS HELD BY THE HONBLE SUPRE ME COURT IN THE CASE OF UMA CHARAN SHAW & BROS VS CIT REPORTED IN 37 ITR 271, HOWSOEVE R GRAVE THE SUSPICION THE AO MAY ENTERTAIN, THE SUSPICION CANNOT TAKE PLACE OF THE E VIDENCE OR FINDING OF FACT. THE SUSPICION ON THE AOS PART CAN CERTAINLY PROMPT HIM TO CONDUC T ENQUIRY & INVESTIGATION BUT ULTIMATE FINDING OF THE AUTHORITY MUST BE BASED ON THE MATER IAL OR EVIDENCES GATHERED BY HIM AND WHICH HAS LIVE NEXUS WITH THE FINDING RECORDED BY T HE AUTHORITY AFTER OBJECTIVE CONSIDERATION OF FACTS AND EVIDENCES GATHERED. IF THE MATERIAL OR EVIDENCE GATHERED DOES NOT HAVE ANY PROXIMATE CAUSE WITH THE FINDING ULTIMATELY REACHED , THEN THE FINDING OF THE AUTHORITY HAS TO BE HELD TO BE PERVERSE AND UNSUSTAINABLE. HERE IN T HE PRESENT CASE, AS NOTED IN THE FOREGOING, THE REASONING GIVEN BY THE AO TO JUSTIFY THE IMPUGN ED DISALLOWANCE WAS BASED ON MERE SUSPICION AND HEARSAY WITHOUT BRINGING ON RECORD AN Y TANGIBLE EVIDENCE/MATERIAL TO SUPPORT THE SAME. ON THE CONTRARY, WE NOTE THAT THE ASSESSE E HAD PLACED ON RECORD SUFFICIENT DOCUMENTARY EVIDENCES WHICH SUBSTANTIATED ITS COMMO DITY TRANSACTIONS ON NCME. AS NOTED EARLIER, BOTH THE DIRECTOR OF THE ASSESSEE AS WELL AS THE BROKER WERE EXAMINED U/S 131 OF THE ACT AND BOTH OF THEM SUBSTANTIATED THE COMMO DITY TRANSACTIONS AND THERE WAS NO SELF- INCRIMINATING AVERMENT MADE BY EITHER OF THEM OR TH ERE WERE ANY MATERIAL IN THE POSSESSION OF AO OR THAT COULD BE POINTED OUT BY LD. CIT, DR D URING HEARING BEFORE US, WHICH WOULD SUGGEST THAT THE ASSESSEES TRANSACTIONS ON THE NMC E PLATFORM WAS FICTITIOUS. MOREOVER, EVEN THE ENQUIRIES MADE BY THE AO FROM THE BROKERS U/S 133(6) OF THE ACT, REVEALED THAT EACH OF THE BROKERS HAD AFFIRMED THE ASSESSEES TRA NSACTIONS WITH SUPPORTING EVIDENCES. 52. FOR THE REASONS DISCUSSED IN THE FOREGOING, WE THEREFORE DO NOT FIND ANY MERIT IN THE GRIEVANCE RAISED BY THE REVENUE IN THE GROUNDS TAKE N IN THE PRESENT APPEAL. IN SUPPORT OF THESE FINDINGS, WE MAY GAINFULLY REFER TO THE DECIS ION IN THE CASE OF BLB CABLE & CONDUCTORS PVT LTD IN ITA NO.1070/KOL/2012 DATED 03 .02.2016 WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, THE CO-ORDINATE BENCH OF THIS TR IBUNAL HAD DELETED THE DISALLOWANCE OF 42 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 LOSS INCURRED BY THE ASSESSEE IN COMMODITY TRANSACT IONS ON NMCE DURING FY 2008-09, WHICH WAS DISALLOWED BY THE AO ON THE GROUND OF BEI NG BOGUS IN NATURE. THE RELEVANT FINDINGS OF THIS TRIBUNAL ARE AS FOLLOWS: 4. WE HAVE HEARD BOTH THE SIDE AND PERUSED THE MAT ERIALS AVAILABLE ON RECORD. THE LD. AR SUBMITTED TWO PAPERS BOOKS. FIRST BOOK IS RUNNING I N PAGES NO. 1 TO 88 AND 2ND PAPER BOOK IS RUNNING IN PAGES 1 TO 34. BEFORE US THE LD. AR SUBM ITTED THAT THE ORDER OF THE AO IS SILENT ABOUT THE DATE FROM WHICH THE BROKER WAS EXPELLED. THERE IS NO LAW THAT THE OFF MARKET TRANSACTIONS SHOULD BE INFORMED TO STOCK EXCHANGE. ALL THE TRANS ACTIONS ARE DULY RECORDED IN THE ACCOUNTS OF BOTH THE PARTIES AND SUPPORTED WITH THE ACCOUNT PAY EE CHEQUES. THE LD. AR HAS ALSO SUBMITTED THE IT RETURN, LEDGER COPY, LETTER TO AO AND PAN OF THE BROKER IN SUPPORT OF HIS CLAIM WHICH IS PLACED AT PAGES 72 TO 75 OF THE PAPER BOOK. THE LD. AR PRODUCED THE PURCHASE & SALE CONTRACTS NOTES WHICH ARE PLACED ON PAGES 28 TO 69 OF THE PAP ER BOOK. THE PURCHASE AND SALES REGISTERS WERE ALSO SUBMITTED IN THE FORM OF THE PAPER BOOK W HICH IS PLACED AT PAGES 76 TO 87. THE BOARD RESOLUTION PASSED BY THE COMPANY FOR THE TRANSACTIO NS IN COMMODITY WAS PLACED AT PAGE 88 OF THE PAPER BOOK. ON THE OTHER HAND THE LD. DR RELIED IN THE ORDER OF THE LOWER AUTHORITIES. 4.1 FROM THE AFORESAID DISCUSSION WE FIND THAT THE ASSESSEE HAS INCURRED LOSSES FROM THE OFF MARKET COMMODITY TRANSACTIONS AND THE AO HELD SUCH LOSS AS BOGUS AND INADMISSIBLE IN THE EYES OF THE LAW. THE SAME LOSS WAS ALSO CONFIRMED BY THE LD. CIT(A). HOWEVER WE FIND THAT ALL THE TRANSACTIONS THROUGH THE BROKER WERE DULY RECORDED IN THE BOOKS OF THE ASSESSEE. THE BROKER HAS ALSO DECLARED IN ITS BOOKS OF ACCOUNTS AND OFFERED FOR TAXATION. IN OUR VIEW TO HOLD A TRANSACTION AS BOGUS, THERE HAS TO BE SOME CONCRETE EVIDENCE WH ERE THE TRANSACTIONS CANNOT BE PROVED WITH THE SUPPORTIVE EVIDENCE. HERE IN THE CASE THE TRANS ACTIONS OF THE COMMODITY EXCHANGED HAVE NOT ONLY BEEN EXPLAINED BUT ALSO SUBSTANTIATED FROM THE CONFIRMATION OF THE PARTY. BOTH THE PARTIES ARE CONFIRMING THE TRANSACTIONS WHICH HAVE BEEN DUL Y SUPPORTED WITH THE BOOKS OF ACCOUNTS AND BANK TRANSACTIONS. THE LD. AR HAS ALSO SUBMITTED TH E BOARD RESOLUTION FOR THE TRADING OF COMMODITY TRANSACTION. THE BROKER WAS EXPELLED FROM THE COMMODITY EXCHANGE CANNOT BE THE CRITERIA TO HOLD THE TRANSACTION AS BOGUS. IN VIEW OF ABOVE, WE REVERSE THE ORDER OF THE LOWER AUTHORITIES AND ALLOW THE COMMON GROUNDS OF ASSESSE E'S APPEAL. 53. IT IS NOTED THAT THE HONBLE JURISDICTIONAL CAL CUTTA HIGH COURT HAS DISMISSED THE APPEAL PREFERRED BY THE REVENUE AGAINST THE ABOVE O RDER BY THEIR JUDGMENT DATED19.06.2018 IN GA NO.747 OF 2017.RESPECTFULLY FOLLOWING THE LAW LAID DOWN IN THE AFORESAID JUDGMENT (SUPRA) WHICH IS BINDING UPON US, AND APPLICABLE TO THE FACTS OF THE PRESENT CASE, THUS WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(A). 54. BEFORE WE PART, IN RESPECT OF AY 2014-15 , THE LD. AR ALSO BROUGHT TO OUR ATTENTION THAT THE LOSSES INCURRED IN COMMODITY TRANSACTIONS IN AY 2014-15 WAS DISALLOWED BY THE AO ON COMPLETE NON-APPLICATION OF MIND AND BY SIMPL Y CITING TO THE APPRAISAL REPORT OF THE INVESTIGATION DIRECTORATE AT AHMEDABAD, WHICH PERTAINED TO FY 2008-09 TO 2011-12 HE HAS RESORTED TO DISALLOWANCE WHICH IS UNTENABLE AND THEREFORE, THE LD. CIT(A) GAVE RELIEF TO THE ASSESSEE AND HE CONTENTED THAT THE LEGAL MAXIM FALSUS IN UNUS, FALSUS IN OMINIBUS HAS NOT BEEN RECOGNIZED BY HONBLE APEX COURT, AND SO THE AO COULD NOT HAVE DRAWN 43 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 ADVERSE INFERENCE AGAINST ASSESSEE QUA THIS AY 2014 -15, WITHOUT ANY EVIDENCE/MATERIAL. IT IS NOTED THAT THE APPRAISAL REPORT DID NOT RAISE ANY A PPREHENSION REGARDING THE LOSS INCURRED BY THE ASSESSEE IN FY 2013-14. UPON PERUSING THE REASO NING GIVEN BY THE AO IN THE ASSESSMENT ORDER FOR AY 2014-15, PARTICULARLY PAGES 12 TO 36 O F THE SAID ORDER, WE NOTE THAT THE AO HAD SIMPLY COPY-PASTED HIS REASONING OF AY 2009-10 AND DID NOT EVEN BOTHER TO EXAMINE THE ASSESSEES COMMODITY TRANSACTIONS FOR AY 2014-15. U NLIKE AY 2009-10 TO AY 2012-13, IN THE ASSESSMENT ORDER FOR AY 2014-15, THERE WAS NO A LLEGATION BY THE AO THAT THE ASSESSEE HAD ENGAGED IN SYNCHRONIZED TRADING IN THIS YEAR. THE CHARTS AND TABLES EXTRACTED BY THE AO ANALYZING THE TRADES OF THE ASSESSEE PERTAINED ONLY TO FYS 2008-09 TO 2011-12 AND THERE WAS NOTHING CONTAINED IN THE ASSESSMENT ORDER FOR A Y 2014-15 WHICH WOULD EVEN REMOTELY SUGGEST THAT THE AO HAD APPLIED HIS MIND TO THE ASS ESSEES COMMODITY TRANSACTIONS FOR AY 2014-15 AND THEN ARRIVED AT A CONCLUSION THAT IT WA S CONTRIVED OR BOGUS. WHEN CONFRONTED WITH THE AFORESAID FACT, EVEN THE LD. CIT, DR COULD NOT CONTROVERT THE SAME. WE THEREFORE, FIND MERIT IN THE ASSESSEES ALTERNATE PLEA FOR AY 2014-15 THAT THE REASONING GIVEN BY THE AO TO DISALLOW THE LOSS INCURRED IN COMMODITY TRANS ACTIONS IN THAT YEAR, WAS FACTUALLY PERVERSE AND THEREFORE RIGHTLY DELETED BY THE LD. C IT(A). 55. FOR THE REASONS DISCUSSED IN THE FOREGOING, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE IMPUGNED ORDERS OF THE LD. CIT(A) WHICH ARE ALL DATED 30-08-2018. ACCORDINGLY ALL THE APPEALS OF THE REVENUE FOR AYS 2009-10 TO 2012-13 A ND 2014-15 STAND DISMISSED. 56. IN THE RESULT, THE APPEALS OF THE REVENUE ARE D ISMISSED AND THE CROSS OBJECTIONS OF ASSESSEE ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 04.12.2020 . SD/- SD/- P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED :04.12.2020 JD.(SR.P.S.) 44 IT(SS)A NOS.120-123/KOL/2018 & C.O. NOS. 123 TO 126/KOL/2018 GRD COMMODITIES LTD., AYS- 2009-10 TO 2012- 13 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT ACIT, CENTRAL CIRCLE-4(3), KOLKATA. 2 RESPONDENT M/S. GRD COMMODITIES LTD., 7, B. B. G ANGULI STREET, KOLKATA-700 012. 3. 4. 5. CIT(A)-21, KOLKATA. (SENT THROUGH E-MAIL) CIT- , KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR ITAT, KOLKATA.