ITO, New Delhi V. M/s. JRD Stock Brokers (P) Ltd., New Delhi

ITA 252/DEL/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6902 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-08-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 17-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R S SINGHVI SH SATYAJEET GOEL
• Keywords: Unexplained cash credit; Gift; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 234B; 147; 68; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SH. G.D. AGRAWAL, PRESIDENT AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.252/DEL/2012 (ASSESSMENT YEAR: 2003-04) ITO WARD-4(2), ROOM NO. 413A, C.R.BUILDING, I.P.ESTATE NEW DELHI VS. JRD STOCK BROKERS (P) LTD. 4852/24, FIRST FLOOR, ANSARI ROAD, DARYA GANJ NEW DELHI PAN : AABCJ0701D PAN : (APPELLANT) (RESPONDENT) ITA NO.1002/DEL/2012 (ASSESSMENT YEAR: 2003-04) JRD STOCK BROKERS (P) LTD. 4852/24, FIRST FLOOR, ANSARI ROAD, DARYA GANJ NEW DELHI PAN : AABCJ0701D VS. ITO WARD-4(2), ROOM NO. 413A, C.R.BUILDING, I.P.ESTATE NEW DELHI PAN : (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. R.S.SINGHVI, SH. SATYAJEET GOEL, CA REVENUE BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 25.04.2018 DATE OF PRONOUNCEMENT : 23.07.2018 2 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) O R D E R PER BENCH: ITA NO. 252/DEL/2012 IS THE DEPARTMENTS APPEAL FILED AGAI NST ORDER DATED 23.11.2011 PASSED BY THE LD. CIT (APPEA LS) VII, NEW DELHI FOR ASSESSMENT YEAR 2003-04 WHEREIN THE LD. CI T (A) HAS DELETED AN ADDITION OF RS. 1,62,80,585/- MADE BY TH E ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). ITA NO. 1002/DEL/2012 IS THE ASSESSE ES APPEAL FOR THE SAME YEAR AND CHALLENGES THE ACTION OF THE LD. CIT (A) IN HOLDING THAT THE RE-ASSESSMENT PROCEEDINGS INITIATED FOR TH E YEAR U/S 147/148 OF THE ACT WERE VALID. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L ASSESSMENT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-0 4 WAS COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 29.03.2006 A T A TOTAL LOSS OF RS. 1,29,550/-AS AGAINST THE DECLARED RETURNED LOSS OF RS. 1,53,053/-. SUBSEQUENTLY, INFORMATION WAS RECEIVED F ROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THA T THE ASSESSEE COMPANY HAD ALLEGEDLY RECEIVED ACCOMMODATION ENTRIE S. THE AO RECORDED REASON TO BELIEVE THAT ASSESSEES INCOME T O THE TUNE OF RS. 82,90,360/- CHARGEABLE TO TAX HAD ESCAPED ASSESSMEN T DUE TO THE 3 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE NO TICE OF RE- ASSESSMENT U/S 148 WAS ISSUED ON 30.03.2010. DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE NATURE AND SOURCES OF CREDIT ENTRIES IN THE ASSESSE ES BANK ACCOUNT WITH STATE BANK OF PATIALA (A/C. NO. 50086), DARIYA GANJ, NEW DELHI. AS PER THE AO, THE ASSESSEE WAS NOT ABLE TO FULLY EX PLAIN THE NATURE AND SOURCES OF THE CREDIT ENTRIES ALONG WITH SUPPORT ING EVIDENCES. THE AO ADDED THE AMOUNT OF CREDIT ENTRIES AT RS. 1, 62,80,585/- TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED CREDIT U/ S 68 OF THE ACT AND COMPLETED THE ASSESSMENT AT RS. 1,61,51,035/-. 2.1 AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO T HE LD. FIRST APPELLATE AUTHORITY AND CHALLENGED THE INITIATION O F RE-ASSESSMENT PROCEEDINGS. THE ASSESSEE ALSO CHALLENGED THE ADDIT ION ON MERITS. THE LD. CIT (A) DISMISSED THE ASSESSEES LEGAL CHAL LENGE BY HOLDING THAT THE RE-ASSESSMENT PROCEEDINGS WERE VALID. HOWE VER, THE LD. CIT (A) GIVE PARTIAL RELIEF TO THE ASSESSEE ON MERITS BY FOLLOWING HIS PREDECESSORS ORDER FOR ASSESSMENT YEAR 2002-03 AN D RESTRICTED THE ADDITION TO ONLY RS. 12,21,044/- BEING 7.5% OF RS. 1,62,80,585/- 4 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) BEING THE RATE OF COMMISSION ON THE IMPUGNED AMOUNT OF RS. 1,62,80,585/-. 2.2 NOW THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT AND ITS CHALLENGING THE ACTION OF LD. CIT (A) IN RESTRICTIN G THE ADDITION TO RS. 12,21,044/- WHEREAS THE ASSESSEE IS IN APPEAL CHALLE NGING THE SUSTENANCE OF ADDITION TO THE EXTENT OF RS. 12,21,0 44/- ON MERITS AND IS ALSO CHALLENGING THE UPHOLDING OF VALIDITY O F RE-ASSESSMENT PROCEEDINGS. THE RESPECTIVE GROUNDS RAISED BY BOTH THE PARTIES ARE AS UNDER: ITA 252/DEL/2012 (DEPARTMENTS APPEAL): 1. THE ORDER OF THE LEARNED CIT (APPEALS) IS ERRO NEOUS & CONTRARY TO FACTS & LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN DELETING ADDITION AMOUNTING TO RS. 1,62,80,585/- DESPITE THE FACT THAT THE ASSESSEE WA S NOT ABLE TO EXPLAIN THE NATURE AND SOURCE OF CASH DEPOS ITS AGGREGATING TO THE ABOVE AMOUNT IN ITS BANK ACCOUNT . 3. THE CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE ASSESSEE DID NOT DISCLOSE ITS BANK ACCOUNT MAINTAIN ED WITH STATE BANK OF PATIALA IN ITS BALANCE SHEET AND HAD NOT DISCLOSED THE SAME EVEN DURING THE COURSE OF ASSESS MENT PROCEEDINGS. 5 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) 4. THE CIT (A) WITHOUT ANY COGENT REASON DELETED TH E ADDITION ON ACCOUNT OF THE ABOVE AND INSTEAD HELD THAT THE A SSESSEE HELD THAT THE ASSESSEE HAD COMMISSION/BROKERAGE OF 7.5% OF THE TOTAL CASH DEPOSIT APPEARING IN IT UNDISCLOSED BANK STATEMENT. ITA 1002/DEL/2012 (ASSESSEES APPEAL): L(I). THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION U/S. 147 EVE N THOUGH THE ASSESSING OFFICER HAS NO JURISDICTION IN ACCORDANCE WITH RELEVANT PROVISIONS. (II) THAT THE FINDING AND OBSERVATION OF THE ASSESSING O FFICER THAT THE PROVISO TO SEC. 147 IS NOT APPLICABLE IS WITHOU T APPRECIATION OF FACTS AS THERE IS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING RELEVANT PARTICULARS OF INCO ME SUPPORTED BY AUDITED ACCOUNTS AND AS SUCH ACTION OF THE ASSES SING OFFICER IS NOT IN CONFIRMITY WITH PROVISO TO SEC. 147 AND W HOLE BASIS OF REASSESSMENT IS ILLEGAL, INVALID AND WITHOUT JURISD ICTION. (III) THAT THERE HAS BEEN NO PROPER AND VALID SERVICE OF NOTICE AS REQUIRED UNDER THE LAW AND INITIATION OF PROCEEDING S BEING BARRED BY LIMITATION, ASSESSING OFFICER HAS NOT LEG AL BASIS TO ASSUME JURISDICTION. 2(I) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CAS E, THE CIT(A) IS NOT JUSTIFIED IN CONFIRMING 6 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) ACTION OF THE ASSESSING OFFICER U/S. 69A/68 OF THE INCOME TAX ACT, 1961 AND IN CONFIRMING ADDITION TO THE EXTENT OF RS. 12,21,044/- BEING ON ACCOUNT OF COMMISSION @ 7.5% I N RESPECT OF ENTRIES IN THE BANK ACCOUNT OF THE ASSESSEE TO T HE EXTENT OF RS. 1,62,80,585/-. (II) THAT THERE IS NO FACTUAL OR LEGAL BASIS FOR ANY ADD ITION AND SAME IS NOT SUSTAINABLE UNDER THE LAW. (III) THAT THERE IS NO FACTUAL OR LEGAL BASIS FOR CONSIDE RING CREDIT ENTRIES IN THE BANK ACCOUNT AT RS. 1,62,80,585/-. (IV) THAT IN THE ALTERNATIVE, ESTIMATION OF COMMISSION @ 7.5% IS HIGHLY ARBITRARY AND EXCESSIVE. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDERS OF THE LOWER AUTHORITIES REGARDING CHARGE OF INTEREST U/S. 234B ARE WITHOUT ANY LEGAL BASIS AS THIS IS A CASE OF RE-ASS ESSMENT U/S. 147. 3. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIVE A PPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT ASSESSEES AP PEAL SHOULD BE HEARD FIRST AS IT CHALLENGES THE VERY VALIDITY OF T HE RE-ASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER AND FURTHER THAT IF THE LEGAL GROUND BEING RAISED BY THE ASSESSEE IS ALLOWED IN ASSESSEES FAVOUR THEN THE ARGUMENTS ON MERITS OF THE ADDITION WILL NOT BE REQUIRED. 7 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) 4. THE LD. SR. DEPARTMENTAL REPRESENTATIVE HAD NO O BJECTION TO THIS REQUEST OF THE LD. AUTHORISED REPRESENTATIVE. 5. THE LD. AUTHORISED REPRESENTATIVE, ARGUING ON TH E VALIDITY OF THE RE-ASSESSMENT PROCEEDINGS, DREW OUR ATTENTION TO THE COPY OF REASONS RECORDED AND PLACED AT PAGE 3 OF THE PAPER BOOK. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT A PERUSAL OF THE REASONS WOULD SHOW THAT THERE IS NO DISCUSSION BY THE AO AS T O WHETHER HE HAS EXAMINED THE ORIGINAL RETURN AND OTHER MATERIAL ON RECORD WHILE HE WAS ISSUING NOTICE U/S 148 OF THE ACT. THE LD. AU THORISED REPRESENTATIVE HIGHLIGHTED THE FACT THAT THE AO HAS ONLY RELIED ON THE INFORMATION RECEIVED BY THE INVESTIGATION WING OF THE DEPARTMENT AND FURTHER THAT THE AO HAD FAILED TO SP ECIFY IN THE REASONS RECORDED AS TO WHAT MATERIAL FACTS WERE NOT DECLARED BY THE ASSESSEE WHICH LED TO INCOME ESCAPING ASSESSMENT. TH E LD. AUTHORISED REPRESENTATIVE EMPHASIZED THAT THE REASO NS WERE RECORDED WITHOUT APPLICATION OF MIND AND WITHOUT BRIN GING ON RECORD OR EXAMINING ANY ADVERSE MATERIAL. IT WAS SUB MITTED THAT INFORMATION RECEIVED FROM THE INVESTIGATION WING WAS SIMPLY RELIED UPON AND COMPLETED ASSESSMENT OF THE ASSESSEE WAS RE -OPENED WHICH WAS ILLEGAL AND NOT TENABLE IN LAW. THE LD. AUTH ORISED 8 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) REPRESENTATIVE ALSO SUBMITTED THAT THE CASE OF THE ASSESSEE WAS RE- OPENED AFTER FOUR YEARS FROM THE END OF THE RELEVAN T ASSESSMENT YEAR AND, THEREFORE, IT WAS INCUMBENT ON THE PART OF THE AO TO DEMONSTRATE THAT ANY INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT BY REASON OF FAILURE ON PART OF THE ASSE SSEE. IT WAS SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESS MENT PROCEEDINGS, WHICH CULMINATED IN THE ASSESSMENT ORDE R BEING PASSED U/S 143(3) OF THE ACT, THE AO HAD EXAMINED T HE BOOKS OF ACCOUNTS OF THE ASSESSEE ALONG WITH SUPPORTING VOUC HERS. THE LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT THE I MPUGNED BANK ACCOUNT OF STATE BANK OF PATIALA WAS CLOSED ON 24.08 .2002 I.E. BEFORE THE CLOSE OF ASSESSMENT YEAR ON 31.03.2003 A ND, THEREFORE, ITS CLOSING BALANCE DID NOT APPEAR IN THE BALANCE S HEET. THE LD. AUTHORISED REPRESENTATIVE RE-EMPHASIZED THAT THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIA L FACT DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THE LD. AUTHORISED REPRESENTATIVE ALSO PLACED RELIANCE ON A NUMBER OF JUDICIAL PRECEDENTS TO SUPPORT THE ASSESSEES CASE THAT THE ASSUMPTION OF JURISDICTION FOR RE-ASSESSMENT AFTER FOUR YEARS WAS NOT LEGALLY SUSTAINABLE. 9 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) 6. IN RESPONSE, THE LD. SR. DEPARTMENTAL REPRESENTA TIVE PLACED RELIANCE ON THE FINDINGS OF CONCURRENT FINDINGS OF THE AO AND THE LD. CIT (A) AND VEHEMENTLY ARGUED THAT THIS WAS A F IT CASE FOR INITIATION OF RE-ASSESSMENT PROCEEDINGS AS THERE WE RE HUGE DEPOSITS IN THE ASSESSEES IMPUGNED BANK ACCOUNT WITH STATE B ANK OF PATIALA WHICH THE ASSESSEE HAD FAILED TO SUBSTANTIATE AND FU LLY EXPLAIN EVEN DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS. THE LD. SR. DR FURTHER SUBMITTED THAT IT WAS VERY MUCH EVIDENT THAT THERE WAS A LAPSE ON THE PART OF THE ASSESSEE TO FULLY DISCLOSE ALL THE MATERIAL FACTS IN RESPECT OF THE IMPUGNED BANK ACCOUNT AND, THEREFORE, THE AO HAD ADEQUATE REASON TO INITIATE THE RE-ASSESSMEN T PROCEEDINGS. THE LD. SR. DR SUBMITTED THAT THE ASSESSEES CHALLE NGE TO THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS DESERVED TO B E DISMISSED AND FURTHER SUBMITTED THAT THE ASSESSEE SHOULD ADVANCE ITS ARGUMENTS ON THE MERITS OF THE ADDITION. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. THE REASONS RECORDED BY THE ASSESSING OFFICER ON 18.03.2010 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ARE BEING REPRODUCED HEREIN UNDER FOR A READY REFER ENCE:- 10 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) REASONS RECORDED IN WRITING FOR REOPENING THE CASE U/S.148 M/S. JRD STOCK BROKERS PVT. LTD. 4852/24,1ST FLOOR, ANSARI ROAD, DARYA GANJ, N. DELH I A.Y. 2003-04 INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATIO N WING OF INCOME-TAX DEPARTMENT, NEW DELHI REGARDING BENEF ICIARIES AND OPERATORS OF ACCOMMODATION ENTRIES IN DELHI. IN THE SAID INFORMATION, IT HAS BEEN INTER ALIA REPORTED AS UNDER:- ENTRIES ARE BROADLY TAKEN FOR TWO PURPOSES 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC. IN THE FORM OF GIFTS, SHARE APPLICATION MONEY, LOANS ETC. 2. TO INFLATE EXPENSES IN THE TRADING AND PROFIT AND LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREBY PAY LESS TAXES. THE SPECIFIC INFORMATION PROVIDED BY THE INVESTIGAT ION WING OF INCOME-TAX DEPARTMENT, NEW DELHI IS ENCLOSED AS PER ANNEXURE. IN VIEW OF THE SPECIFIC INFORMATION RECEIVED AS ABO VE FROM INVESTIGATION WING OF INCOME-TAX DEPARTMENT, NEW DE LHI, I HAVE SUFFICIENT REASON TO BELIEVE THAT THE ASSESSEE COMP ANY M/S. JRD STOCK BROKERS PVT. LTD. HAS INDULGED IN THE ACTIVITY OF ACCOMMODATION ENTRIES AND THE TOTAL AMOUNT OF TRANS ACTION BY THE ASSESSEE COMPANY AMOUNTING TO RS . 82,90,360/- WHICH IS BOGUS 11 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) AND REPRESENTS THE UNDISCLOSED INCOME/INCOME FROM O THER SOURCES OF THE ASSESSEE COMPANY, WHICH HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE IN THE RETURN FILED. ACCORDINGLY, I HAVE REASON TO BELIEVE THAT ON ACCOU NT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THEREF ORE, THE INCOME OF RS.82,90,360/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2003-04. 7.1 ALONG WITH THE REASONS THERE IS ALSO ONE ANNEXUR E RUNNING IN 5 PAGES IN WHICH THE NAME OF THE ASSESSEE APPEARS AT PAGES 3 AND 5. HOWEVER, APART FROM THE AO MAKING A REFERENCE TO THE INFORMATION RECEIVED BY THE DEPARTMENT FROM THE INV ESTIGATION WING, THERE IS NO MENTION BY THE AO, AS TO HOW HE HA S ARRIVED AT A CONCLUSION THAT HE HAD REASON TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT IN THE CASE OF THE ASSESSEE. AFTER PERUS ING THE REASONS RECORDED, WE FIND THAT A MERE REFERENCE IS MADE TO THE INFORMATION RECEIVED FROM THE INVESTIGATION WING. THE AO HAS MEC HANICALLY ISSUED NOTICE U/S 148 OF THE INCOME TAX ACT 1961 ON THE BASIS OF INFORMATION RECEIVED BY HIM FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT. THEREFORE, WE ARE OF THE CONS IDERED VIEW THAT THE AO HAS NOT APPLIED HIS MIND SO AS TO REACH AN INDEPENDENT 12 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) CONCLUSION THAT HE HAD REASON TO BELIEVE THAT INCOM E HAD ESCAPED ASSESSMENT DURING THE YEAR UNDER CONSIDERATION. WE DRAW OUR SUPPORT FROM THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN ITA NO. 545/2015 DATED 8.10.2015 IN THE CASE OF PR. COM MISSIONER OF INCOME TAX -4 VS. G&G PHARMA INDIA LTD. IN WHICH THE HONBLE JURISDICTIONAL HIGH COURT HAS RECAPITULATED THE JUR ISDICTIONAL REQUIREMENT FOR REOPENING OF THE ASSESSMENT U/S 147 /148 OF THE ACT AS UNDER:- 9. THE COURT AT THE OUTSET PROPOSES TO RECAPITU LATE THE JURISDICTIONAL REQUIREMENT FOR REOPENING OF THE A SSESSMENT UNDER SECTION 147/148 OF THE ACT BY REFERRING TO TW O DECISIONS OF THE SUPREME COURT. IN CHHUGAMAL RAJPAL V. SP CHALIHA (1971) 79 ITR 603, THE SUPREME COURT WAS DEALING WI TH A CASE WHERE THE AO HAD RECEIVED CERTAIN COMMUNICATIONS FR OM THE COMMISSIONER OF INCOME TAX SHOWING THAT THE ALLEGED CREDITORS OF THE ASSESSEE WERE NAME-LENDERS AND THE TRANSACT IONS ARE BOGUS. THE AO CAME TO THE CONCLUSION THAT THERE WE RE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE SUPREME COURT DISAGREED AND OBSERVED THAT THE A O HAD NOT EVEN COME TO A PRIMA FACIE CONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. HE APPEARED TO HAVE HAD ONLY A VAGUE FELLING THAT THEY MAY BE 'BOGUS TRANSACTIONS'.' IT WAS FURTHER EXPLAINED BY THE SUPREME 13 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) COURT THAT: BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMI SSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR OR ALTERNATIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON THE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. UNLESS THE REQUIREMENTS OF CL. (A) OR CL. (B) OF S. 147 ARE SA TISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A NOTICE UNDER S. 148. THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFI ED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COUL D SATISFY THE REQUIREMENTS UNDER SECTION 147 AND THER EFORE COULD NOT HAVE ISSUED NOTICE UNDER SECTION 148. 10. IN ACIT V. DHARIYA CONSTRUCTION CO.(2010)328 ITR 515 THE SUPREME COURT IN A SHORT ORDER HELD AS UNDER: HAVING EXAMINED THE RECORD, WE FIND THAT IN THIS CASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DVO. OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER S. 147 OF THE IT ACT, 1961. THE AO HAS TO APPLY HIS MIND T O THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. 14 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVI L APPEAL. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. 11. THE ABOVE BASIC REQUIREMENT OF SECTIONS 147/14 8 HAS BEEN REITERATED IN NUMEROUS DECISIONS OF THE SUPREME COU RT AND THIS COURT. RECENTLY, THIS COURT RENDERED A DECISION DAT ED 22ND SEPTEMBER 2015 IN ITA NO. 356 OF 2013 (COMMISSIONER OF INCOME TAX II V. MULTIPLEX TRADING AND INDUSTRIAL CO. LTD.) WHERE THE ASSESSMENT WAS SOUGHT TO BE REOPENED BEYO ND THE PERIOD OF FOUR YEARS. THIS COURT CONSIDERED THE DEC ISION OF THE SUPREME COURT IN PHOOL CHAND BAJRANG LAL V. INCOME- TAX OFFICER (SUPRA) AS WELL AS THE DECISION OF THIS COURT IN M/ S HARYANA ACRYLIC MANUFACTURING CO. (P) LTD. V. CIT 308 ITR 3 8 (DEL). THE COURT NOTED THAT A MATERIAL CHANGE HAD BEEN BROUGHT ABOUT TO SECTION 147 OF THE ACT WITH EFFECT FROM 1ST APRIL 1 989 AND OBSERVED: 29. IT IS AT ONCE SEEN THAT THE AMENDMENT IN SECTI ON 147 OF THE ACT BROUGHT ABOUT A MATERIAL CHANGE IN LAW W .E.F. 1ST APRIL, 1989. SECTION 147(A) AS IT STOOD PRIOR T O 1ST APRIL 1989 REQUIRED THE AO TO HAVE A REASON TO BELIEVE TH AT (A) THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT A ND (B) THAT SUCH ESCAPEMENT IS BY REASON OF OMISSION O R FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETUR N OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT YEAR. AFTER THE AMENDMENT, ONLY ONE SINGULAR REQUIREMENT IS TO BE FULFILLED UNDER SECTI ON 147(A) AND THAT IS, THAT THE AO HAS REASON TO BELIEVE THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT. HOWEVER, THE PROVISO TO SECTION 147 OF THE ACT PROVIDES A COMPLE TE BAR 15 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) FOR REOPENING AN ASSESSMENT, WHICH HAS BEEN MADE UN DER SECTION 143(3) OF THE ACT, AFTER THE EXPIRY OF FOUR YEARS. HOWEVER, THIS PROSCRIPTION IS NOT APPLICABLE WHERE THE INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO M AKE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THUS, IN ORDER TO REO PEN AN ASSESSMENT WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE CONDIT ION THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSE E TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS MUST BE CONCLUDED WITH CERTAIN LEVEL OF CERTAINTY. IT IS IN THE AFORESAID CONTEXT THAT THIS COURT IN M/S HARYANA AC RYLIC MANUFACTURING CO. (P) LTD. (SUPRA) EXPLAINED THAT T HE RATIO OF THE DECISION IN PHOOL CHAND BAJRANG LAI (SUPRA) MAY NOT BE ENTIRELY APPLICABLE SINCE THE SAME WAS IN RE SPECT OF SECTION 147(A) AS IT EXISTED PRIOR TO THE AMENDMENT . 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENT RIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DAT E I.E. 10 TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERME D AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED : I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGA TION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IT ITS BANK AC COUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONC LUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED H IS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINC E HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N WHICH 16 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED I S 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 ACCOU NTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14 TH 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 I S EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOU NTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW E XPLAINED WITH SUFFICIENT CLARITY BY SUPREME COURT IN THE DECISION S DISCUSSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO B ELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MI SSING IN THE PRESENT CASE. 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER O F THE CIT (A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERIALS PRO DUCED DURING THE HEARING OF THE APPEAL. THE COURT WOULD L IKE TO OBSERVE THAT THIS IS IN THE NATURE OF A POST MORTEM EXERCISE AFTER THE EVENT OF REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASIS THAT THE RE OPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT 17 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMEN T, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE TH AT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS E SCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIR EMENT IS SATISFIED, A POST MORTEM EXERCISE OF ANALYSING MATE RIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDIT Y. 7.2 IN THE PRESENT CASE ALSO, IT IS SEEN THAT TH E AO HAS MERELY RELIED ON THE REPORT OF THE INVESTIGATION WING BUT I T IS APPARENT THAT HE HAS NOT APPLIED HIS MIND TO THE MATERIALS WHICH WE RE BEFORE HIM. IN OUR VIEW, WITHOUT FORMING A PRIMA FACIE OPINION ONLY ON THE BASIS OF THE REPORT OF THE INVESTIGATION WING OF THE INCO ME TAX DEPARTMENT, IT WAS NOT LEGAL FOR THE AO TO HAVE SIM PLY CONCLUDED THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT. UNLESS THE BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED, A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHER ENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY. IN THE CIRCUMSTAN CES AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE H IGH COURT OF DELHI IN THE CASE OF PR. COMMISSIONER OF INCOME TAX -4 VS. G&G 18 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) PHARMA INDIA LTD. (SUPRA) WE HOLD THAT THE REOPENIN G OF THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR IS BAD IN LAW. IN THE CIRCUMSTANCES, WE QUASH THE REASSESSMENT PROCEEDINGS . 7.3 SINCE, WE HAVE ALREADY QUASHED THE RE-ASSESSMENT PROCEEDINGS, THE ASSESSEES CHALLENGE TO THE ADDITI ON SUSTAINED BECOMES ACADEMIC IN NATURE AND THE SAME IS NOT BEIN G ADJUDICATED UPON. 8. IN VIEW OF OUR QUASHING THE RE-ASSESSMENT PROCEED INGS AND ALLOWING THE ASSESSEES APPEAL, THE DEPARTMENTS APP EAL BECOMES IN FRUCTUOU S AND THE SAME IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND ALLOWED WHEREAS THE DEPARTMENTS APPEAL STANDS DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD JULY, 2018). SD/- SD/- (G.D.AGARWAL) (SUDHANSHU SRIVASTAVA ) PRESIDENT JUDICIAL MEMBER DATE: 23.07.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 19 ITA NO.1002/DEL/2012 AND 252/DEL/2012 (JRD STOCK BROKERS (P) LTD.) 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI