DCIT, New Delhi V. M/s. Insecticides (India) Ltd., New Delhi

ITA 2332/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52788 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 17-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: MOHIT PAREKH
• Keywords: Reopening of assessment; Audit objection; Tangible material; Difference of opinion; Validity of assessment; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C: NEW DELHI BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T. A. NO.2332 & 2333/DEL/2010 ASSESSMENT YEARS : 2002-03 & 2003-04 DY. COMMISSIONER OF INCOME-TAX, M/S. INSECTICIDES (INDIA) LTD., CIRCLE 11(1), NEW DELHI. VS. 401-402, LUSA TOWER, AZADPUR COMMERCIAL COMPLEX, AZADPUR, NEW DELHI. PAN: AAACI3076P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SALIL MISHRA, SR. DR. RESPONDENT BY : SHRI MOHIT PAREKH, CA. O R D E R PER C.L. SETHI, JUDICIAL MEMBER: THESE TWO APPEALS, FILED BY THE REVENUE, ARE DIRECT ED AGAINST COMMON ORDER DATED 02.03.2010 PASSED BY THE LEARNED COMMIS SIONER OF INCOME-TAX (APPEALS) IN THE MATTER OF AN ASSESSMENT MADE BY TH E ASSESSING OFFICER UNDER SEC. 147/143(2) OF THE INCOME-TAX ACT, 1961 ( THE ACT) FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04. 2. IN BOTH THE YEARS, A COMMON AND IDENTICAL GROUND HAS BEEN RAISED BY THE REVENUE STATING THAT THE LEARNED CIT(A) HAS ERR ED IN HOLDING THAT THE 2 REOPENING OF ASSESSMENT IN TERMS OF SEC. 147 OF THE ACT, WAS NOT A JUSTIFIED ACTION BY THE AO. 3. THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO HAVE BEEN HELD TO BE NOT SUSTAINABLE IN LAW BY THE LEARNED CIT(A) IN THE ASSESSMENT YEAR 2002-03. IN THE ASSESSMENT YEAR 2003-04 ALSO, THE LEARNED CIT(A) FOLLOWED HIS VIEW TAKEN IN THE ASSESSMENT YEAR 2002 -03 AFTER FINDING THAT THE REASONS RECORDED BY THE AO IN BOTH THE ASSESSME NT YEARS WERE AD VERBATIM. THE DETAILED ORDER HAS BEEN PASSED BY TH E LEARNED CIT(A) IN THE A.Y. 2002-03, WHICH HAS BEEN FOLLOWED IN THE A.Y. 2 003-04 BY THE COMMON IMPUGNED ORDER. 4. IN THE A.Y. 2002-03, THE ASSESSEE FILED ITS RETU RN OF INCOME ON 31.10.2002 DECLARING A TOTAL LOSS OF RS.9,71,710/-. THEREAFTER, AN ASSESSMENT UNDER SEC. 143(3) WAS MADE BY THE AO ON 29.11.2004 DETERMINING THE NET LOSS AT RS.9,56,710/- AFTER DISALLOWING DEFERRED RE VENUE EXPENDITURE OF RS.15,000/-. SUBSEQUENTLY, THE AO ISSUED A NOTICE U/S 148 ON 21.09.2006 REQUIRING THE ASSESSEE TO FILE ITS RETURN OF INCOME WITHIN TIME SPECIFIED IN THE NOTICE. THE ASSESSEE VIDE LETTER DATED 17.10.2006 SUBMITTED THAT THE RETURN FILED ON 31.10.2002 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE UNDER SEC. 148 OF THE ACT. IT HAS BEEN STATED BY THE AO T HAT IN THIS CASE, INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G, NEW DELHI THAT THE 3 ASSESSEE WAS INVOLVED IN GIVING AND TAKING ACCOMMOD ATION ENTRIES. THE AO FURTHER STATED THAT CERTAIN ENTRIES REPRESENTED THE UNACCOUNTED MONEY OF THE ASSESSEE. ACCORDINGLY, THE AO ASKED THE ASSESSEE V IDE LETTER DATED 17.08.2007 TO PROVE THE GENUINENESS OF CERTAIN TRAN SACTIONS, DETAILS OF WHICH ARE MENTIONED IN THE ASSESSMENT ORDER. THE ASSESSE E SUBMITTED VARIOUS DETAILS, SUCH AS COPY OF SHARE APPLICATION FORM, CO NFIRMATION, PHOTO COPIES OF CERTIFICATES ISSUED TO THE SHARE HOLDERS, COPY O F BANK ACCOUNT AND AFFIDAVITS FROM THE DIRECTORS OF THE SHARE APPLICAN TS ETC. HOWEVER, THE AO FOUND THE EVIDENCES AND EXPLANATION OF THE ASSESSEE TO BE NOT ACCEPTABLE. THE AO, THEREFORE, MADE AN ADDITION OF RS.30,00,000 /- IN THE REASSESSMENT MADE UNDER SEC. 143(3)/147 OF THE ACT ON 15.10.2007 . 5. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LEARNED CIT(A). 6. THE FIRST AND PRELIMINARY GROUND RAISED BY THE A SSESSEE BEFORE THE LEARNED CIT(A) WAS AGAINST THE AOS ACTION IN INITI ATING REASSESSMENT PROCEEDINGS UNDER SEC. 147 OF THE ACT. 7. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THAT IN THE COURSE OF ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, ALL THE DETAILS OF SHARE CAPITAL/SHARE APPLICATION MONEY AS WELL AS UN SECURED LOAN ETC. WERE DULY FURNISHED AND AFTER VERIFYING THE SAME, THE AO COMPLETED THE 4 ASSESSMENT U/S 143(3) OF THE ACT WHEREBY THE AMOUNT OF RS.15,000/- WAS ONLY ADDED BACK ON ACCOUNT OF DEFERRED REVENUE EXPE NDITURE. IT WAS FURTHER SUBMITTED THAT THE AO PROCEEDED TO COMPLETE THE REA SSESSMENT U/S 147 WITHOUT DISPOSING OFF THE OBJECTION FILED BY THE AS SESSEE COMPANY VIDE LETTER DATED 28.08.2007 AGAINST THE AOS ACTION IN INITIAT ING REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT. IT WAS ALSO ARGUED THAT THE REASSESSMENT PROCEEDINGS WERE COMPLETED MECHANICALLY IN HURRIED MANNER WITHOUT COMPLYING/FOLLOWING THE VARIOUS PROVISIONS OF LAW A S WELL AS THE JUDGMENTS OF VARIOUS HIGH COURTS. IT WAS, THUS ARGUED THAT T HE REOPENING OF THE ASSESSMENT WAS ITSELF ILLEGAL AND WITHOUT JURISDICT ION. IT WAS ALSO ARGUED THAT REOPENING OF THE ASSESSMENT WAS ILLEGAL IN THE LIGH T OF THE FACT THAT THE ORIGINAL ASSESSMENT WAS ALREADY COMPLETED UNDER SEC . 143(3) OF THE ACT AFTER MAKING FULL ENQUIRY AND INVESTIGATION WITH REGARD T O THE FRESH SHARE CAPITAL RECEIVED BY THE ASSESSEE COMPANY AND THERE WAS NO F AILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR MAKING ASSESSMENT OF THE ASSESSEE. IT WAS ALSO ARGUED THA T THE ACTION OF REOPENING OF THE ASSESSMENT WAS NOTHING BUT A MERE CHANGE OF OPINION. IT WAS ALSO ARGUED THAT IN THE ABSENCE OF ANY DIRECT NEXUS OR L IVE LINK OR DIRECT MATERIAL/EVIDENCE, NO LEGAL ACTION U/S 147 COULD BE TAKEN AND IN SUPPORT 5 THEREOF, RELIANCE WAS PLACED UPON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS, 103 ITR 437 (SC). 8. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS AND THE REASONS RECORDED BY THE AO, LEARNED CIT(A) HELD THAT THE REOPENING O F ASSESSMENT U/S 147 OF THE ACT WAS NOT VALID INASMUCH AS NO FRESH MATERIAL , LET ALONE TANGIBLE MATERIAL HAD COME TO THE AOS POSSESSION SO AS TO E MPOWER HIM TO TAKE RECOURSE TO THE PROVISIONS OF SEC. 147 OF THE ACT. THE LEARNED CIT(A) HAS TAKEN A VIEW THAT THE REOPENING OF THE ASSESSMENT W AS BASED MERELY ON CHANGE OF OPINION, WHICH WAS NOT SUSTAINABLE IN LAW . THE LEARNED CIT(A) RELIED ON VARIOUS DECISIONS MENTIONED IN HIS ORDER IN SUPPORT OF THE VIEW, HE HAD TAKEN. 9. THE LEARNED CIT(A) ALSO CONSIDERED THE ADDITION OF RS.30,00,000/- MADE BY THE AO ON ITS MERIT, AND FOUND THAT THE ASS ESSEE HAS BEEN ABLE TO EXPLAIN THE AMOUNT OF RS.30,00,000/- RECEIVED BY TH E ASSESSEE IN THE FORM OF SHARE APPLICATION MONEY IN THE LIGHT OF THE VARIOUS DETAILS AND EVIDENCES FILED BY THE ASSESSEE. 10. SIMILARLY, IN THE ASSESSMENT YEAR 2003-04, THE ASSESSEE FILED ORIGINAL RETURN OF INCOME ON 31.10.2003 DECLARING A LOSS OF RS.25,92,790/- AFTER ADDING EARLIER YEAR LOSS OF RS.9,71,706/-. THEREAF TER, THE AO ISSUED NOTICE U/S 148 ON 21.09.2006, IN RESPONSE TO WHICH, THE AS SESSEE VIDE LETTER DATED 6 17.10.2006 SUBMITTED THAT THE RETURN FILED ON 31.10 .2003 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. IN THE COURSE OF RE- ASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE ACT , THE AO VIDE LETTER DATED 17.08.2007 ASKED THE ASSESSEE TO PROVE THE GENUINEN ESS OF THE TRANSACTION OF RS.35,00,000/- RECEIVED BY WAY OF SHARE APPLICATION MONEY FROM DIFFERENT PARTIES. IN REPLY THERETO, THE ASSESSEE FURNISHED VARIOUS DETAILS BEFORE THE AO. HOWEVER, THE AO WAS NOT SATISFIED WITH THE ASS ESSEES EXPLANATION AND MADE THE ADDITION OF RS.35,00,000/- ON ACCOUNT OF U NEXPLAINED SHARE APPLICATION MONEY. 11. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPE AL BEFORE THE LEARNED CIT(A). 12. THE LEARNED CIT(A) FOLLOWED HIS ORDER FOR THE A SSESSMENT YEAR 2002- 03 AND HELD THAT THE REOPENING OF THE ASSESSMENT U/ S 147 OF THE ACT WAS INVALID. THE LEARNED CIT(A) ALSO DELETED THE ADDIT ION OF RS.35,00,000/- ON ITS MERIT AFTER CONSIDERING VARIOUS EVIDENCES FILED BY THE ASSESSEE. 13. HENCE, THE REVENUE IS IN APPEAL IN BOTH THE ASS ESSMENT YEARS BEFORE US CHALLENGING THE LEARNED CIT(A)S ACTION IN CANCE LLING THE ASSESSMENT MADE UNDER SEC. 147 OF THE ACT AS WELL AS IN DELETI NG THE ADDITIONS MADE BY THE AO IN BOTH THE ASSESSMENT YEARS. 7 14. WE SHALL FIRST DECIDE AS TO WHETHER THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT THE REOPENING OF THE ASSESSMENT U/S 14 7 OF THE ACT BY THE AO IS NOT VALID IN THE EYES OF LAW. 15. IN THE COURSE OF HEARING OF THESE APPEALS, THE LEARNED COUNSEL FOR THE ASSESSEE INVITED OUR ATTENTION TO THE REASONS RECOR DED BY THE AO UNDER SEC. 148 OF THE ACT FOR INITIATING PROCEEDINGS U/S 147 O F THE ACT, WHICH ARE REPRODUCED HEREIN AS UNDER:- IT HAS BEEN INFORMED BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI VIDE LETTER DATED 16.6.2006 THAT THE ABOVE NAMED COMPANY WAS INVOLVED IN GIVING AND TAKING BOG US ENTRIES/TRANSACTIONS DURING THE F.Y. 2001-02. FROM THE INFORMATION GATHERED BY THE DIT(INV.)-1, N EW DELHI THAT THE ASSESSEE WAS INVOLVED IN GIVING AND TAKING ACCOMMODATION ENTRIES ONLY AND REPRESENTED UNSECURE D MONEY OF THE ASSESSEE COMPANY IS ACTUALLY UNEXPLAINED INC OME OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS AND SOURCE O F THESE FUNDS ROUTED THROUGH BANK ACCOUNTS OF THE ASSESSEE COMPAN Y. I, THEREFORE HAVE REASONS TO BELIEVE THAT THE INCOME H AS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961 FOR THE ASSTT. YEAR REFERRED ABOVE. HENCE NOTICE U/S 148 IS ISSUED. 16. IDENTICAL REASONS WERE RECORDED IN THE ASSESSME NT YEAR 2003-04 EXCEPT WITH THE VARIATION IN THE ASSESSMENT YEAR. 17. THE COPIES OF THESE REASONS ARE PLACED AT PAGES 12 & 13 OF THE PAPER BOOK FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 8 RESPECTIVELY. IT WAS SUBMITTED BY THE LEARNED COUN SEL FOR THE ASSESSEE THAT AFORESAID REASONS WERE SUPPLIED BY THE AO TO THE AS SESSEE IN PURSUANCE TO THE ASSESSEES LETTER DATED 26.06.2007, WHEREBY THE AO WAS REQUESTED TO SUPPLY COPY OF REASONS RECORDED FOR REOPENING THE A SSESSMENT. THE ASSESSEES LETTERS DATED 26.06.2007 ARE PLACED AT P AGES 11 & 12 OF THE PAPER BOOK FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 RE SPECTIVELY. THEREAFTER, THE ASSESSEE FILED OBJECTION AGAINST TH E AOS ACTION IN REOPENING THE ASSESSMENT VIDE LETTER DATED 28.08.2007 FILED I N BOTH THE ASSESSMENT YEARS, A COPY OF WHICH IS PLACED AT PAGES 13-15 AND 14-16 OF THE PAPER BOOK FILED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 RESPECTIVELY. IN THE OBJECTION, THE ASSESSEE HAS S TATED, AMONGST OTHERS, THAT THERE WAS NO DIRECT NEXUS OR LINK OR MATERIAL OR EV IDENCES TO JUSTIFY THE REOPENING OF THE ASSESSMENT WITHIN THE MEANING OF S EC. 147 OF THE ACT AND IN THAT CONNECTION, A DECISION OF HONBLE SUPREME COUR T IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS (SUPRA), AMONGST OTHERS, WAS REL IED UPON. 18. THE QUESTION WHICH ARISES NOW FOR OUR CONSIDERA TION IS, WHETHER PROCEEDING INITIATED U/S 147/148 OF THE ACT ARE INV ALID FOR WANT OF JURISDICTION AS THE PRE-CONDITIONS FOR INITIATION O F THE SAID PROCEEDINGS AS STIPULATED UNDER SEC. 147 OF THE ACT, ARE NOT SATIS FIED. 9 19. WE HAVE CAREFULLY PERUSED THE PROVISIONS OF SEC . 147 OF THE ACT. SEC. 147 AUTHORIZES AND PERMITS THE AO TO ASSESS OR REAS SESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT INCOME FROM ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. IT IS ALSO WELL-SETTLED THAT TH E WORDS REASON TO BELIEVE USED IN SEC. 147 OF THE ACT, ARE STRONGER THAN THE WORDS IS SATISFIED. THE BELIEF ENTERTAINED BY THE AO FOR THE PURPOSE OF INI TIATING PROCEEDINGS U/S. 147 OF THE ACT MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE. IN OTHER WORDS, IT MUST BE BASED ON REASONS, WHICH A RE RELEVANT AND MATERIAL AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF GANGA SARAN AND SONS PVT. LTD. VS. ITO (1981) 130 ITR 1. IT IS ALS O WELL SETTLED THAT THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQU ACY OR SUFFICIENCY OF THE REASONS, WHICH HAVE WEIGHED WITH THE AO IN COMING T O THE BELIEF, BUT THE COURT CAN CERTAINLY EXAMINE WHETHER REASONS ARE REL EVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERTAIN A BELIEF BEFORE HE CAN ISSUE NOTICE U/S. 147/148 OF THE ACT. IF TH ERE IS NO RATIONAL OR INTELLIGIBLE NEXUS OR LINK BETWEEN THE REASON TO BE LIEVE, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED ON FACT AND L AW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSION WOULD BE INE SCAPABLE THAT THE AO COULD NOT HAVE REASON TO BELIEVE THAT ANY PART OF THE ASS ESSEES INCOME HAD ESCAPED 10 ASSESSMENT, AND THE NOTICE ISSUED BY HIM WOULD BE L IABLE TO BE STRUCK DOWN AS INVALID. 20. SIMILARLY, IN THE CASE OF ITO & OTHERS VS. LAK HMANI MEWAL DAS (1976) 103 ITR 437 (SC), THE HONBLE APEX COU RT OF THE LAND HAS HELD THAT THE REASONS FOR THE FORMATION OF THE BE LIEF CONTEMPLATED BY THE SECTION 147 OF THE ACT FOR REOPENING OF THE AS SESSMENT MUST HAVE RATIONAL CONNECTIONS OR RELEVANT BEARING ON TH E FORMATION OF BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE IN THE PARTICULAR YEAR. IT WAS FURTHER HELD THEREI N THAT IT IS NO DOUBT TRUE THAT COURT CANNOT GO INTO THE SUFFICIENCY OR ADEQUA CY OF THE MATERIAL AND SUBSTITUTES ITS OWN OPINION FOR THAT OF THE AO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING THE ASSESSMENT. AT THE SAME TIME, IT IS TO BE BORNE IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER, VAGUE AND INDEFINITE OR DISTANT, R EMOTE AND FAR-FETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BEL IEF RELATING TO THE ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT. ACTION U/S. 147 OF THE ACT CAN NOT, THEREFORE, BE TAKEN FOR REOPENING THE ASSESSMENT IF THE INFORMATION IS WHOLLY VAGUE, INDEFINITE, FAR-FE TCHED OR REMOTE. THE 11 REASON FOR FORMATION OF THE BELIEF MUST BE HEL D IN GOOD FAITH AND SHOULD NOT BE MERE PRETENCE. THE EXISTENT OF THE BELIEF CAN BE CHALLENGED BY THE ASSESSEE, BUT NOT THE SUFFICIENCY OF THE REA SONS FOR THE BELIEF. THUS, THE EXPRESSION REASON TO BELIEVE DOES NOT MEAN P URELY SUBJECTIVE SATISFACTION ON THE PART OF THE AO. IT IS OPEN TO COURT TO EXAMINE WHETHER THE REASONS FOR THE FORMATION OF THE BELIEF HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT FOR THE PURPOSE OF THE SECTION. TO THIS LIMITED EXTENT, THE ACTION OF THE AO IN STARTING THE PROCEEDINGS U/S. 147 OF T HE ACT IN RESPECT OF INCOME ESCAPING ASSESSMENT IS OPEN TO CHALLEN GE IN COURT OF LAW. 21. SIMILARLY, IN THE CASE OF RAYMOND WOOLLEN MI LLS VS. ITO (1999) 236 ITR 34 (SC), THE HONBLE SUPREME COURT H AS HELD THAT THE COURT CAN ONLY CONSIDER WHETHER THERE WAS A PRIMA FACIE CAUSE FOR REOPENING THE ASSESSMENT, AND SUFFICIENCY OF MATERIAL CANNOT BE CONSIDERED AT THE STAGE OF ISSUING THE NOTICE U/S. 148 OF THE ACT. IN DETERMINING WHETHER COMMENCEMENT AND REASSESSMENT PROCEEDINGS WAS VALID, IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT COULD REOPEN THE CASE, AND THE SUFFICIENCY AND CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CO NSIDERED AT THAT STAGE. 12 22. APPLYING THE DECISION IN THE CASE OF RAYMOND WOOLLEN MILLS VS. ITO (SUPRA), AND ANOTHER, AND IN THE CASE OF SELECT ED DALURBAND COAL CO. PVT. LTD. (1996) 217 ITR 597 (SC), THE HONBLE SUPR EME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (2007) 291 ITR 500 (SC) HAS CONSIDERED THE SCOPE AND MEANING OF THE W ORDS REASON TO BELIEVE USED IN SECTION 147 OF THE ACT, AND, THUS, HELD AND OBSERVED AS UNDER:- SECTION 147 AUTHORIZES AND PERMITS THE ASSESS ING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE H AS REASON TO BELIEVE THAT INCOME FOR ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD REASON IN THE PHRASE REASON TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF TH E ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPO SE THAT INCOME HAS ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESS MENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE ASSE SSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LE GAL EVIDENCE OR CONCLUSION. THE FUNCTION OF THE ASSESSING OFFI CER IS TO ADMINISTER THE STATUTE WITH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO T AXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINC ES MANGANESE ORE CO. LTD. VS. ITO [1991] 191 ITR 662, FOR INITIATION OF ACTION U/S. 147 (A) (AS THE PROVISION STOOD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDINGS IS NOT RELEVANT. IN OTHER WORDS, AT TH E INITIATION STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT TH E STAGE OF ISSUE OF NOTICE, THE ONLY ISSUE WHETHER THERE WAS R ELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF. WHETHER THE MATERIAL WOULD C ONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT T HAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE ASSESSING OFFICER IS WITHIN THE REALM OF SUBJECTIVE SATI SFACTION (SEE ITO VS. SELECTED DALURBAND COAL CO. P. LTD. [1996] 217 ITR 13 597 (SC); RAYMOND WOOLLEN MILLS LTD. VS. ITO [1999] 236 ITR 34 (SC). 23. IN THE CASE OF CIT VS. (1) ATUL JAIN, AND (2) S MT. VINITA JAIN (2007) 299 ITR 383 (DEL), THE HONBLE DELHI HIGH COURT HAS REITERATED THAT THERE MUST BE REASON TO BELIEVE WARRANTING THE ISSUANCE OF A NOTICE OF REASSESSMENT BY THE AO. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING PROCEEDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE QUASHED. MERE SATISFACTION O F THE AO FOR ISSUANCE OF A NOTICE IS NOT ENOUGH, THERE MUST BE REASONS ON RE CORD WHICH LED HIM TO BELIEVE THAT A NOTICE SHOULD BE ISSUED. AFTER A FO UNDATION BASED ON INFORMATION IS SET-UP, THERE MUST STILL BE S OME REASONS, WHICH WARRANT THE HOLDING OF A BELIEF SO AS TO NECESSITATE THE IS SUANCE OF A NOTICE U/S. 148 OF THE ACT. IN THIS CASE, THE HONBLE DELHI HIGH COURT HAS APPLIED THE RATIO OF THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF CHHUGAMAL RAJPAL VS. CHALIHA (SP) (1971) 79 ITR 663. IN THE CASE OF CHHUGAMAL RAJPAL VS. CHALIHA (SUPRA), THE REASSESSMENT PRO CEEDINGS WERE STRUCK DOWN BY THE HONBLE SUPREME COURT ON THE GROUND THAT IN THE REASONS RECORDED BY HIM, THE AO HAD VAGUELY REFERRED TO CERTAIN COMMUNICATIONS THAT HE HAD RECEIVED; HE DID NOT MENTION THE FAC TS CONTAINED IN THOSE COMMUNICATIONS EXCEPT THAT FROM THOSE COMMUNICA TIONS: IT APPEARS THAT THESE PERSONS (ALLEGED CREDITORS) ARE NA ME LENDERS AND THE 14 TRANSACTIONS ARE BOGUS; HE DID NOT COME TO ANY P RIMA FACIE CONCLUSION THAT THE REFERRED TRANSACTIONS ARE NOT GENUINE; HE APPEA RED TO HAVE A VAGUE FEELING THAT THE REFERRED TRANSACTIONS MAY BE BOGUS TRANSACTIONS, AND, FINALLY, HIS CONCLUSIONS WAS TO THE EFFECT THAT A PROPER INV ESTIGATION REGARDING THE LOANS IS NECESSARY. 24. IN THE CASE OF CIT VS. (I) ATUL JAIN, AND (II) SMT. SMITA JAIN (SUPRA), THE HONBLE DELHI HIGH COURT HAS ALSO MADE A REFERENCE TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GANGA SARAN DAS & SONS VS. ITO (SUPRA), AND ITS OWN DECISION IN THE CASE OF UNITED ELECTRICAL CO. PVT. LTD. VS. CIT (2002) 258 ITR 317 AND IN THE CASE OF BAWA ABHAI SINGH VS. DEPUTY CIT (2002) 253 ITR 53 (DEL.), W HEREIN IT WAS OBSERVED THAT REASON TO BELIEVE POSTULATES THE FOUNDATIO N BASED ON INFORMATION AND A BELIEF BASED ON REASONS. 25. THE EXPRESSION INFORMATION MUST BE SOMET HING MORE THAN A MERE RUMOUR OR GOSSIP OR A HUNCH AS SO OBSERVED BY THE DIVISION BENCH OF DELHI HIGH COURT IN THE CASE OF L. R. GUPTA VS. UNI ON OF INDIA (1992) 194 ITR 32. OF COURSE, THIS WAS IN THE CONTEXT OF SECTION 132 OF THE ACT BUT AS HELD IN UNITED ELECTRICAL CO. LTD. (SUPRA ), THE LOGIC IS EQUALLY APPLICABLE TO A CASE U/S. 147 OF THE ACT. 15 26. RECENTLY, IN THE CASE OF SIGNATURE HOTELS (P) L TD. VS. ITO, 338 ITR 51, THE HONBLE JURISDICTIONAL HIGH COURT OF DELHI HAS CONSIDERED THE OBJECT AND SCOPE OF SEC. 147 OF THE ACT AND HAS HELD AS UN DER:- 4. THE AFORESAID SECTION IS WIDE BUT IT IS NOT PLEN ARY. WE HAVE TO CONSIDER AND EXAMINE THE CRUCIAL EXPRESSION REASON TO BELIEVE USED IN THE SAID SECTION. THE ASSESSING OF FICER MUST HAVE REASON TO BELIEVE THAT AN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS MANDATORY AND THE REA SONS TO BELIEVE ARE REQUIRED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. SUFFICIENCY OF REASONS IS NOT A MATTER, WHICH IS TO BE DECIDED BY THE WRIT COURT BUT EXISTENCE OF BELIEF IS THE SUBJECT MATTER OF THE SCRUTINY. A NOTICE UNDER SECT ION 148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISCERNIBLE FROM THE MATERIAL ON R ECORD, WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER, WHEN HE R ECORDED THE REASON. THERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFI CER. HOWEVER, AS WE ARE DEALING WITH INITIATION OF PROCE EDINGS, IT IS NOT NECESSARY THAT THE MATERIAL SHOULD CONCLUSIVELY PROVE THE ESCAPEMENT. THE REASONS TO BELIEVE WOULD MEAN CAU SE OR JUSTIFICATION OF THE ASSESSING OFFICER TO BELIEVE T HAT THE INCOME HAS ESCAPED ASSESSMENT AND DO NOT MEAN THAT THE ASS ESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE SAID FA CT BY LEGAL EVIDENCE OR REACHED A CONCLUSION, AS THIS IS DETERM INED AND DECIDED IN THE ASSESSMENT ORDER, WHICH IS THE FINAL STAGE BEFORE THE ASSESSING OFFICER. 5. BEFORE DEALING WITH THE FACTS OF THE CASE, WE MA Y NOTICE SOME JUDGMENTS OF THE SUPREME COURT WHEN PROCEEDING S UNDER SECTION 147/148 OF THE ACT CAN BE INITIATED ON STAT EMENTS MADE BY THIRD PERSON ON THE ACCOUNT OF ACCOMMODATION EN TRY. IN ITO VERSUS LAKHMANI MEWAL DAS, [1976] 103 ITR 437 ( SC), THE SUPREME COURT AFFIRMED THE DECISION OF THE HIGH COURT AND HELD THAT THERE WAS NOTHING TO SHOW IN THE CONFESSI ON MADE BY A THIRD PARTY RELATED TO THE LOAN TAKEN BY THE ASSE SSEE MUST LESS A LOAN WHICH WAS SHOWN TO HAVE ADVANCED BY THAT PER SON TO THE 16 ASSESSEE AND, THEREFORE, LIVE LINK OR CLOSE NEXUS, WHICH SHOULD BE THERE BETWEEN THE MATERIAL AND THE BELIEF FORMED BY THE ASSESSING OFFICER WAS MISSING OR WAS TOO TENUOUS TO PROVIDE LEGAL SOUND BASIS FOR INITIATION OF ASSESSMENT PROC EEDINGS UNDER SECTION 147. AFTER REFERRING TO THIS JUDGMENT , A DIVISION BENCH OF DELHI HIGH COURT, IN INCOME-TAX OFFICER, S PECIAL CIVIL NO. VII, NEW DELHI, AND ANOTHER VERSUS DWARKA DASS AND BROTHERS, [ 1981] 131 ITR 571 (DEL) HAS HELD AS UNDER : THE SUPREME COURT, AFFIRMING THE DECISION OF THE HIGH COURT, HELD THAT THERE WAS NOTHING TO SHOW THAT THE CONFESSION OF M.K. RELATED TO A LOAN TO THE ASSESSEE, MUCH LESS TO THE LOAN WHICH WAS SHOWN TO HAVE BEEN ADVANCED BY THAT PERSON TO THE RESPONDENT AND THE LIVE LINK OR CLOSE NEXUS WHICH SHOULD BE THERE BETWEEN THE MATERIAL BEFORE THE ITO AND THE BELIEF WHICH HE WAS TO FORM WAS MISSING OR WAS, IN ANY EVENT, TOO TENUOUS TO PROVIDE A LEGALLY SOUND BASIS FOR REOPENING THE ASSESSMENT .. THE POSITION IN THE PRESENT CASE FALLS WITHIN THE SAME CATEGORY. AT THE TIME OF THE ORIGINAL ASSESSMENT ALL THE FACTS RELATING TO THE CASH CREDI TS IN QUESTION WERE FULLY DISCLOSED. THIS HAS BEEN FOUND BY THE LEARNED JUDGE AT PAGE 960 (OF 118 ITR) AND INDEED THIS IS THE ACCEPTED POSITION ON THE BASIS OF WHICH EVEN THE PROPOSAL OF THE ITO TO THE COMMISSIONER (SET OUT AT PAGE 964) PROCEEDED. THEREAFTER, THE ONLY MATERIAL RECEIVED BY THE ITO APPEARS TO BE THAT THE REVENUE AUTHORITIES HAD CARRIED OUT CERTAIN INVESTIGATIONS, THAT THEY HAD DISCOVERED THE EXISTENCE OF BOGUS HUNDI BROKERS WHO WERE ALLEGEDLY LENDING THEIR NAMES TO ASSESSEE AND THAT A LIST HAD BEEN CIRCULATED TO VARIOUS ITOS OF THE HUNDI BROKERS WHO WERE ALLEGEDLY INDULGING IN MALPRACTICES. THE INTERNAL AUDIT PARTY APPEARS TO HAVE DISCOVERED THAT SOME OF THE CREDITORS WHOSE CREDITS HAD BEEN ACCEPTED IN THE ASSESSEES CASE FELL WITHIN THIS CATEGORY AND 17 RAISED AN AUDIT OBJECTION WHICH WAS THE IMMEDIATE PROVOCATION FOR THE REOPENING OF THE ASSESSMENT. IN THIS CASE ALSO, AS IN THE CASE BEFORE THE SUPREME COURT, THERE IS NO LIVE CONNECTION OR LINK ESTABLISHED BETWEEN THE INFORMATION OR THE FACTS, I N THE POSSESSION OF THE ITO, AND THE GENUINENESS OF THE PARTICULAR LOANS RECORDED IN THE ASSESSEES BOOKS. THE MERE FACT THAT THE NAMES OF THE SOME OF THE CREDITORS FIGURED IN A LIST MADE OUT BY THE DEPARTMENT WOULD BE TOO GENERAL AND VAGUE TO LEAD TO AN INFERENCE REGARDING THE TRUTH OR OTHERWISE OF THE LOANS RECORDED BY THE ASSESSEE. WE ARE WHOLLY UNABLE TO FIND ANY MATERIAL POINT OF DISTINCTION BETWEEN THE FACTS OF THE PRESENT CASE AND THOSE CONSIDERED BY THE SUPREME COURT IN THE CASE OF LAKHMANI MEWAL DAS [1976] 103 ITR 437. 6. THE VIEW TAKEN BY THE SUPREME COURT IN LAKHMANI MEWAL DAS (SUPRA) WAS FOLLOWED IN GANGA SARAN AND S ONS PRIVATE LIMITED VERSUS INCOME-TAX OFFICER-1, [1981] 130 ITR 1 (SC). THE MATER WAS AGAIN EXAMINED BY THE SUPREME C OURT IN PHOOL CHAND BAJRANG LAL AND ANOTHER VERSUS INCOME-T AX OFFICER AND ANOTHER, [1993] (203) ITR 456 (SC). IN THE SAID CASE, INFORMATION WAS RECEIVED BY THE ASSESSING OFF ICER THAT THE THIRD COMPANY HAD NEVER ACTUALLY ADVANCED LOANS TO ANY PERSON AND THE SAID THIRD COMPANY WAS IN THE BUSINESS CONS ISTING ENTIRELY OF NAME LENDING. NOTICING THE JUDGMENT IN LAKHMANI MEWAL DAS (SUPRA) IT WAS HELD THAT THE NATURE OF INFORMATION WHICH WAS AVAILABLE WAS VASTLY DIFFERENT. IN THE CA SE OF LAKHMANI MEWAL DAS (SUPRA), THE INFORMATION WAS EXTREMELY VAGUE AND SCANTY WHEREAS IN THE CASE OF PHOOL CHAND BAJRANG LAL (SUPRA), THE INFORMATION WAS SPECIFIC, UNAMBIGU OUS AND CLEAR. 27. THE HONBLE HIGH COURT FURTHER REFERRED TO A DE CISION OF DIVISION BENCH OF HONBLE BOMBAY HIGH COURT IN THE CASE OF N .D. BHATT IAC OF IT 18 VERSUS IBM WORLD TRADE CORPORATION (1995) 216 ITR 8 11 (BOM.), WHERE IT HAS BEEN HELD AS UNDER:- IT IS ALSO WELL-SETTLED THAT THE REASONS FOR REOPE NING ARE REQUIRED TO BE RECORDED BY THE ASSESSING AUTHORITY BEFORE ISSUING ANY NOTICE UNDER SECTION 148 BY VIRTUE OF T HE PROVISIONS OF SECTION 148(2) AT THE RELEVANT TIME. ONLY THE RE ASONS SO RECORDED CAN BE LOOKED AT FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED UNDER SECTION 148. IN THE CASE OF EQU ITABLE INVESTMENT CO. P. LTD. V. ITO [1988] 174 ITR 714, A DIVISION BENCH OF THE CALCUTTA HIGH COURT HAS HELD THAT WHER E A NOTICE ISSUED UNDER SECTION 148 OF THE INCOME-TAX ACT, 196 1, AFTER OBTAINING THE SANCTION OF THE COMMISSIONER OF INCOM E-TAX IS CHALLENGED, THE ONLY DOCUMENT TO BE LOOKED INTO FOR DETERMINING THE VALIDITY OF THE NOTICE IS THE REPORT ON THE BAS IS OF WHICH THE SANCTION OF THE COMMISSIONER OF INCOME-TAX HAS BEEN OBTAINED. THE INCOME-TAX DEPARTMENT CANNOT RELY ON ANY OTHER MATERIAL APART FROM THE REPORT. AFTER REFERRING THE AFORESAID DECISION OF THE HONB LE BOMBAY HIGH COURT, THE HONBLE DELHI HIGH COURT FURTHER OBSERVED AS UN DER:- 11. THE AFORESAID PARAGRAPH IN IBM WORLD TRADE CORPORATION (SUPRA) WAS CITED WITH APPROVAL IN PRAS HANT S. JOSHI VERSUS INCOME-TAX OFFICER AND ANOTHER, 2010 (324) ITR 154 (BOM.) AND IT WAS HELD AS UNDER :- SECTION 147 PROVIDES THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 163, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THE SECTION. THE FIRST PROVISO TO SECTION 147 HAS NO APPLICATION IN THE FACTS OF THIS CASE. THE BASIS POSTULATE WHICH 19 UNDERLIES SECTION 147 IS THE FORMATION OF THE BELIE F BY THE ASSESSING OFFICER THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT SUCH IS THE CASE BEFORE HE PROCEEDS TO ISSUE A NOTICE UNDER SECTION 147. THE REASONS WHICH ARE RECORDED BY THE ASSESSING OFFICER FOR REOPENING AN ASSESSMENT ARE THE ONLY REASONS WHICH CAN BE CONSIDERED WHEN THE FORMATION OF THE BELIEF IS IMPUGNED. THE RECORDING OF REASONS DISTINGUISHES AN OBJECTIVE FROM A SUBJECTIVE EXERCISE OF POWER. THE REQUIREMENT OF RECORDING REASONS IS A CHECK AGAINST ARBITRARY EXERCISE OF POWER. FOR IT IS ON THE BASIS OF THE REASONS RECORDED AND ON THOSE REASONS ALONE THAT THE VALIDITY OF THE ORDER REOPENING THE ASSESSMENT IS TO BE DECIDED. THE REASONS RECORDED WHILE REOPENING THE ASSESSMENT IS TO BE DECIDED. THE REASONS RECORDED WHILE REOPENING THE ASSESSMENT CANNOT BE ALLOWED TO GROW WITH AGE AND INGENUITY, BY DEVISING NEW GROUNDS IN REPLIES AND AFFIDAVITS NOT ENVISAGED WHEN THE REASONS FOR REOPENING AN ASSESSMENT WERE RECORDED. THE PRINCIPLE OF LAW, THEREFORE, IS WELL SETTLED THAT THE QUESTION AS TO WHETHER THERE WAS REASON TO BELIEVE, WITHIN THE MEANING OF SECTION 147 THAT INCOME HAS ESCAPED ASSESSMENT, MUST BE DETERMINED WITH REFERENCE TO THE REASONS RECORDED BY THE ASSESSING OFFICER. THE REASONS WHICH ARE RECORDED CANNOT BE SUPPLEMENTED BY AFFIDAVITS. THE IMPOSITION OF THAT REQUIREMENT ENSURES AGAINST AN ARBITRARY EXERCISE OF POWERS UNDER SECTION 148. 28. FROM THE AFORESAID DECISIONS, WE MAY NOTE THE F OLLOWING PROPOSITION TO DECIDE THE QUESTION AS TO WHETHER THE REASONS RE CORDED BY THE AO WERE SUFFICIENT TO INITIATE PROCEEDINGS UNDER SEC. 147 O F THE ACT: 20 (I) FORMATION OF THE REQUIRED OPINION AND THE BELIEF BY THE AO IS A CONDITION PRECEDENT TO EXERCISE JURISDICTION TO INI TIATE PROCEEDINGS UNDER SEC. 147 OF THE ACT. THE FULFILLMENT OF THIS CONDITION IS NOT A MERE FORMALITY, BUT IT IS MANDATORY. THE FAILURE T O FULFILL THAT CONDITION WOULD VITIATE THE ENTIRE PROCEEDINGS. (II) THE REASONS FOR THE FORMATION OF THE REQUIRE D BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF BELIEF. THE RATIONAL CONNECTION POSTULATES THAT THERE MUST BE DIRECT NEXUS OR LIVE LINK BETW EEN THE MATERIAL COMING TO THE NOTICE OF THE AO AND THE FORMA TION OF THE BELIEF THAT THERE HAS BEEN ESCAPEMENT OF INCOME OF THE ASSESSEE FROM THE ASSESSMENT IN THE PARTICULAR YEAR. (III) IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER, VAGUE AND INDEFINITE OR DISTANT, REMOTE OR FAR-FETCHED, WHICH WOUL D WARRANT THE FORMATION OF THE BELIEF RELATING TO THE ESCAP EMENT OF INCOME OF THE ASSESSMENT. (IV) IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS B ETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, N O ONE CAN PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY ENTERTAIN A BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT TH E AO COULD NOT HAVE REASON TO BELIEVE. IN SUCH A CASE, THE NOTICE ISSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID. (V) THE REASONS RECORDED BY THE AO CANNOT BE SUPPLEMENT ED BY FILING AN AFFIDAVIT OR MAKING AN ORAL SUBMISSION, OTHERWIS E, THE REASONS, 21 WHICH WERE LACKING IN THE MATERIAL PARTICULARS WOUL D GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES TO THE COURT ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSIONS ADVANCED. IN OTHER WORDS, THE REASONS RECORDED BY THE AO FOR INITIATING PROCE EDINGS UNDER SEC. 147 OF THE ACT, CAN ONLY BE LOOKED AT FOR SUST AINING OR SETTING ASIDE A NOTICE ISSUED U/S 148 OF THE ACT. IT IS ON THE BASIS OF THE REASONS RECORDED AND ON THOSE REASONS ALONE THAT TH E VALIDITY OF THE ORDER REOPENING THE ASSESSMENT IS TO BE DECIDED. T HE REASONS RECORDED WHILE REOPENING THE ASSESSMENT CANNOT BE A LLOWED TO GROW WITH AGE AND INGENUITY, BY DEVISING NEW GROUND S IN REPLIES AND AFFIDAVITS NOT ENVISAGED WHEN THE REASONS FOR R EOPENING AN ASSESSMENT WERE RECORDED. THE PRINCIPLE OF LAW, TH EREFORE, IS WELL SETTLED THAT THE QUESTION AS TO WHETHER THERE WAS R EASON TO BELIEVE, WITHIN THE MEANING OF SEC. 147, THAT INCOME HAS ESC APED ASSESSMENT, MUST BE DETERMINED WITH REFERENCE TO TH E REASONS RECORDED BY THE ASSESSING OFFICER. THE IMPOSITION OF THAT REQUIREMENT ENSURES AGAINST AN ARBITRARY EXERCISE O F POWERS UNDER SEC. 148 OF THE ACT. 29. NOW, THE FACTUAL MATRIX OF THE PRESENT CASE HAS TO BE CONSIDERED ON THE ANVIL OF PROPOSITION OF THE LAW ENUMERATED ABOVE. 30. IN THE CASE AT HAND, AS IS SEEN FROM THE REASON S RECORDED BY THE AO, WE FIND THAT THE AO HAS MERELY STATED THAT IT HAS B EEN INFORMED BY THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETT ER DATED 16.06.2006 THAT THE ABOVE NAMED COMPANY WAS INVOLVED IN GIVING AND TAKING BOGUS ENTRIES/TRANSACTIONS DURING THE RELEVANT YEAR, WHIC H IS ACTUALLY UNEXPLAINED 22 INCOME OF THE ASSESSEE COMPANY. THE AO HAS FURTHER STATED THAT THE ASSESSEE COMPANY HAS FAILED TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS AND SOURCE OF THESE FUNDS ROUTED THROUGH BANK ACCOUNT O F THE ASSESSEE COMPANY. IN THE REASONS RECORDED, IT IS NOWHERE MENTIONED AS TO WHO HAD GIVEN BOGUS ENTRIES/TRANSACTIONS TO THE ASSESSEE OR TO WHOM THE ASSESSEE HAD GIVEN BOGUS ENTRIES OR TRANSACTIONS. IT IS ALSO NOWHERE MENTIO NED AS TO ON WHICH DATES AND THROUGH WHICH MODE THE BOGUS ENTRIES AND TRANSA CTIONS WERE MADE BY THE ASSESSEE. WHAT WAS THE INFORMATION GIVEN BY TH E DIRECTOR OF INCOME-TAX (INV.), NEW DELHI, VIDE LETTER DATED 16.06.2006 HAS ALSO NOT BEEN MENTIONED. IN OTHER WORDS, THE CONTENTS OF THE LETTER DATED 16 .06.2006 OF THE DIRECTOR OF INCOME-TAX (INV.), NEW DELHI HAVE NOT BEEN GIVEN. THE AO HAS VAGUELY REFERRED TO CERTAIN COMMUNICATIONS THAT HE HAD RECE IVED FROM THE DIT(INV.), NEW DELHI; THE AO DID NOT MENTION THE FACTS MENTION ED IN THE SAID COMMUNICATION EXCEPT THAT FROM THE INFORMATIONS GAT HERED BY THE DIT (INV.), NEW DELHI THAT THE ASSESSEE WAS INVOLVED IN GIVING AND TAKING ACCOMMODATION ENTRIES ONLY AND REPRESENTED UNSECURE D MONEY OF THE ASSESSEE COMPANY IS ACTUALLY UNEXPLAINED INCOME OF THE ASSESSEE COMPANY OR THAT IT HAS BEEN INFORMED BY THE DIRECTOR OF INC OME-TAX (INV.), NEW DELHI VIDE LETTER DATED 16.06.2006 THAT THE ASSESSEE COMP ANY WAS INVOLVED IN GIVING AND TAKING BOGUS ENTRIES/TRANSACTIONS DURING THE RELEVANT FINANCIAL 23 YEAR. THE AO DID NOT MENTION THE DETAILS OF TRANSA CTIONS THAT REPRESENTED UNEXPLAINED INCOME OF THE ASSESSEE COMPANY. THE IN FORMATION ON THE BASIS OF WHICH THE AO HAS INITIATED PROCEEDINGS U/S 147 O F THE ACT ARE UNDOUBTEDLY VAGUE AND UNCERTAIN AND CANNOT BE CONST RUED TO BE SUFFICIENT AND RELEVANT MATERIAL ON THE BASIS OF WHICH A REASO NABLE PERSON COULD HAVE FORMED A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN OTHER WORDS, THE REASONS RECORDED BY THE AO ARE TOTALLY VAGUE, SCANT Y AND AMBIGUOUS. THEY ARE NOT CLEAR AND UNAMBIGUOUS BUT SUFFER FROM VAGUE NESS. THE REASONS RECORDED BY THE AO DO NOT DISCLOSE THE AOS MIND AS TO WHAT WAS THE NATURE AND AMOUNT OF TRANSACTION OR ENTRIES, WHICH HAD BEE N GIVEN OR TAKEN BY THE ASSESSEE IN THE RELEVANT YEAR. THE REASONS RECORDE D BY THE AO ALSO DO NOT DISCLOSE HIS MIND AS TO WHEN AND IN WHAT MODE OR WA Y THE BOGUS ENTRIES OR TRANSACTIONS WERE GIVEN OR TAKEN BY THE ASSESSEE. FROM THE REASONS RECORDED, NOBODY CAN KNOW WHAT WAS THE AMOUNT AND N ATURE OF BOGUS ENTRIES OR TRANSACTIONS GIVEN AND TAKEN BY THE ASSE SSEE IN THE RELEVANT YEAR AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. AS ALREADY NOTED ABOVE, IT IS WELL SETTLED THAT ONLY THE REASONS RECORDED BY T HE AO FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT ARE TO BE LOOKED AT OR EXAMINED FOR SUSTAINING OR SETTING ASIDE A NOTICE ISSUED U/S 148 OF THE ACT . THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUB STITUTION OR DELETION IS 24 PERMISSIBLE. NO ADDITION CAN BE MADE TO THOSE REAS ONS. THEREFORE, THE DETAILS OF ENTRIES OR AMOUNT MENTIONED IN THE ASSES SMENT ORDER AND IN RESPECT OF WHICH ULTIMATE ADDITION HAS BEEN MADE BY THE AO, CANNOT BE MADE A BASIS TO SAY THAT THE REASONS RECORDED BY THE AO WERE WIT H REFERENCE TO THOSE AMOUNTS MENTIONED IN THE ASSESSMENT ORDER. THE REA SONS RECORDED BY THE AO ARE TOTALLY SILENT WITH REGARD TO THE AMOUNT AND NATURE OF BOGUS ENTRIES AND TRANSACTIONS AND THE PERSONS WITH WHOM THE TRAN SACTIONS HAD TAKEN PLACE. IN THIS RESPECT, WE MAY RELY UPON THE DECIS ION OF HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF CIT VS. ATUL JAIN (2000) 299 ITR 383, IN WHICH CASE THE INFORMATION RELIED UPON BY THE AO FOR INITIATING PROCEEDINGS U/S 147 OF THE ACT DID INDICATE THE SOU RCE OF THE CAPITAL GAIN AND NOBODY KNEW WHICH SHARES WERE TRANSACTED AND WITH W HOM THE TRANSACTION HAS TAKEN PLACE AND IN THAT CASE THERE WERE ABSOLUT ELY NO DETAILS AVAILABLE AND THE INFORMATION SUPPLIED WAS EXTREMELY SCANTY A ND VAGUE AND IN THAT LIGHT OF THOSE FACTS, THE HONBLE JURISDICTIONAL DE LHI HIGH COURT HELD THAT INITIATION OF PROCEEDINGS U/S 147 OF THE ACT BY THE AO WAS NOT VALID AND JUSTIFIED IN THE EYES OF LAW. THE RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF SIGNATURE HOTELS (P) LTD. (SUPRA) ALSO SUPPORTS THE VIEW WE HAVE TAKEN ABOVE. 25 31. FOR THE REASONS GIVEN ABOVE BY US, WE HOLD THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO ARE WITHOUT JURISDI CTION AND INVALID IN THE EYES OF LAW INASMUCH AS THE REASONS RECORDED BY THE AO DO NOT SATISFY THE REQUIREMENT OF SECTION 147 OF THE ACT. WE, THEREFO RE, UPHOLD THE ORDER OF THE LEARNED CIT(A) IN HOLDING THAT THE PROCEEDINGS INITIATED BY THE AO UNDER SEC. 147 OF THE ACT ARE WITHOUT JURISDICTION AND IN VALID, HOWEVER, FOR THE REASONS GIVEN BY US. THUS, THE GROUND OF THE REVEN UE REGARDING THE VALIDITY OF ASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE ACT IS REJECTED IN BOTH THE ASSESSMENT YEARS UNDER APPEAL. 32. SINCE THE VERY ASSESSMENT MADE BY THE AO UNDER SEC. 147 OF THE ACT IS FOUND TO BE WITHOUT JURISDICTION AND IS NOT SUST AINABLE IN THE EYES OF LAW FOR WANT OF JURISDICTION, THE QUESTION AS TO WHETHE R THE ADDITION MADE BY THE AO ON ACCOUNT OF SHARE CAPITAL MONEY RECEIVED BY TH E ASSESSEE HAS BEEN RIGHTLY DELETED BY THE LEARNED CIT(A), HAS BECOME R EDUNDANT AT THIS STAGE. WE, THEREFORE, DO NOT PROCEED TO DECIDE THE SAME AN D DISMISS THE SAME AS REDUNDANT. 33. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. 34. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 12 TH OCTOBER, 2011. SD/- SD/- (SHAMIM YAHYA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14 TH NOVEMBER, 2011. 26 ITA NOS.2332 & 2333/DEL/2010 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT