Shri Farhat Husain, Kanpur V. Dy. Commissioner of Income Tax, Kanpur

ITA 245/LKW/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4410 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-04-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRADEEP MEHROTRA SHRI A K
• Keywords: Loose papers; Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI. P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI ABY T VARKEY, JUDICIAL MEMBER ITA NO.245/LKW/2015 ASSESSMENT YEAR:2002-03 SHRI FARHAT HUSAIN KANPUR V. DCIT CENTRAL CIRCLE-V KANPUR TAN/PAN:AAGPH9142L (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI PRADEEP MEHROTRA, ADVOCATE RESPONDENT BY: SHRI A. K. MISHRA, D.R. DATE OF HEARING: 27 04 2016 DATE OF PRONOUNCEMENT: 08 06 2016 O R D E R PER ABY T VARKEY, JM: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AG AINST THE ORDER OF THE LD. CIT(A), KANPUR, DATE D 30.1.2015 FOR ASSE SSMENT YEAR 2002- 03. 2. THE ASSESSEE HAS, INTER ALIA, RAIS ED VARIOUS GROUNDS, HOWEVER, WE WOULD LIKE TO TAKE FIRST THE LEGA L ISSUE RAISED BY THE ASSESSEE I.E. AGAINST THE REOPENING ASSESSMENT UN DER SECTION 147/148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER IN SHORT THE ACT') . 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE, AN INDIVIDUAL, IS REGULARLY ASSESSED TO TAX AND HE HAS FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 DECLARIN G AN INCOME OF RS.1,14,730/- ON 22.10.2002. THEREAFTER THE ASSESSING OFFICER IS SUED A NOTICE UNDER SECTION 148 OF THE ACT ON 13.7.2007 AND THE REASONS FO R REOPENING THE :-2-: ASSESSMENT WAS GIVEN TO THE ASSESS EE VIDE LETTER DATED 8.12.2008, WHICH IS PLACED AT PAGES 14 AND 15 OF THE PAPER BOOK. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT ARE GIVEN BELOW:- 1. ON 18.11.1998, A SEARCH & SEIZ URE OPERATION WAS CONDUCTED IN THE RESIDENTIAL PREMISES OF SH RI TARIQ JAMAL, 16/16, GOKUL APARTMENT, CIVIL LINES, KANPUR. DURING THE SEARCH & SEIZURE OPERATION, A DIARY AS PER ANNEX. A-4, A BUNCH OF LOOSE PAPERS AS PER ANNEX-A-3 OF THE PANCHNAMA DRAWN AT HIS RESIDENCE WERE SEIZED. 2. THESE ANNEXURES WERE EXAMINED AND IT WAS OBSERVED THAT AS PER ANNEX.A-4, FLAT NO.110 IN TH E EMPIRE ESTATE BUILDING, 15/47, CIVIL LINES, KANPUR WAS BOOKED IN THE NAME OF SH RI VIKAS CHOPRA AND PAYMENT OF RS.4,00,000/- IN CASH AND RS.2,50,000/- BY CHEQUE ON VARIOUS DATES I.E. ON 4.8.98 AND 13.8.98 IN RESPECT OF FLAT NO.110 WAS MADE AS ADVANCE. AS PER SCHEDULE OF PAYMENTS AS RECORDED IN ANNEX.A-3, PA YMENT OF RS.2,00,000/- IN JUNE, 1997, RS.1,50,00/- IN DEC., 1997, RS.1,50,000/- IN MARCH, 98 AND RS.1,50,000/- IN JUNE, 1998 WERE SCHEDULED TO BE MADE. THE STATEMENT OF SHRI VIKAS CHOP RA WAS RECORDED ON 26.7.2000 WHEREIN HE HAS ADMITTE D PAYING RS.5,00,000/- TILL OCT., 1999 BY CHEQUE. HE HAD ALSO AGREED TO HAVE PAID RS.2,50,000/- BY CHEQUE TO THE BUILDER AS RECORDED IN ANNEXURE A-4. HOWEVER, HE DID NOT AGREE TO THE CASH PAYMENT. IT WAS FURTHER OBSERVED THAT SHRI VIKAS CHOPRA CANCELLED THE DEAL AND RECEIVED BACK THE CHEQUE AMOUNT. LATER ON THIS FLAT WAS PURCHASED BY THE ASSESSEE SHRI FARHAT HUSSAIN AND THE SA LE DEED WAS REGISTERED ON 28.11.2001 I.E. DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 02-03. 3. ITS A COMMON PRACTICE IN THE PROPERTY TRANSACTIONS TO HAVE PART PAYMENT IN CHEQUE AND PART PAYMENT IN CASH [THE CASH PAYMENT IS ALWAYS NOT DISCLOSE D]. HOWEVER, WHEN THE CHEQUE :-3-: PAYMENTS ON A PIECE OF PAPER HA VE BEEN ADMITTED THEN THERE IS NO REASON THAT THE CASH PAYMENTS WERE NOT MADE. FROM THE ABOVE, IT IS CLEAR THAT SHRI VIKAS CHOPRA HAS MADE PAYMENTS OF RS.9,00,000/- [RS.5,00,000/- BY CHEQUE AND RS.4,00,000/- BY CASH] TILL OCTOBER, 1999. THE A SSESSEE SHRI FARHAT HUSSAIN HAS STATED TO HAVE PURCHASED THIS FLAT ONLY FOR RS.5,89,694/-. A FLAT WHICH WAS COSTING RS.9,00,000/- IN THE YEAR 1998 CANNOT BE SOLD FOR A CONSIDERATION AS LOW AS RS .5,89,694/- AS DECLARED BY THE ASSESSEE. THE ONLY LOGICAL CONCLU SION IS THAT TH E FLAT HAS BEEN SOLD FOR A CONSIDERATION OF AT LE AST RS.9,00,000/- AND THERE WAS AN ELEMENT OF CASH TR ANSACTION AS WELL . THE AMOUNT PAID BY SHRI VIKAS CHOPRA WAS ONLY AN ADVANCE AND EVEN THAT WAS TO THE TUNE OF RS.5,00,000/-. EVEN IF IT IS TAKEN AS BENCHMARK, THE ASSESSEE MUST HAVE PAID AT LEAST THE SAME AMOUNT IN CASH AS SHRI VIKAS CHOPRA HAS PAID I.E. RS.4,00,000/- OUT OF UNDISCLOSED SOURCES, WHICH WAS THE INCOME OF THE ASSE SSEE DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YE AR 2002-03, WHICH HAS ESCAPED ASSESSMENT. ACCORDINGLY, PR OCEEDINGS UNDER SECTION 147 ARE BEING INITIATED AND NOTICE UNDER SECTION 148 OF THE ACT IS BEING ISSUED. 4. THE LD. COUNSEL FOR THE ASSESSE E, SHRI PRADEEP MEHROTRA ASSAILED THE DECISION OF LD. CIT (A) BY STATING THAT THE LD. CIT (A) ERRED IN NOT APPRECIATING THE CONTENTIONS RA ISED BEFORE HIM IN RESPECT TO THE VERY LEGALITY OF REOPENING OF THE ORIGINAL ASSESSMENT WHICH WAS CARRIED OUT UNDER SECTION 143 (1) OF THE ACT. ACCORDING TO HI M, THE BASIS FOR REOPENING IS EMANATING FROM THIRD PART Y TRANSACTION. THUS, ACCORDING TO THE LD. AR, THE AFORESAID LEGAL GROUNDS RAISED BEFORE TH E LD. CIT (A) HAS NOT BEEN DEALT WITH IN ACCORDANCE WITH LAW A ND WELL SETTLED PRINCIPLES OF LAW, THUS VITIATING THE IMPUGNED ORDE R. IN THE LIGHT OF THE AFORESAID SUBMISSION, THE LD. AR PR AYED THAT THE REOPENI NG OF THE ASSESSMENT IS :-4-: LEGALLY IMPERMISSIBLE AND, THEREFORE, THE AO LACKS JURISDICTION TO REASSESS THE ASSESSEE. 5. THE LD. D.R. PLACED RELIANCE UP ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE HEARD BOTH THE PARTIE S AND PERUSED THE RECORD. WE TAKE NOTE THAT THE RETU RN OF INCOME REFLECTING RS.1,14,713/- WAS FILED BY THE ASSESSEE ON 22.10.2002 AND THE SAME WAS PROCESSED ON 14.2.2003. SO WE TAKE IT AS THAT INTIMATION UNDER SECTION 143(1) OF THE ACT WAS GIVEN TO THE ASSESSEE. WE FURTHE R TAKE NOTE THAT ON 18.9.2000 THE ASSESSEE MADE FIRST PAYMENT OF RS.1 LAKH BY CHEQUE AND ON 27.11.2001 MADE THE BALANCE PAYMENT OF RS .4,89,694/- BY CHEQUE AND ON 28.11.2001 THE SALE DEED WAS EX ECUTED. ON 25.4.2007 THE PROCEEDINGS INITIATED UNDER SECT ION 158BD OF THE ACT WAS DROPPED AGAINST THE ASSESSEE. ON 13.7.2007 NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO THE ASSESSEE AND ON 16.8.2007 THE ASSESSEE REQUESTED FOR THE REASONS RECORDED TO REOPEN THE ASSESSMENT. ON 8.12.2008 THE REASONS WERE INTIMATED AFTER MORE TH AN ONE YEAR & FOUR MONTHS AND THE OBJECTION TO REOPEN WAS DISPOSED OF BY ORDER DATED 26.12.2008 AND RE- ASSESSMENT WAS COMP LETED ON 31.12.2008 BY COMPUTING THE TOTAL INCOME AS RS.5,14,730/- IN PLACE OF ASSESSES RETURN SHOWING RS.1,14,730/-. THE ASSE SSING OFFICER ADDED RS.4 LAKHS AS UNDISCLOSED INVESTMENT FOR PURCHASE OF FLAT. THE CIT(A) REPELLED THE CHALLENGE AGAINST REOPENING. NOW THE ASSESSEE IS CHALLENGING BEFORE US THE ACTION OF THE AO TO REOPEN ASSESSMENT IN VOKING SECTION 147/148 OF THE ACT. 7. BEFORE WE ADVERT TO THE FACTS IN THIS CASE, LET US LOOK INTO THE WELL SETTLED PRINCIPLES REGARDING REOPEN ING U/S 148/147 OF THE ACT. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECORDED FOR REOPENING THE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDED TO THE REASONS SO RECORDED , NOR ANYTHING CAN BE DELETED FROM :-5-: THE REASONS SO RECORDED. THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADK AR [(2004) 268 ITR 332], HAS, INTER ALIA, OBSERVED THAT '.IT IS NEED LESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DR AWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE AO TO DISC LOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION A ND THE EVIDENCE.'. THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. 8. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARI LY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REAS ONS MUST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AN D NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE ASSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE SOMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEME NT OF INCOME FROM ASSESSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSE SSING OFFICER CAN FO RM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMEN T. MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHIC H, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING ASSESSMENT, CANN OT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMEN T. IT IS ALSO :-6-: IMPORTANT TO BEAR IN MIND THE SUBT LE BUT IMPORTANT DI STINCTION BETWEEN FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMENT. THE LATTER CA TEGORY 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 SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECO RDED AND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPE CT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE OBSERVATIONS MADE BY HONBLE SUPR EME COURT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 ITR 437] THAT, THE REASONS FOR THE FORMATION OF THE BELIE F MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MU ST BE A DIRECT NE XUS OR LIVE LINK BETWEEN THE 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 BE CAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS. IT IS NO DO UBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE PO INT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOP ENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DI STANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELI EF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. 9. IT IS NECESSARY TO EXAMINE WH ETHER THERE WAS ANY REASON TO BELIEVE TO HAVE HAD SUCH AN EXERCISE. THE TERM REASON TO BELIEVE :-7-: CANNOT BE CONSIDERED OR EVALUATED IN A WATER TIGHT COMPARTMENT AND SCOPE AND APPLICABILITY MA Y VARY FROM CASE TO CASE, DEPENDING UPON THE FACTS AND CIRCUMSTANCES. THE PO WER UNDER SECTIONS 147 / 148 COMES INTO EXISTENCE IF HE HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. FORMATION OF REASON TO BELIEVE THAT INCOME ESCAPED ASSESSMENT HAS TO BE THAT OF A PR UDENT PERSON. THE REASONS FOR SUCH BELIEF HAVE TO BE RECORDED IN WRITI NG ON THE BASIS OF MATERIAL IN THE POSSESSION OF AO. WHILE THE WORDS R EASON TO BELIEVE ARE WIDE IN THEIR IMPORT, IT CANNOT INCLUDE A MERE SUSPIC ION OR IPSE DIXIT OF THE AO. THE BELIEF OF THE AO SHOULD LEAD HIM TO FORM AN HONEST AND REASONABLE OPINION BASED ON REASONABLE GROUND S. (ITO VS. LAKHMANI MEWAL DAS 103 ITR 437 AT 448 (SC) AND NAVINCHA NDRA MOHANLAL PARIK VS. VS. WTO 124 ITR 68). THE REASONABILITY OF THE GROUNDS WHICH LED TO THE FORMATION OF BELIEF WARRANTING REOPENIN G IS TESTED FROM THE POINT OF VIEW WHETHER OR NOT THEY ARE GERMANE TO THE FORMATION OF BELIEF THAT INCOME ESCAPED ASSESSMENT AND AFTER 4 YEAR S, AN ADDITIONAL SAFEGUARD OR CONDITION THAT ESCAPEMENT OF INCOME WAS DUE TO FAULT OF THE ASSESSEE, IN NOT FULLY AND TRULY DISC LOSING THE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT. THE HONBL E SUPREME COURT ENDO RSING THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. KELVINATOR OF INDIA LTD. 256 ITR 1 HELD IN ITS ORDER REPORTED IN 320 ITR 561. IN OUR VIEW, ALL THAT ONE HAS TO EXAMINE IS THAT WHETHER THERE WAS SOME MATERIAL WHICH, GAVE RISE TO PRIMA FACIE VIEW IF THAT INCOME HAS ESCAPED ASSESSMENT AND THE BELIEF WAS FORMED IN GOOD FAITH OR WAS IT MERE PRETENCE FOR INITIATING ACTION U/S 147/148 OF THE ACT. 10. NOW WE HAVE TO EXAMINE WHETHE R THE ASSESSING OFFICER WAS IN POSSESSION OF ANY MATERIAL TO HAVE REASON TO BELIEVE THAT THERE WAS AN ESCAPEMENT OF INCOME. THE CASE OF THE ASSESSING OFFICER IS THAT WHILE CONDUCTING SEARCH ON 18.11.1998 AT TH E RESIDENTIAL PREM ISES OF SHRI :-8-: TARIQ JAMAL, THE DEPARTMENT STUMBLED ACROSS A DIARY WHICH WAS MARKED AS ANNEXURE A-4 AND A BUNCH OF LO OSE PAPERS WHICH WAS MARKED AS ANNEXURE A-3 IN THE PANCHNAMA DR AWN FROM THE SEARCHED PERSONS RESIDENCE. WHILE EXAMIN ING ANNEXURE A-3, IT WAS OBSERVED THAT FLAT NO.110 IN EMPIRE ESTATE BUILDING, 15/47, CIVIL LINE S, KANPUR (HEREINAFTER REFERRED IN SHORT FLAT NO.110) WA S BOOKED IN THE NAME OF VIKAS CHROPRA AND THE SAID VIKASH CHOPRA HAS MADE PAYMENT OF RS.4 LAKHS IN CASH AND RS.2.50 LAKHS BY CHEQUE ON VARIOUS DATES I.E. ON 4.8.1998 AND 13.8.1998 AS ADVANCE. FR OM A PERUSAL OF ANNEXURE A-3 (LOOSE PAPERS), IT WAS DISCOVERED THAT THE SCHEDULE OF PAYMENTS WAS GIVEN I.E. PAYMENT OF RS.2 LAKHKS IN JUNE, 1997; RS.1.50 LAKHS IN DECEMBER, 1997; RS.1.50 LAKHS IN MARCH, 1998 AND RS.1.50 LAKH KS IN JUNE, 1998. THE ASSESSING OFFICER NOTES THAT THE STATEMENT OF VIKASH CHOPRA WAS RECORDED ON 26.7.2000 WHEREIN HE HAS ADMITTED PAYMENT OF RS .5 LAKHS TILL OCTOBER, 1999 BY CHEQUE AND ALSO AGREED THAT HE HAS PAID RS.2.50 LAKHS BY CHEQUE TO THE BUILDER AS RECORDED IN ANNEXURE A-4. HOWEVER, HE DID NOT AGREE TO THE CASH PAYMENT OF RS.4 LAKHS AS NOTED IN THE DIARY. THE ASSESSING OFFICER NOTES TH AT THE SAID VIKASH CHOP RA CANCELLED THE DEAL AND HE GOT REFUND FROM TH E BUILDER. LATER ON THE FLAT WAS PURCHASED BY SHRI FARHAT HUSSAIN, WHO IS THE ASSESSEE BEFORE US. 11. THE ASSESSEE HAD BOOKED FLAT NO.110 ON 18.9.2000 AND GAVE A CHEQUE OF RS.1 LAKH FOR IT AND ON 28.11.2001 A REGISTERED SALE DEED WAS MADE AND A PAYMENT OF RS.4, 89,694/- WAS MADE BY CHEQUE AND ALSO PAID RS.66,500/- AS REGISTRATION FEE. THUS, TH E ASSESSEE PAID A TOTAL AMOUNT OF RS.6,56,194/- FOR THE SAID FLAT. 12. THE ASSESSING OFFICER IN THE REASON S RECORDED STATES THAT IT IS A COMMON PRACTICE IN THE PR OPERTY TRANSACTION TO MAKE PART PAYMENT IN CHEQUE AND PART PAYMENT IN CASH AND THEN HE GOES ON TO SAY THAT WHEN VIKASH CHOPRA HAS ADMITTED TO HAVE GIVEN CHEQUE OF RS.2.50 LAKHS AS :-9-: PER NOTING IN THE DIARY, THEN HIS NON-ADMITTING TH E FACT OF GIVING RS.4 LAKHS IN CASH CANNOT BE BELIEVED. IN THE WORDS OF THE ASSESSING OFFICER WHEN THE PAYMENT BY CHEQUE NOTED ON THE PIECE OF PAPER HAS BEEN FOUND CORRECT AS HE HAS ADMITTED TO TH AT FACT, THEN THERE IS NO REASON THAT THE CASH PAYMENTS NOTED ON TH E VERY SAME PAPER IS NOT CORRECT ONLY BECAUSE IT IS DENIED BY VIKASH CHOPRA. SO ACCO RDING TO THE A.O, FROM THE ABOVE IT IS CLEAR THAT VIKA SH CHOPRA HAS MADE PAYMENT OF RS.9 LAKHS (RS.5 LAKHS BY CHEQUE AND RS.4 LAKHS BY CASH TILL OCTOBER, 1999). 13. THEN THE ASSESSING O FFICER GOES ON TO SA Y THAT THE ASSESSEE HAS PURCHASED FLAT FOR RS.5,89,694/- IN THE YEAR 2001 WHEREAS THE FLAT WAS COSTING RS.9 LAKHS IN THE YEAR 1998. SO THE ASSE SSING OFFICER WAS OF THE OPINION THAT THE FLAT COUL D NOT HAVE BEEN SOLD FOR LOWER CONSIDERATION AS DECLARED BY THE A SSESSEE. SO, THE ASSESSING OFFICER SAYS THAT IT IS ONLY A LOGICAL CONCLU SION THAT THE FLAT HAS BEEN SOLD FOR CONSIDERATION OF ATLEAST RS.9 LAKHS AND THERE WAS AN ELEMENT OF CASH TRANSACTION AND HE MADE REFERENC E TO ANNEXURE A-4 WHEREIN THE TRANSACTION OF VIKASH CHOPRA IS NOTE D AS TO VIKAS CHOP RA HAS PAID RS.4 LAKHS IN CASH. SO RELYING ON ANNEXURE A-4, THE ASSESSING OFFICER STATES THAT HE HAS REASON TO BELIEVE THAT THE ASSESSEE HAS MADE PAYMENT OF RS.4 LAKHS OUT OF UNDISCLOSED SOUR CE, WHICH WAS THE INCOME OF THE ASSESSEE DURING THE ASSESSMENT YE AR 2002-03, WHICH HAS ESCAPED ASSESSMENT. SO HE INVOKED THE PROVIS IONS OF SECTION 147 OF THE ACT AND INITIATED REASSESSMENT PROCEEDINGS BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT. 14. FROM THE AFORESAID REASONING GIVE N BY THE ASSESSING OFFICER, IT IS CLEAR THAT THE ASSE SSING OFFICER RELIES ON ANNEXURE A-4 (DIARY UNEARTHED FROM THE HOUSE OF SH RI TARIQ JAMAL ON 18.11.1998). ADMITTEDLY THE NAME OF THE ASSESSEE NEVER CROPPED UP FROM THE SAID DIARY. ONLY CONNECTION OF THE ASSE SSEE WITH THE BUSINESS RUN BY SHRI :-10-: TARIQ JAMAL WAS THAT ON 18.9.2000 HE B OOKED A FLAT BY GIVING A CHEQUE OF RS.1 LAKH AND ON 28.11.2001 GOT IT REGISTERED IN HIS NAME AND THE BALANCE AMOUNT OF RS.4,89,694/- WA S PAID THROUGH CHEQUE AND AFTER REGISTRATION, THE TOTAL COMES TO RS.6,56,194/-. THE ANNEXURE A-4, WHICH THE ASSESSING OFFICER RELIES, ONLY REFERS TO VIKASH CHOPRA WHO HAS BOOKED FLAT NO.110 AND HA S SUPPOSED TO HAVE AGR EED TO PAY AN AMOUNT OF RS.6.50 LAKHS AS CONSIDERATION AS PER SCHEDULE OF PAYMENT REFERRED IN THE REASONS RECORDED. THE ASSESSING OFFICER NOTICES THAT VIKASH CHOPRA HAS STATED ON 26.7.2000 THAT HE HAS PAID RS.5 LAKHS TILL OCTOBER, 1999 BY CHEQUE. HOWEVER, HE DID NOT AD MIT THAT RS.4 LAKHS WAS MADE IN CASH AS NOTED BY SHRI TARIQ JAMAL IN THE DIARY REFLECTING CASH PAYMENT FROM VIKASH CHOPRA. THEREAFTER THE ASSESSIN G OFFICER NOTICES THAT VIKASH CHOPRA HAS CANCE LLED THE DEAL AND THE AMOUNT WAS REFUNDED TO HIM BY CHEQUE. THEREAFTER THE AS SESSEE PURCHASED THE PROPERTY FOR RS.6,56,194/- (INCLUDING FE E FOR REGISTRATION). NOW BASED ON THE NOTING BY SELLER IN THE SEIZED DIARY ABOUT THE CASH TRANSA CTION OF RS.4 LAKHS BY EARLIER BUYER, THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT THE ASSESSEE HAS ALSO PARTED WITH RS.4 LAKHS FROM HIS UNDISCLOSED INCOME AND THUS COMES TO THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT. 15. IN SUM AND SUBSTANCE, THE AS SESSING OFFICER RELIES ON ANNEXURE A-4 WHICH DOES NOT PERTAIN IN ANY MANNER WITH THAT OF THE ASSESSEE. THE ASSESSEES NAME DOES NOT APPEAR IN ANNEXURE A-4 OR A-3 OR ANY SEIZED MATERIAL FROM SHRI TARIQ JAMAL, WHOSE HOUSE WAS SEARCHED ON 18.11.1998. THE ASSESS EE HAS BOOKED FLAT AFTE R TWO YEARS OF SEARCH AND BOUGHT THE FLAT. BASED ON THIRD PARTY TRANSACTION AND THAT TOO WITH OUT PROVING AS TO WHETHER SHRI VIKASH CHOPRA HAS IN FACT PAID ANY CASH AS NOTED BY SHRI TARIQ JAMAL IN THE DIARY, CANNOT BE THE BASIS ON WHICH A REASONABLE AND PRUDENT PERSON COULD HAVE REASON TO BELIEVE THAT CASH :-11-: PAYMENT HAS BEEN MADE AS SUGGESTED BY THE ASSESSING OFFICER. THE INFORMATION GOT DURING THE SEARCH, CAN BEST RAISE A SUSPICION, BASED ON THAT INFORMATION THE ASSESSING OFFICE R HAS TO ENQUIRE/INV ESTIGATE AND IF HE GETS SOME MATERIAL IN HIS HANDS, THEN IT CAN BE THE BASIS FOR REASON TO BELIEVE. THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND NOT REASON TO SUSPECT WHICH THE LEGISLATURE HAS PROVIDED FOR IN THE STATUTE FOR AO TO VALIDLY RE-OPEN U/S 148/147 OF THE ACT . IT HAS NOT BEEN THE CASE OF THE ASSESSING OFFICER THAT THERE IS SOME UNDERSTANDING BETWEEN THE ASSE SSEE AND SHRI VIKAS CHOPRA AND THE ASSESSEE HAS PAID ANY AMOUNT TO SHRI VIKASH CHOPRA. THE GENERAL OBSERVATION OF SHRI TARIQ JAMAL THAT 25 TO 30% OF THE MONEY WAS ACCEPTED IN CASH FROM THE BUYERS CAN AT BEST BE CALLED A GENERAL OBSERVATION. IF THAT OBSERVATION CA N BE THE BASIS FOR REOPENING, THEN EVERY FLAT OWNER IN THIS COUNTRYS ASSESSMENT HAS TO BE REOPENED. WE ALSO DO NOT FIND THAT TH E ASSESSING OFFICER HAS MA DE ANY ATTEMPT TO FIND OUT WHAT WAS THE MARKET VALUE OF FL AT NO.110 AT THE RELEVANT POINT OF TIME. IT IS AN ADMITTED POSITION THAT THE FLAT HAS BEEN PURCHASED MUCH AFTER THE DATE OF SEARCH. THEREFORE, IT WAS NECESSARY FOR THE ASSESSING OFFICER TO GIVE ACTUAL MARKET VALUE OF THE FLAT ON THE DATE OF BOOKING. IN THE ABSENCE OF SUCH EVID ENCE ON RECORD, THE REOP ENING ON THE BASIS OF CERTAIN NOTING IN THE DIARY OF SHRI TARIQ JAMAL CAN BE SAID TO BE ONLY BASED ON SURMISES AND CONJECTURES, WHICH CAN NEVER TAKE THE PLACE OF EVIDENCE. THEREFORE, WE ARE OF TH E VIEW THAT THE AL LEGED REASON TO BELIEVE IS NOT EMANATING FROM RELEVA NT FACTS AND SO IT CANNOT BE THE BASIS FOR THE FORMATION OF BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF IN DIA LTD. (SUPRA) WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT WHAT NEEDS TO BE EXAMINED IS THAT WHETHER THERE WAS SOME MATERIAL WHICH GAVE RISE TO PRIMA FACIE VIEW IF THAT INCOME HAS ESCAPED ASSESSMENT A ND THE BELIEF WAS FORMED IN GOOD :-12-: FAITH OR WAS IT MERE PRETENCE FOR INITIATING AN ACTION UNDER SECTION 147/148 OF THE ACT. HERE WE FIND THAT REASON TO BELIEVE HAS BEEN MADE ON AN IRRELEVANT FACT WHICH IS THAT OF A PURPORTED THIRD PARTY TRANSACTION, WHICH ALSO HAS NOT BEEN PROVED TO BE TRUE, SO THE REASON TO BELIEVE IS VITIATED AND CANNOT SUSTAIN IN THE EYES OF LAW. THEREFORE, IN THE ABSENCE OF ANY RELEVANT MATERIAL, ON THE BASIS OF WH ICH THE ASSESSING OFFICER SOUGHT TO REOPEN THE ASSESS MENT, CANNOT FORM NEXUS TO FORM A BELIEF THAT THE ASSESSEE HAS PARTED AW AY RS.4 LAKHS IN CASH FROM HIS UNDISCLOSED INCOME. THEREFORE, RELY ING ON THE CASE LAWS CITED ABOVE, WE QUASH THE PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT FOR REOPENING THE ASSESSMENT. 16. SINCE WE HAVE QUASHED THE AS SESSMENT INITIATED UNDER SECTION 147/148 OF THE ACT ON THE LEGAL ISSUE RAISED BY THE ASSE SSEE, WE ARE NOT ADJUDICATING THE OTHER GROUNDS RAISED BY THE ASSESSEE ON THE MERIT OF THE CASE, AS IT WILL BE ONLY AN AC ADEMIC EXERCISE, FOR WHICH WE ARE NOT INCLINED. 17. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN TH E OPEN COURT ON 8.6.2016. SD/- SD/- [P. K. BANSAL] [ABY T VARKEY] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED:8 TH JUNE, 2016 JJ:2904 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR