M/s. M.S. Software (P) Limited, Noida V. ITO, Noida

ITA 2708/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5127 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 11-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI
• Assessee Lawyers: K C SINGHAL
• Keywords: Reopening of assessment; Principle of natural justice; Question of law; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: SMC , NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2708 /DEL/201 6 AY: 20 06 - 07 M.S.SOFTWARE (P) LTD. 331, BLOCK II, GANGAL SHOPPING COMPLEX, SECTOR 29 NOIDA 201 301 PAN: AAECM 2515 K VS . ITO, WARD 1(2) AYAKAR BHAWAN A - 2D, SECTOR 24 NOIDA 201 301 (APPELLANT) (RESPONDENT) APPELLAN T BY SH. K.C.SINGHAL, ADV. RESPONDENT BY MS.BEDOBANI, SR.D.R. DATE OF HEARING 1 1 TH MAY , 2017 DATE OF PRONOUNCEMENT 09 TH AUGUST , 2017 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DT. 02.03. 2016 OF THE LD. CIT(A) - I , NOIDA RELATING TO ASSESSMENT YEAR (A.Y.) 20 06 - 07 . 2 . THIS APPEAL WAS ORIGINALLY DIS MISSED BY THE TRIBUNAL FOR NON - PROSECUTION. SUBSEQUENTLY THE TRIBUNAL VIDE ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 2 M.A.NO.429/DEL/2016 ORDER DT. 12.4.2017 RECALLED THE ORDER. H ENC E , T H I S I S A R E C A L L E D M A T T E R . 3 . FACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MAINTENANCE OF COMPUTERS. THE ORIGINAL RETURN OF INCOME WAS FILED ON 18 TH SEPTE MBER,2006 DECLARING NIL INCOME. SUBSEQUENTLY THE ASSESSING OFFICER (A.O.) ISSUED NOTICE U/S 148 OF THE ACT BY RECORDING THE FOLLOWING REASONS AS MENTIONED AT PAGE 2 OF THE ASSESSMENT ORDER. ' FROM THE FACTS ON RECORD A LETTER DATED 15 . 0 3 . 2013 WAS RECEIVED FROM DY. DIRECTOR OF INCOME TAX (INV) , UNIT - VI(2), NEW DELHI THROUGH JOINT COMMISSIONER OF 1NCOME TAX RANGE - 1, NOIDA THAT A SEARCH & SEIZURE ACTION WAS CONDUCTED BY THE DY. DIRECTOR OF INC OME TAX (INV) UNIT - VI(2), NEW DELHI IN THE CASE OF SH. SURENDRA KUMAR JAIN AND SH. VIRENDRA KUMAR JAIN AT THE RESIDENCES AND OFFICES PREMISES. DURING THE COURSE OF POST SEARCH INVESTIGATION IT WAS BEEN EVIDENTLY ESTABLISHED THAT SH. SURENDRA KUMAR JAIN A ND HIS BROTHER SH. VIRENDRA KUMAR JOIN WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY PROVIDING CHEQUES, THROUGH A NUMBER OF PAPER AND DUMMY COMPANIES IN LIEU OF CASH TO A LARGE NUMBER OF BENEFICIARY COMPANIES. AS PER INFORMATION FORWA RDED BY DY. DIRECTOR OF INCOME TAX INVESTIGATION, UNIT - VI (2), NEW DELHI, THROUGH THE JOINT COMMISSIONER OF INCOME TAX RANGE - I, NOIDA THE ASSESSEE COMPANY RECEIVED ACCOMMODATION ENTRIES OF RS. 4,00,000/ - FROM ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 3 SH. SURENDRA KUMAR JAIN AND SH. VIRENDRA KU MAR JAIN GROUP THROUGH CHEQUE IN LIEU OF CASH, THEREFORE IT IS CLEAR THAT THE ASSESSEE COMPANY HAS OBTAINED ACCOMMODATION ENTRIES AFTER GIVING CASH WHICH HAS NOT BEEN OFFERED FOR TAXATION DURING THE AY 2006 - 07. CONSIDERING THE FACTS RECORDED ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX AMOUNTING TO 4 LAKHS HAS ESCAPED ASSESSMENT FOR THE A. Y. 2006 - 07 WITHIN THE MEANING OF THE PROVISIONS OF SECTION 147 OF THE 1. T. ACT. 1961. THEREFORE, TO ASSESS THE SAME, PROCEEDING U/S 147 OF THE 1. T. ACT ARE BEING INITIATED. ' 3 .1. I N RESPONSE TO THE A B O V E NOTICE THE ASSESSEE REPLIED THAT THE ORIGINAL RETURN FILED ON 18 TH SEPTEMBER,2006 MAY BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE UNDER SECTION 148 OF THE A CT . SUBSEQUENTLY THE ASSESSEE ASKED FOR THE REASONS AND FILED OBJECTIONS AGAINST SUCH REOPENING. THE A.O. DISPOSED OFF SUCH OBJECTIONS RAISED BY THE ASSESSEE AND DISMISSED THE OBJECTIONS. 3 .2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE SHAR E APPLICATION MONEY OF RS. 2 LAKHS EACH RECEIVED FROM M/S HILLR IDGE INVEST MENT LTD. AND M/S KARISHMA INVESTMENTS LTD. THE A.O. NOTED THAT THE INVESTIGATION WING OF THE DEPARTMENT HAS ESTABLISHED THAT SHRI SURENDRA KUMAR JAIN GR OUP HAS GIVEN ACCOMMODATION ENTRY IN ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 4 LIEU OF CASH THROUGH ITS GROUP COMPANIES. IT WAS ASCERTAINED DURING THE COURSE OF SEARCH AT THE PREMISES OF SHRI SURENDRA KUMAR JAIN THAT SHRI SURENDRA KUMAR JAIN GROUP IS MANAGING THE ABOVE COMPANIES THROUGH DUMMY DI RECTORS/PRINCIPAL OFFICERS. ALL THE DATA RELATING TO THESE COMPANIES INCLUDING BOTH OF THEM IN COMPUTER HARD DISK AND TALLY DATA WHICH CONTAIN THE BOOKS OF ACCOUNTS OF THESE COMPANIES, BLANK UNSIGNED AS WELL AS SIGNED CHEQUE BOOKS, ITRS, USER ID AND PASS WORD OF THESE COMPANIES WERE FOUND FROM THE CUSTODY OF SHRI SURENDRA KUMAR JAIN AND SHRI VIRENDRA KUMAR JAIN . SO FAR AS THE AMOUNT OF RS.4 LAKHS RECEIVED BY THE ASSESSEE I S CONCERNED, THE A.O. MENT IONED THE DETAILS AT PAGE 6 OF THE ORDER WHICH ARE AS UNDER. SL. NO. CHEQUE BOOK DATE NAME OF THE COMPANY FROM SUM RECEIVED BANK DETAIL CHEQUE NO. AMOUNT RS. 1. 28.5.2005 M/S HILLRIDGE INVESTMENT LTD. BANK OF INDIA 048011 2.00 LAKHS 2. 30.5.2005 M/S KARISHMA INDUSTRIES LIMITED KOTAK MAHINDRA 2.00 LAKHS 3 .3. HE , THEREFORE , ASKED THE ASSESSEE TO FURNISH THE COMPLETE ADDRESS, PAN AND CONFIRMATION OF THE ABOVE SHARE APPLICA N T S A N D TO PRODUCE THE DIRECTORS OF THE ABOVE TWO COMPANIES FOR HIS VERIFICATION. HOWEVER, INSTEAD OF PRODUCING THE ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 5 SAME THE ASSESSEE RA ISED CERTAIN OBJECTIONS CHALLENGING THE VALIDITY OF THE REASSESSMENT PROCEEDINGS WHICH THE A S S E S S E E HAD REPRODUCED AT PAGES 7 TO 9 OF THE ASSESSMENT ORDER. AFTER CONSIDERING THE REPLY GIVEN BY THE A.O. AND OBSERVING THAT DURING THE COURSE OF SURVEY ALL THE AB OVE NAMED COMPANIES W H O HAVE GIVEN SHARE APPLICATION MONEY TO THE ASSESSEE, THEY WERE NOT FOUND IN THE ADDRESS GIVEN BY THESE COMPANIES AND FURTHER CONSIDERING THE REPORT OF THE INSPECTOR WHO HAD RE P O R TED THAT THERE ARE NO BUSINESS ACTIVITIES OF THE A BOVE COMPAN I E S ON THE ADDRESS GIVEN BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. INVOKING P R O V I S I O N S O F SECTION 68 OF THE ACT MADE ADDITION OF RS.4 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER THE A.O. ALSO MADE ADDITION OF RS.20,000/ - BEING THE COMMISSION PAID BY THE ASSESSEE FOR O B T A I N ING SUCH ACCOMMODATI ON ENTRY. 4 . THE ASSESSEE APPEALED BEFORE THE LD. CIT(A) CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS AS WELL AS THE ADDITION MADE BY THE A.O. HOWEVER, DUE TO NON APPEARANCE BY THE ASSESSEE BEFORE THE LD. CIT(A) HE PASSED AN EX PARTE ORDER REJECT ING VARIOUS GROUNDS RAISED BY THE ASSESSEE IN ITS GROUNDS OF APPEAL. ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 6 4 . 1 . AGGRIEVED WITH SUCH ORDER OF LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY TAKING THE FOLLOWING GROUNDS. 1. THE REASSESSMENT PROCEEDINGS U / S 1471148 ARE WITHOUT JURISDICTI ON AND VOID AB INITIO FOR THE REASONS - (A) THE ALLEGED REASONS WERE RECORDED MECHANICALLY WITHOUT VERIFYING THE CORRECTNESS OF THE INFORMATION RECEIVED FROM INVESTIGATION WING AS HELD BY THE HON'BLE DELHI HIGH COURT IN VARIOUS CASES; (B) THE REASONS RECO RDED U / S 148 DOES NOT REFER TO ANY MATERIAL ON THE BASIS OF WHICH THE ITO COULD FORM THE BELIEF CONTEMPLATED U / S 147 AND THEREFORE THERE WAS NO LIVE LINK BETWEEN THE FORMATION OF BELIEF CONTEMPLATED U / S 147 AND THE MATERIAL ON RECORD AS HELD BY THE APEX COURT IN CASE OF LAKHMANI MEWALDAS 103 ITR 437; ( C ) THE ITO REFUSED TO SUPPLY THE COPIES OF MATERIALS ON RECORD ON THE BASIS OF WHICH REASONS WERE RECORDED DESPITE REPEATED REQUESTS ON THE FRIVOLOUS GROUND OF CONFIDENTIALITY WHICH AMOUNTED TO BREACH OF PRINCIPLES OF NATURAL JUSTICE. (D) THE ITO FAILED TO DISPOSE OF OBJECTIONS BEFORE PROCEEDING TO MAKE ASSESSMENT; (E) THE ITO FAILED TO PROVIDE THE COPY OF APPROVAL GRANTED U / S 151. IT IS ALLEGED THAT SUCH APPROVAL WAS NOT IN ACCORDANCE WITH THE JUDICIAL VIEWS. 2 . THE CIT(A) WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF SECTION 292BB FOR REJECTING THE GROUND CHALLENGING THE JURISDICTION OF ITO U/S 148 SINCE SUCH SECTION WAS NOT APPLICABLE TO THE FACTS OF THE CASE. ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 7 3 . THE ASS E SSMENT MADE IS CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE AND WITHOUT REFERENCE TO ANY MATERIAL ON RECORD. THE ONUS ON ASSESSEE WAS DULY DISCHARGED BY FURNISHING ALL RELEVANT EVIDENCES AND THUS ONUS SHIFTED TO REVENUE WHICH HAS NOT BEEN DISCHARGED BY NO T BRINGING ANY MATERIAL OR EVIDENCE TO THE KNOWLEDGE OF THE ASSESSEE FOR REBUTTAL. THUS, THERE WAS NO MATERIAL ON RECORD TO PROVE THAT ENTRIES WERE ACCOMMODATION ENTRIES. THE ASSESSMENT, ON MERITS, WAS ILLEGAL AND AGAINST THE JUDICIAL VIEW. HENCE CIT(A) OU GHT TO HAVE DELETED THE ADDITION. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 5 . THE LD.COUNSEL FOR THE ASSESSEE STRONGLY OBJECTED TO THE ORDER OF THE LD. CIT(A). HE SUBMITTE D THAT THE LD. J CIT IN A MECHANICAL MANNER HAD APPROVED THE REASONS RECORDED BY THE A.O. 5 .1 . REFERRING TO THE DECISION IN THE CASE OF CIT VS. S GO YA NKA LIME AND CHEMICALS LTD. REPORTED IN 231 TAXMANN.COM 73 (MP) HE SUBMITTED THAT THE HON BLE HIGH COUR T IN THE SAID DECISION HAS HELD THAT WHERE THE JCIT RECORDED SATISFACTION IN A MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND TO ACCORD SANCTION FOR ISSUING NOTICE U/S 148 OF THE ACT, REOPENING OF ASSESSMENT H A S T O B E H E L D INVALID. H E S U B M I T T E D T H A T T H E S L P F I L E D B Y T H E R E V E N U E W A S D I S M I S S E D B Y H O N B L E S U P R E M E C O U R T A S R E P O R T E D I N 2 3 7 T A X M A N N 3 7 8 . ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 8 5 . 2 . REFERRING TO THE REASONS RECORDED B Y T H E A.O. , A COPY OF WHICH IS PLACED AT PAGE 8 OF THE PAPER BOOK , THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NOTHING IN THE REASONS RECORDED AS TO HOW THE MONEY HAS BEEN TRANSFERRED AND WHO HAS GIVEN THE MONEY ETC. THE A.O. DOES NOT KNOW THE DATE WHEN THE MONEY WAS GIVEN FOR ISSUING CHEQUE. HE SUBMITTED THAT THE REASONS AND INFORMATION REFERRED TO BY THE A.O. IN NOTICE U /S 148 A R E EXTREMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT. THE A.O. HAS ACCEPTED THE REPORT OF THE INVESTIGATION WING , WHICH IS VERY VAGUE , IN A MECHANICAL MANNER. THE JCIT ACCORDED HIS APPROVAL IN A MECHANICAL MANNER. HE S UBMITTED THAT THE REASONS RECORDED REFLECT THAT THE A.O. DID NOT INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE DIRECTOR (INVESTIGATION). 5 . 3 . REFERRING TO THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF RAM B AI VS. CIT REPORTED IN 23 6 ITR 696 (SC) HE SUBMITTED THAT HON BLE SUPREME COURT HAS HELD THAT IN ABSENCE OF AT LEAST SOME MATERIAL IN THE HANDS OF THE A.O. TO SAY THAT HE HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT, HE COULD NOT HAVE REOPENED THE ASSESSMENT MEREL Y ON THE BASIS OF SOME REPORT OF THE INVESTIGATION WING. 5 . 4 . REFERRING TO THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTELS P.LTD. VS ITO REPORTED IN 338 ITR 51 DELHI HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HA S HELD THAT INFORMATION GIVEN BY DIRECTOR OF INCOME TAX (INVESTIGATION) THAT AMOUNT RECEIVED BY ASSESSEE FROM OTHER ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 9 COMPANY WAS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE WAS BENEFICIARY, WAS NOT SUFFICIENT TO REOPEN THE ASSESSMENT WHEN THE A.O. DID NOT APPLY HIS MIND. HE ALSO REFERRED TO VARIOUS OTHER DECISIONS IN THE CASE LAW COMPILATIONS. H E A L S O R E F E R R E D T O T H E D E C I S I O N O F H O N B L E D E L H I H I G H C O U R T I N T H E C A S E O F P R I N C I P A L C I T V S . G & G P H A R M A L T D . 5 . 5 . SO FAR AS MERIT OF THE CASE IS CONCERNED THE LD.COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 33 TO 74 OF THE PAPER BOOK DREW ATTENTION OF THE BENCH TO VARIOUS DETAILS THAT HAVE BEEN FILED BEFORE THE A.O. HE SUBMITTED THAT THE ASSESSEE HAS GIVEN FULL DETAILS OF SHARE APPLICANTS SUCH AS NAME, ADDRESS, PAN NUMBERS, BANK ACCOUNT ETC. FURTHER THE DEPARTMENT HAS C O M P L E T E D T H E A S S E S S M E N T O F T H E ABOVE COMPANIES U/S 143(3). THEREFORE NO ADDITION U/S 68 COULD HAVE BEEN MADE. 5 . 6 . REFERRING TO THE DECISION OF HON BLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS MIQ SALES P LTD. REPORTED IN 217 TAXMAN 422 (ALL.) HE SUBMITTED THAT THE HON BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHE RE THE ASSESSEE COMPANY RECEIVED FROM SHARE HOLDERS CERTAIN AMOUNT ON ACCOUNT OF SHARE APPLICATION MONEY, IT WAS REQUIRED TO PROVE ONLY THE IDENTITY OF SHARE HOLDERS AND NOT GENUINENESS OF TRANSACTIONS AND CREDIT WORTHINESS OF SHARE HOLDERS. HE ACCORDINGL Y SUBMITTED THAT BOTH LEGALLY AND ON MERIT THE ADDITION COULD NOT HAVE BEEN MADE AND THE SAME SHOULD BE DELETED. ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 10 5. 7 . THE LD.DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE A.O. AND CIT(A). HE SUBMITTED THAT THE ASSESSEE IN THE INSTANT CASE HAS NOT CONCLUSIVELY PROVED THE IDENTITY AND CREDIT WORTHINESS OF THE SHARE APPLICANTS AND GENUINENESS OF TRANSACTION. DESPITE OPPORTUNITIES GRANTED BY THE A.O., THE ASSESSEE COULD NOT PRODUCE THE DIRECTORS OF THE ABOVE TWO COMPANIES. DURING THE COURSE OF SURVE Y IT WAS FOUND THAT NO BOOKS OF ACCOUNTS ARE MAINTAINED BY THE ABOVE TWO COMPANIES AND THERE IS NO BUSINESS. THE REPORT OF THE INSPECTOR ALSO CONCLUSIVELY PROVES T H A T T H E S E C O M P A N I E S ARE ONLY PAPER COMPANIES AND ARE NOT DOING ANY BUSINESS. REFERRING TO VARIOUS DECISIONS INCLUDING THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF NR PORTFOLIO, NOVA PROMOTERS, NIKUNJ BUILDERS ETC. A ND THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE AND SUMATHI DAYAL HE SUBMITTED THAT THE ADDITION MADE BY THE A.O. AND SUSTAINED BY CIT(A) IS FULLY JUSTIFIED. 6. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH SIDES, PERUSED T H E ORDERS OF THE AUTHORITIES BELOW AND T H E PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I H A V E A L S O C O N S I D E R E D T H E V A R I O U S D E C I S I O N S R E L I E D O N B Y B O T H S I D E S . I FIND THAT THE A.O. ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES OF RS.4 LAKHS FROM C O M P A N I E S O P E R A T E D B Y SHRI SU RENDRA KUMAR JAIN AND SH RI VIKRAM KUMAR JAIN THROUGH CHEQUE IN LIEU OF CASH REOPENED THE ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148. DESPITE GIVEN DUE OPPORTUNITY TO THE ASSESSEE TO PRODUCE T H E DIRECTORS OF THE COMPANIES IN QUESTION, THE ASSESSEE FAILED TO ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 11 PRODUCE THE DIRECTORS. SINCE THE ASSESSEE COULD NOT DISCHARGE THE ONUS CAST ON IT THE A.O. MADE ADDITION OF RS.4 LAKHS TO TH E TOTAL INCOME OF THE ASSESSEE U/S 69 OF THE ACT. SINCE THE ASSESSEE DID NOT APPEAR BEFORE THE CIT(A) DURING THE APPEAL PROCEEDINGS HE DISMISSED THE APPEAL FILED BY THE ASSESSEE THOUGH ON MERITS. IT IS THE SUBMISSION OF THE LD.COUNSEL FOR THE ASSESSEE TH AT IN VIEW OF THE DECISION OF HON BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. G&G PHARMA LTD. (SUPRA) AND IN THE CASE OF SIGNATURE HOTELS LTD. (SUPRA), THE NOTICE ISSUED U/S 148 HAS TO BE QUASHED SINCE THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE A.O. AND HE HAS ISSUED NOTICE U/S 148 BY REOPENING ASSESSMENT U/S 147 ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT. 7. I FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HON BLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. G&G PHARMA LTD. (SUPRA ) WHEREIN THE HON BLE HIGH COURT HAD QUASHED THE REASSESSMENT PROCEEDINGS INITIATED ON THE BASIS OF INFORMATION OBTAINED FROM THE INVESTIGATION W I N G OF THE DEPARTMENT ON THE GROUND THAT THE A.O. HAS NOT APPLIED HIS MIND TO THE MATERIAL BEFORE HIM TO PROVE THAT HE HAD REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE RELEVANT OBSERVATION FROM PARAS 12 TO 15 READ AS UNDER. 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 12 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 UNACCOUNTED 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 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 TH E ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES . IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREINBEFOR E, 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) T O SHOW HOW THE CIT(A) DISCUSSED THE MATERIALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COURT WOULD LIKE TO OBSERVE THAT THIS IS IN THE NATURE OF A POST MORTEM EXERCISE AFTER THE EVENT OF ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 13 REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT(A) 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 B ELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY. 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. 8. I FIND THAT THE HON BLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTEL S LTD. (SUPRA) HAS ALSO TAKEN SIMILAR VIEW. THE RELEVANT OBSERVATION FROM PARA 14 TO 19 IS AS UNDER. 14. THE FIRST SENTENCE OF THE REASONS STATES THAT INFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCOME - TAX (INVESTIGATION) THAT THE PETITIONER HAD INT RODUCED MONEY AMOUNTING TO RS.5 LACS DURING FINANCIAL YEAR 2002 - 03 AS PER THE DETAILS GIVEN IN W.P. (C) NO. 8067/2010 PAGE 12 ANNEXURE. THE SAID ANNEXURE, REPRODUCED ABOVE, RELATES TO A CHEQUE RECEIVED BY THE PETITIONER ON 9TH OCTOBER, 2002 FROM SWETU STON E PV FROM THE BANK AND THE ACCOUNT NUMBER MENTIONED THEREIN. THE LAST SENTENCE RECORDS THAT AS PER ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 14 THE INFORMATION, THE AMOUNT RECEIVED WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. 15. THE AFORESAID REASONS DO NOT SATISFY TH E REQUIREMENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFERRED TO IS EXTREMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT ANNEXURE, WHICH HAS BEEN QUOTED ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWS OR ESTABLISHES NEXUS OR LINK WHICH DISCLOSES ESCAPEMENT OF INCOME. ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO TH E INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THE ASSESSING OFFICER ACCEPTED THE PLEA ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANNER. THE COMMISSIONER ALSO ACTED ON THE SAME BASIS BY MECHANICALLY GIVING HIS APPROVAL. THE RE ASONS RECORDED REFLECT THAT THE ASSESSING OFFICER DID NOT INDEPENDENTLY APPLY HIS MIND TO THE W.P. (C) NO. 8067/2010 PAGE 13 INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME - TAX (INVESTIGATION) AND ARRIVE AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED A SSESSMENT. 16. IT MAY BE NOTED HERE THAT A COMPANY BY THE NAME OF SWETU STONE PVT. LTD. HAD APPLIED FOR AND WAS ALLOTTED SHARES IN THE PETITIONER COMPANY ON PAYMENT BY CHEQUE OF RS.5 LACS. AS NOTICED ABOVE, IN THE ANNEXURE THE NAME OF THE COMPANY/ACCOUNT H OLDER IS MENTIONED AS SWETU STONE PV. THE SAME IS ALSO MENTIONED IN THE UNDATED REASONS MENTIONED ABOVE. ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 15 17. IN THE COUNTER AFFIDAVIT IT IS STATED THAT M/S SWETU STONE PVT. LTD. HAD APPLIED FOR ALLOTMENT OF SHARES WORTH RS.5 LACS AND THE SAME WERE ALLOTTED BY THE PETITIONER. IT IS FURTHER STATED THAT STATEMENTS OF MAHESH GARG AND SHUBHASH GUPTA WERE RECORDED BY THE DIRECTOR OF INCOME - TAX (INVESTIGATION) AND ON THE BASIS OF THE STATEMENTS THEY HAVE COME TO THE CONCLUSION THAT THE SAID PERSONS WERE ENTRY OPER ATORS. COPY OF THE STATEMENTS OF MAHESH GARG AND SHUBHASH GUPTA HAVE NOT BEEN PLACED ON RECORD BY THE RESPONDENT. THE PETITIONER, HAS, HOWEVER, ENCLOSED COPY OF STATEMENTS OF MAHESH GARG AND SHUBHASH GUPTA RECORDED ON DIFFERENT DATES. THE SAID PERSONS W.P. (C) NO. 8067/2010 PAGE 14 HAVE NOT SPECIFICALLY NAMED THE PETITIONER THOUGH OTHER PARTIES HAVE BEEN NAMED AND DETAILS HAVE BEEN GIVEN AND IT IS STATED THAT THEY WERE PROVIDED ACCOMMODATION ENTRIES. HOWEVER, IT IS STATED THAT THE ENTRIES WERE MADE BY GIVIN G CHEQUE/DD/PO AFTER RECEIVING CASH AND SOMETIMES EXPENSES ENTRIES WERE PROVIDED. THE REASONS RECORDED BY THE ASSESSING OFFICER DO NOT MAKE REFERENCE TO ANY STATEMENT OF MAHESH GARG OR SHUBHASH GUPTA. THIS MAY NOT ALSO BE NECESSARY, IF THE STATEMENTS WERE ON RECORD AND IT IS CLAIMED AND PRIMA FACIE ESTABLISHED THAT THEY WERE EXAMINED BY THE ASSESSING OFFICER BEFORE OR AT THE TIME OF RECORDING REASONS. ON THE OTHER HAND, IN THE PRESENT CASE, INFORMATION AS ENCLOSED AS ANNEXURE, HAS BEEN REFERRED. THIS IS THE ONLY MATERIAL RELIED UPON BY THE ASSESSING OFFICER. THE SAID ANNEXURE HAS BEEN QUOTED ABOVE. IN THIS CONNECTION, WE MAY NOTICE THAT M/S SWETU STONE PVT. LTD. IS AN INCORPORATED COMPANY AND THE PETITIONER HAS PLEADED AND STATED THAT THE SAID COMPANY HAS A PAID - UP CAPITAL OF RS.90 LACS. THE COMPANY WAS INCORPORATED ON 4TH JANUARY, 1989 ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 16 AND WAS ALSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER, 2001. TO THIS EXTENT, THERE IS NO DISPUTE. IN THESE CIRCUMSTANCES, WE FEEL THE JUDGMENTS OF THE DELHI HIGH COURT IN COMMISSIONER OF INCOME W.P. (C) NO. 8067/2010 PAGE 15 TAX VERSUS SFIL STOCK BROKING LIMITED, [2010] 325 ITR 285 (DELHI) AND SARTHAK SECURITIES COMPANY PRIVATE LIMITED VERSUS INCOME TAX OFFICER, 2010 (329) ITR 110 (DELHI), IN WHICH CIT VERSUS LOVELY EXP ORTS (P) LIMITED, (2009) 216 CTR 195 (SC) HAS BEEN APPLIED AND FOLLOWED, ARE APPLICABLE. WE MAY NOTICE HERE THAT THE RESPONDENT IN THEIR COUNTER AFFIDAVIT HAVE STATED THAT SWETU STONE PVT. LTD. IS UNIDENTIFIABLE AND, THEREFORE, THE AFORESAID DECISIONS SHOU LD NOT BE APPLIED AND THE RATIO OF THE DECISION DATED 7TH JANUARY, 2011 IN WRIT PETITION (CIVIL) NO. 7517/2010, AGR INVESTMENT LIMITED VERSUS ADDITIONAL COMMISSIONER OF INCOME TAX AND ANOTHER SHOULD BE APPLIED. IN THE SAID DECISION, DECISIONS IN THE CASE O F SARTHAK SECURITIES COMPANY PRIVATE LIMITED (SUPRA) AND SFIL STOCK BROKING LIMITED (SUPRA) WAS DISTINGUISHED BY GIVING THE FOLLOWING REASONS: '22. ....IN SFIL STOCK BROKING LTD. (SUPRA), THE BENCH HAS INTERFERED AS IT WAS NOT DISCERNIBLE WHETHER THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT A BELIEF ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM THAT THE INCOME HAD ESCAPED ASSESSMENT. IN OUR CONSIDERED OPINION, THE DECISION RENDERED THEREIN IS NOT APPLICA BLE TO THE FACTUAL MATRIX IN THE CASE AT HAND. IN THE CASE OF SARTHAK SECURITIES CO. PVT. LTD. (SUPRA), THE DIVISION BENCH HAD NOTED THAT CERTAIN COMPANIES W.P. (C) NO. 8067/2010 PAGE 16 WERE USED AS CONDUITS BUT THE ASSESSEE HAD, AT THE STAGE OF ORIGINAL ASSESSMENT, FURNISHED THE NAMES OF THE COMPANIES WITH WHICH IT HAD ENTERED INTO TRANSACTION AND THE ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 17 ASSESSING OFFICER WAS MADE AWARE OF THE SITUATION AND FURTHER THE REASON RECORDED DOES NOT INDICATE APPLICATION OF MIND. THAT APART, THE EXISTENCE OF THE CO MPANIES WAS NOT DISPUTED AND THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE MADE TO THE ASSESSEE COMPANY THROUGH THE BANKING CHANNEL. REGARD BEING HAD TO THE AFORESAID FACT SITUATION, THIS COURT HAD INTERFERED. THUS, THE SAID DECISION IS ALSO DISTINGUIS HABLE ON THE FACTUAL SCORE.' 18. THE FACTS INDICATED ABOVE DO NOT SHOW THAT M/S SWETU STONE PVT. LTD. IS A NON - EXISTING AND A FICTITIOUS ENTITY/PERSON. DECISION IN AGR INVESTMENT LIMITED (SUPRA), THEREFORE, DOES NOT HELP THE CASE OF THE RESPONDENT. 19. FOR THE REASONS STATED ABOVE, THE PRESENT WRIT PETITION IS ALLOWED AND WRIT OF CERTIORARI IS ISSUED QUASHING THE PROCEEDINGS UNDER SECTION 148 OF THE ACT. IN THE FACTS OF THE CASE, THERE WILL BE NO ORDER AS TO COSTS. 9. SINCE IN THE INSTANT CASE THE A.O. HAS REOPENED T H E ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT AND THERE IS NO INDEPENDENT APPLICATION OF MIND BY HIM FOR ISSUE OF S U C H NOTICE, THEREFORE, IN VIEW OF T HE DECISIONS OF HON BLE JURISDICTIONAL HIGH COURT CITED ( S U P R A ) , T H E REASSESSMENT NOTICE HAS TO BE QUASHED BEING VOID AB INITIO. THE ITA 2078/DEL/16 A.Y. 2006 - 07 M.S.SOFTWARE (P) LTD., NOIDA 18 VARIOUS DECISIONS RELIED UPON BY LD.D.R. ARE NOT APPLICATION FOR DECIDING THIS LEGAL GROUND. SINCE THE ASSESSEE SUCCEEDS ON THIS LEGAL GROUND, THE VARIOUS O T H E R GROUNDS ARE NOT BEING ADJUDICATED BEING ACADEMIC IN NATURE. 10 . IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 0 9 T H AUGUST , 2017. S D / - (R.K. PANDA) ACCOUNTANT MEMBER DATED: THE 0 9 T H AUGUST , 2017 GMV COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES