Smt. Kalpana Agarwal, Mathura V. I.T.O.-3(2), Mathura

ITA 241/AGR/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1948 (ITAT-AGRA)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 04-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BELU SINHA
• Assessee Lawyers: M M AGARWAL
• Keywords: Reopening of assessment; Bonafide belief; Period of limitation; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 234B; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, SMC AGRA BEFORE SH RI J.S. REDDY , ACCOUNTANT MEMBER ITA NO. 241 / AG RA /201 3 ASSESSMENT YEAR : 1998 - 99 SMT. KALPANA AGARWAL VS. INCOME TAX OFFICER 3(2) 16, JAGANNATH PURI MATHURA. MATHURA 281 001 (U. P.) (PAN: AA OPA 7979Q ) . (APPELLANT) (RESPONDENT) A PPELLANT BY : SHRI M.M. AGARWAL, C.A. RE SPONDENT BY : SMT. BELU SINHA, SR. D.R. DATE OF HEARING : 0 5 .07. 201 6 DATE OF PRONOUNCEMENT : 26 . 07.201 6 ORDER THI S IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LEARNED CIT(A) - 1, AGRA DATED 2 6 .0 2 .201 3 FOR THE A SSESSMENT YEAR 1998 - 99 , ON THE FOLLOWING GROUNDS: - THAT THE LEARNED CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE INITIATION OF REASS ESSMENT PROCEEDINGS, INITIATED BY THE LEARNED A.O., MATHURA BY TAKING RECOURSE TO THE PROVISION OF SECTION 147/148 OF THE ACT, DESPITE THE FACT THAT, THERE EXISTED NO MATERIAL ON HIS RECORD FOR HIS REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCA PED ASSESSMENT. 1.1 THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN FAILING TO APPRECIATE THAT, THE REASSESSMENT PROCEEDINGS AS INITIATED ARE LIABLE TO BE QUASHED, IN AS MUCH AS, THE SAME HAVE BEEN INITIATED WITHOUT SATISFYING THE MANDATORY PRECONDITIONS FOR INITIATION OF THE VALID PROCEEDINGS UNDER SECTION 147 OF THE ACT. 1.2 THAT THE LEARNED CIT(A) HAS FAILED TO COMPREHEND THAT, NO VALID REASSESSMENT PROCEEDINGS COULD BE INITIATED AGAINST AN ASSESSEE, UNLESS THE ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 2 ASSESSING OFFICER HAS MATE RIAL BEFORE HIM, WHICH MAY INDUCE HIM TO FORM A REASON TO BELIEVE THAT, THERE HAS BEEN AN ESCAPEMENT OF INCOME OF THE ASSESSEE. 1.3 THAT THE LEARNED CIT(A) HAS OVERLOOKED THE FACT THAT THE LEARNED A.O. HAD NO ANY MATERIAL, EVEN AS ALLEGED, IN THE SHAPE O F THE PURPORTED INFORMATION ALLEGED TO HAVE BEEN RECEIVED FROM DY. DIRECTOR OF INCOME TAX (INVESTIGATION) AGRA, ON 22.03.2005. THE LEARNED CIT(A) HAS THUS GROSSLY ERRED IN UPHOLDING THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. 1.4 THAT IN FACT, THE LEARNED CIT(A) HAS COMPLETELY OVERLOOKED, WHEN HE FAILED TO APPRECIATE THAT, WHAT WAS ALLEGEDLY AVAILABLE WITH LEARNED A.O. ON 22.03.2005, (THE DATE WHEN HE HAD FORMED HIS REASONS TO BELIEVE TO INITIATE PROCEEDINGS U/S 147 OF THE ACT), WAS MERELY A LIST OF ALLEGED BENEFICIARIES (WHICH LIST CONTAINED ONLY THE NAME OF THE ASSESSEE ALONG WITH THE DATE AND AMOUNT CREDITED IN HIS BANK ACCOUNT) AND THUS ON THE BASIS OF SUCH A MATERIAL (ALONE AND NO MORE), THE LEARNED A.O., COULD NOT HAVE FORMED ANY BELI EF MUCH LESS A REASONABLE BELIEF THAT THERE WAS AN ESCAPEMENT OF INCOME AND THE AMOUNT CREDITED REPRESENTED BOGUS ENTRIES, UNLESS THERE EXISTED SOME TANGIBLE MATERIAL DULY SUPPORTED BY THE STATEMENT OF M/S YADAV & COMPANY ALLEGING THAT THE CREDIT REPRESENT S BOGUS ENTRIES AND DID NOT REPRESENT SALE CONSIDERATION OF THE SHARES HELD AND OWNED BY THE ASSESSEE AND IS STATED IN THE REASONS TO BELIEVE, FOR INITIATING THE PROCEEDINGS. 1.5 THAT THE LEARNED CIT (A) HAS FURTHER FAILED TO APPRECIATE THAT, BEFORE FORMI NG THE REASONS TO BELIEVE, THE LEARNED A.O. DID NEITHER HAD THE RETURN OF INCOME FILED BY THE APPELLANT FOR THE A.Y. 1998 - 99 NOR THE ALLEGED REPORT OF THE DDIT (INVESTIGATION) (WHICH WAS THE SOLE BASIS FOR THE FORMATION OF REASON TO BELIEVE), AS SUCH THE F ORMATION OF BELIEF WITHOUT ANY MATERIAL AND ON THE BASIS OF MERE GENERAL ASSUMPTIONS AND PRESUMPTIONS COULD NOT BE HELD AS A VALID BASIS. 1.6 THAT THE CIT (A) HAS FAILED TO APPRECIATE, HAD THE LEARNED A.O. HAD THE COPY OF THE RETURN FILED, AT THE TIME OF INITIATION OF PROCEEDINGS, THE SAME WOULD HAVE BEEN PRODUCED BY HIM WHEN HE WAS SO DIRECTED TO DO SO. 2. THAT THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THAT THE REASSESSMENT PROCEEDINGS AS INITIATED ARE WHOLLY UNSUSTAINABLE IN AS MUCH AS THE SAME HAV E BEEN INITIATED FOR COLLATERAL PURPOSE I.E. TO MAKE ROVING AND FISHING ENQUIRY, AS THERE WAS NO MATERIAL ON RECORD TO EVEN PRIMA - FACIE CONCLUDE THAT THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 3 2.1 THAT THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THAT, INSTANT PROCEEDINGS HAD BEEN INITIATED TO CIRCUMVENT THE TIME PROVIDED TO MAKE ASSESSMENT BY ISSUE OF A NOTICE UNDER SECTION 143(2) OF THE ACT AND LEARNED A.O. HAVING FAILED TO SCRUTINIZE THE RETURN BY ISSUANCE OF NOTICE U/S 143(2) OF THE ACT, INITI ATED THE PROCEEDINGS UNDER SECTION 147 OF THE ACT TO SCRUTINIZE THE RETURN. 2.2 THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE LEARNED A.O. HAS INITIATED THE PROCEEDINGS U/S 147 OF THE ACT ON THE BASIS OF AN NONEXISTENT INFORMATION RECEIVED FR OM DDIT (INV.) DESPITE THE FACT THAT NO SUCH MATERIAL EXISTED ON HIS RECORD IN SUPPORT THEREOF. IN FACT THE PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITIATED MECHANICALLY AND WITHOUT INDEPENDENT APPLICATION OF HIS MIND, WHICH IS A CONDITION PRECEDENT FOR VALID INITIATION OF PROCEEDINGS. 2.3 THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIATE THAT THE REASONS RECORDED ARE REASONS WHICH ARE REASONS TO SUSPECT AND WERE TO MAKE FISHING AND ROVING ENQUIRIES, SINCE NO INDEPENDENT ENQUIRY WAS CONDUCTED BY THE LEARNED A.O. BEFORE ISSUING SUCH NOTICE U/S 148 OF THE ACT AND AS SUCH THE PROCEEDING INITIATED U/S 148 OF THE ACT IS IN THE NATURE OF MERE PRETENCE AND BORROWED SATISFACTION . 2.4 THAT THE LEARNED CIT (A) HAS FAILED TO APPRECIATE THAT THE LEARNED A.O. HAS FRAMED THE ORDER OF ASSESSMENT WITHOUT DISPOSING OFF THE OBJECTIONS OF THE APPELLANT AND AS SUCH ASSESSMENT FRAMED IS APPARENTLY IN VIOLATION OF LAW LAID DOWN BY THE APEX COURT IN THE CASE OF GKN DRIVE SHAFTS (INDIA) LTD. VS. INCOME TAX OFFICER REPORT ED IN 259 ITR 19. THE ASSESSMENT THUS MADE WAS UNSUSTAINABLE IN LAW. THE LEARNED CIT (A) WAS THUS DUTY BOUND TO ANNUL SUCH AN ORDER OF ASSESSMENT SINCE HE HAD NO POWER TO SET ASIDE THE ASSESSMENT. IN ANY CASE, HE COULD NOT HAVE CONFIRMED SUCH AN ORDER OF A SSESSMENT. 2.5 THAT THE LEARNED CIT (A) HAS GROSSLY ERRED IN FAILING TO APPRECIATE THAT SHRI OM PRAKASH YADAV IN HIS STATEMENT RECORDED BY THE INVESTIGATION WING ON 7.03.2002 HAD NOWHERE STATED THAT HE PROVIDED ANY ACCOMMODATION ENTRY TO THE APPELLANT, AS SUCH, BEFORE THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT, THERE BEING NO EVIDENCE OR MATERIAL WITH THE LEARNED A.O. TO FORM A REASON TO BELIEVE THAT, SHARES SOLD BY THE ASSESSEE REPRESENTED BOGUS ENTRIES. THUS THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IS UNSUSTAINABLE. 2.6 THAT, WITHOUT PREJUDICE AND IN THE ALTERNATIVE, THE REASSESSMENT PROCEEDINGS AS INITIATED ARE BAD IN LAW AS THE SAME HAVE BEEN INITIATED BEYOND THE PERIOD OF LIMITATION AS PROVIDED IN THE PROVISO TO SECTION 147 OF THE INCOM E ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 4 TAX ACT, 1961, SINCE COPY OF THE REASONS RECORDED WERE NOT FORWARDED ALONGWITH THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT. 3. THAT THE ORDER OF THE CIT(A) IS VITIATED BOTH IN LAW AND ON THE FACTS, AS HE HAS GROSSLY ERRED IN FAILING TO APPRECIATE THA T: ( A ) THAT THE A.O. RELIED UPON MATERIAL, ANNEXED WITH THE ORDER OF ASSESSMENT, WITHOUT HAVING CONFRONTED THE SAME TO THE ASSESSEE, IN THE COURSE OF ASSESSMENT PROCEEDINGS; ( B ) ADMITTED FRESH EVIDENCE FURNISHED BY THE A.O. IN THE APPELLATE PROCEEDINGS; ( C ) RELYING ON EXTRANEOUS MATERIAL NOT RELEVANT TO THE APPEAL OF THE ASSESSEE. 4. THAT THE ORDER OF THE LEARNED CIT(A) IS OTHERWISE ARBITRARY AS THE SAME IS BASED ON PRE - DETERMINED OPINION AND IS WITHOUT APPRECIATING THE FACTS OF THE INSTANT CASE. 5. WITHOUT PREJUDIC E TO THE ABOVE AND IN THE ALTERNATIVE, THE LEARNED CIT (A) HAS GROSSLY ERRED BOTH ON FACT AND IN LAW IN UPHOLDING THE ADDITION MADE OF RS. 819,607/ - (ADDITION MADE BY THE LEARNED A.O. WAS OF RS. 904,552/ - ) AS AGAINST THE RETURNED INCOME OF RS. 68,800/ - . 5.1 THAT THE ADDITION SO SUSTAINED IS UNTENABLE SINCE THE LEARNED CIT (A) HIMSELF HAVING REDUCED THE SAID ADDITION BY RS. 84,975/ - BEING THE COST OF SHARES SOLD COULD NOT HAVE HELD THAT THE CREDITS APPEARING REPRESENTED BOGUS ENTRIES AND DID NOT EMANATE FR OM THE PROCEEDS OF SALE OF SHARES. THAT THE LEARNED CIT (A) THUS HAVING REDUCED THE ADDITION FROM THE COST OF THE SHARES SOLD, HAS THUS CONTRADICTED HIMSELF WHEN HE SUSTAINED THE ADDITION OF RS. 819,607/ - , WHEN SUCH A SUM OF ADDITION HAD BEEN MADE ON THE B ASIS THAT THE CREDITS APPEARING REPRESENTED ALLEGED BOGUS ENTRIES AND DID NOT REPRESENT SALE PROCEEDS OF THE SHARES, HELD AND SOLD BY THE ASSESSEE. 5.2 THAT THE LEARNED CIT (A) HAS ERRED IN NOT APPRECIATING THE LEARNED A.O. HAS FRAMED THE ORDER OF ASSESSM ENT IN COMPLETE DISREGARD OF THE DOCUMENTARY EVIDENCES FURNISHED BY THE APPELLANT WHICH ESTABLISH THAT APPELLANT HAS ACTUALLY SOLD THE SHARES AND SALES CONSIDERATION WAS RECEIVED THROUGH BANKING CHANNELS. 5.3 THE LEARNED CIT (A) HAS FURTHER ERRED IN SUST AINING THE ADDITION DESPITE THE FACT THE BURDEN WHICH LAY UPON THE REVENUE THAT THERE IS AN ESCAPEMENT OF INCOME WAS NO DISCHARGED ( CIT VS PRADEEP KUMAR GUPTA REPORTED IN 303 ITR 95). ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 5 5.4 THAT THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT EVEN SHR I OM PRAKASH YADAV OR ANY OTHER PERSON HAS NEVER ALLEGED THAT SALE OF SHARES BY THE APPELLANT IS BOGUS AND THAT THE APPELLANT HAS NOT SOLD THE SHARES AND CONSIDERATION RECEIVED BY THE APPELLANT REPRESENTED THE ACCOMMODATION ENTRIES. 5.5 THAT THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THAT SHRI OM PRAKASH YADAV IN HIS STATEMENT HAS NEVER STATED THAT HE IS IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRY. 5.6 THAT THE LEARNED CIT (A) HAS FURTHER ERRED IN NOT PROVIDING MEANINGFUL AND SUFFICIENT OPPOR TUNITY TO CROSS EXAMINE SHRI O.P. YADAV AND SUCH OTHER PERSONS, WHO AS HAD BEEN ALLEGED, STATED THAT THE ASSESSEE HAD RECEIVED THE SUMS AS ACCOMMODATION ENTRIES ( CIT VS RAO RAJA HANUT SINGH REPORTED IN 252 ITR 528) . 5.7 THAT THE LEARNED CIT (A) HAS ERRED IN FAILING TO APPRECIATE THAT, PURCHASE OF SHARES OF THE COMPANIES I.E. M/S COZY ENTERPRISES LTD., M/S MICRON CHEMICALS LTD. AND M/S SUBHINFIN CAP LTD. WERE DULY DISCLOSED BY THE APPELLANT UNDER VDIS 1997, WHEREIN COST OF SUCH SHARES WERE DISCLOSED AT RS. 84,525/ - AND AS SUCH EXISTENCE OF SUCH SHARES IS PROVED (WHICH STAND OF THE ASSESSEE HAS ALSO BEEN ACCEPTED BY THE LEARNED CIT(A). 5.9 THAT THE LEARNED CIT(A) HAS ERRED IN FAILING TO APPRECIATE THAT, MERELY BECAUSE THE PURCHASER OF THE SHARES OF M/S COZ Y ENTERPRISES LTD. DID NOT GET THE SHARES TRANSFERRED IN HIS NAME, WAS INSUFFICIENT TO LEAD TO A CONCLUSION THAT, THE APPELLANT HAD NOT SOLD THE SHARES, MORE PARTICULARLY WHEN THE DELIVERY OF SHARES WAS DULY ESTABLISHED. 5.10 THAT THE LEARNED CIT(A) HAS ERRED IN FAILING TO APPRECIATE THAT MERELY BECAUSE THE APPELLANT WAS NOT ABLE TO PRODUCE THE PURCHASER OF SHARES OF M/S SUBHINFIN CAP LTD. AND THE BROKER M/S D.P. NAGORI & CO., AFTER A LONG LAPSE OF A PERIOD OF SEVEN YEAR, THE SALE OF SHARES OF THE AFORESA ID COMPANY, IN THE ABSENCE OF ANY ADVERSE MATERIAL, COULD NOT BE HELD AS NON GENUINE. IN FACT, EVEN IN THE REPORT OF INVESTIGATION WING, WHICH HAD PURPORTEDLY EXAMINED THE GENUINENESS OF SALE OF SHARES, THERE WAS NO ADVERSE COMMENT IN RESPECT OF THE AFORES AID SHARES AND AS SUCH, THE LEARNED CIT(A) ERRED IN HOLDING THAT THE SALE WAS NOT GENUINE. 6. THAT THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE LEVY OF INTEREST UNDER THE PROVISIONS OF SECTION 234B OF THE ACT. ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 6 IT IS THEREFORE PRAYED THAT INITIATION OF PROCEEDINGS U/S 147 /148 OF THE ACT BE HELD AS NOT VALIDLY INITIATED AND ASSESSMENT FRAMED IN CONSEQUENCE THEREOF IS UNSUSTAINABLE IN LAW. IT IS FURTHER PRAYED THAT ADDITIONS AND DISALLOWANCES MADE TO THE RETURNED INCOME BE DELETE D, AND INTEREST LEVIED UNDER SECTION 234B OF THE ACT BE DELETED. THE APPELLANT CRAVES AND LEAVES TO HIS RIGHT TO ADD, DELETE, ALTER, SUBSTITUTE OR MODIFY ANY OR ALL THE GROUNDS OF APPEAL AT ANY SUITABLE TIME. ' 2. THE SOLE ISSUE BEFORE US IS WHETHER THE R EOPENING OF ASSESSMENT UNDER SECTION 148 IS BAD IN LAW. THE REASONS BASED ON WHICH THE REOPENING MADE IS AS FOLLOWS: - AS PER INFORMATION RECEIVED FROM THE DDI ( INV ) AGRA VIDE HIS LETTER F . NO .D DIT (INV) / CAPITAL GAIN/AGR / 2004 - 05 DATED 14.3.05, IT IS GATHER ED THAT SMT . KALPANA AGRAWAL W / O . SHRI NARENRA K UMAR A GARWAL , R/O. 16 JAGANNATHPURI , MATHURA HAS OBTAINED FICTITIOUS AND BOGUS ENTRY OF LONG TERM CAPITAL GAIN AMOUNTING TO RS.268 935/ - AND SHOWN BOGUS CAPITAL GAIN IN HER RETURN OF INCOME FOR ASSESSMENT YEA R 1998 - 99 VIDE DEMAND DRAFT NO.181/2271 DATED 5.3.98 ISSUED BY BROKER M/S YADAV & CO . MOHA MMADPUR, NEW DELHI THROUGH UBI , MOTI BAGH , DELHI AND SUBSEQUENTLY DEPOSITED IN HER BANK ACCOUNT NO.11242 IN BANK OF BARODA, K OTWALI R OAD MATHURA . THE WHOLE OF THE AM OUNT SHOWN AS CAPITAL GAIN IN THE RETURN OF INCOME FOR AY 1998 - 99 IS THE INCOME FROM OTHER SOURCES WHICH HAS ESCAPED ASSESSMENT FOR ASSESSMENT Y E A R 1998 - 99 . I HAVE THEREFORE REASON TO BELIEVE THAT INCOME AMOUNTING TO RS.2,68,935/ - CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR ASSESSMENT YEAR 1998 - 99 WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. NOTICE UNDER SECTION 148 MAY BE ISSUED AFTER APPROVAL OF THE ADDL. CIT, R - 3, MATHURA . 3. LEARNED COUNSEL FOR TH E ASSES SE E SUBMITS THAT : I) THE ASSESSING OFFICER WAS NOT KNOWING WHETHER THE ASSESSEE HAS FILED H ER RETURN OF INCOME AND THE RETURN FILED BY H ER WAS NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF RECODING REASONS. ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 7 II) THE ALLEGED REPORT FROM THE INVESTIGATING WING B ASED ON WHICH REASONS WERE RECORDED FOR REOPENING OF THE ASSESSMENT WAS NOT AVAILABLE WITH THE ASSESSING OFFICER. HE POINTED OUT THAT DESPITE REPEATED APPLICATIONS, THE REPORT OF THE INVESTIGATION WING N OR THE MATERIAL WAS GIVEN TO THE ASSESSEE. HE FURTH ER SUBMITS THAT THE SAME HAS NOT BEEN GIVEN TO THE LEARNED C IT(A) ALSO. 4. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THE ASSESSEE NEVER RAISED THI S OBJECTION BEFORE THE LEARNED C IT ( A ) NOR SPE CIFIC GROUND IS TAKEN BY THE ASSESSEE. SHE RELIED ON THE ORDER OF LEARNED CIT ( A ) . 5. I FIND THAT THE ASSESSING OFFICER HAS WRITTEN A LETTER NO.F.NO .MISC/ITO - 3(2)/MTR/2004 - 05 DATED 22.03.2005 ASKING THE ASSESSEE TO FURNISH THE PROOF OF FILING RETURN OF INCOME FOR THE A.Y. 1998 - 99. AGAIN VIDE LETTER NO F .NO.148/ITO - 3(2)/MTR/2005 - 06 DATED 02.05.2005 THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH COPY OF ACKNOWLEDGEMENT OF HAVING FILED THE ALLEGED RETURN OF INCOME FILED BY H ER . THIS CORRESPONDENCE SHOWS THAT THE ASSESSING OFFICER WAS NOT IN POSSESSION OF THE RETURN OF INCOME FILED BY THE ASSESSEE AS ON 22.03.2005, THE DATE OF RECORDING REASONS OR PRIOR TO THAT. SIMILARLY I FIND THAT THE ENTIRE REASONS ARE BASED ON ALLEGED INFORMATION RECEIVED FROM DDI INVESTIGATION, AGRA. COPY OF THE INFORMATION OR T HE REPORT HAS NOT BEEN FURNISHED TO THE ASSESSEE OR E VEN BEFORE THE LEARNED CIT ( A ) . ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 8 WITHOUT HAVING THE RETURN OF INCOME IN HIS POSSESSION, THE ASSESSING OFFICER RECORDS THAT THE ASSESSEE HAS SHOWN WHOLE OF THE AMOUNT AS CAPITAL GAINS IN HER RETURN OF IN COME. HE ALSO RECORDS THAT THE ASSESSEE HAS SHOWN BOGUS CAPITAL GAIN IN HER RETURN OF INCOME. IT GOES TO SHOW THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND TO THE MATERIAL OR INFORMATION RECEIVED BY HIM. THE REASON RECODED IS OBVIOUSLY A PRESUMPTIO N OF THE ASSESSING OFFICER. IT IS NOT BONAFIDE BELIEF THAT INCOME SUBJECT TO TAX HAS ESCAPED ASSESSMENT. MOREOVER, THE A.O. HAS NOT FURNISHED THE COPY OF THE MATERIAL RECEIVED BY HIM FROM THE DY.D.I.(INVESTIGATION) OR A COPY OF THE REPORT DESPITE AN APP LICATION MADE BY THE ASSESSEE FOR THE SAME. THIS INFORMATION WAS NOT PROVIDED TILL DATE TO THE ASSESSEE. UNDER THE CIRCUMSTANCES, I HAVE TO NECESSARILY HOLD THAT THE REOPENING IS BAD IN LAW , BY APPLYING THE PROPOSITION OF LAW LAID DOWN IN THE FOLLOWING CASE : A) IN THE JUDGEMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTELS (P) LTD. VS. ITO AND ANOTHER, REPORTED IN 338 ITR 51 (DELHI) , UNDER SIMILAR CIRCUMSTANCES , HELD AS FOLLOWS : - FOR THE A.Y. 2003 - 04, THE RETURN OF INCOME OF T HE ASSESSEE COMPANY WAS ACCEPTED U/S.143(1) OF THE INCOME - TAX ACT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE OBJECTIONS. THE ASSE SSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 9 (I) SECTION 147 OF THE INCOME - TAX ACT, 1961, IS WIDE BUT NOT PLENARY. THE ASSESSING OFFICER MUS T HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIRED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. (II) A NOTICE U/S.148 CAN BE QUASHED IF THE BELIEF IS NO T BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON - SPECIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISCERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. THERE SHOULD BE A LINK BET WEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME - TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y. 2002 - 03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE R EQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE QUASHED. B) IN THE CASE OF CIT VS. ATUL JAIN REPORTED IN 299 ITR 383 IT HAS BEEN HELD AS FOLLOWS : - HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS BY PAY ING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE AO DID NOT VERIFY THE CORRECTNESS OF INFORMATION RECEIVED ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 10 BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE INFORMATION IN A MECHANICAL MANNER. THE AO HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INF ORMATION FOR ISSUING A NOTICE U/S 148. WHAT HAD BEEN RECORDED BY THE AO AS HIS REASONS TO BELIEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORDING OF REASONS TO BELIEVE FOR ISSUIN G A NOTICE. THE AO HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE ACTION OF THE AO WAS NOT SUSTAINABLE. C) THE HON BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. G & G PHARMA INDIA LTD. IN ITA NO.545/2015 VIDE ORDER D ATED 08 .10.2015 AT PARA 12 AND 13 HELD AS FOLLOWS : - 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATIO N ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS, INTRODUCED ITS OWN UN ACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ITA NO. 3602/DEL/2010 C.O. NO. 276/DEL/2010 A.Y. 2000 - 2001 M/S BAWA FLOAT GLASS LIMITED 3 ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER 2004 AND WAS PROCESSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRI ES . IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERIALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COUR T WOULD LIKE TO OBSERVE THAT THIS IS IN THE NATURE OF A POST MORTEM ITA NO. 241 /AGRA/201 3 A.Y. 1998 - 99 11 EXERCISE AFTER THE EVENT OF REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASIS THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMEN T IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE R EOPENING ORDER FROM INVALIDITY. 6 . IN THE RESULT, I HOLD THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW. HENCE T HE APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY, 2016. SD/ - (J.S. REDDY) ACCOUNTANT MEMBER DATE: 26 TH JU LY , 201 6 PBN/* COPY OF THE O RDER FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA