HARAKCHAND K GADA, MUMBAI V. ITO 16(2)(4), MUMBAI

ITA 2810/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2207 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MOHANDA S
• Assessee Lawyers: AJAY R SINGH
• Keywords: Reopening of assessment; Unexplained investment; Search and seizure; Principle of natural justice; Opportunity of cross examination; Difference of opinion; Corroborative evidences; Accommodation entries; Change of opinion
• Section: 143(3); 147; 148; 132; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI , , BEFORE SHRI JASON P. BOAZ, A M AND SHRI AMIT SHUKLA , J M ./ ITA NO. 281 0/MUM/2014 ( / ASSESSMENT YEAR: 2005 - 06 ) SHRI HARAKCHAND K. GADA /APPELLANT 3, 2 ND FLOOR, TERRACE BUILDING FORJET HILL ROAD, TARDEO MUMBAI 400036 / VS. INCOME TAX OFFICER - 16(2)(4) / RESPONDENT MUMBAI ./ PAN - AAFPG0299N M / APPELLANT BY: SHRI AJAY R. SINGH / RESPONDENT BY : SHRI K. MOHANDAS / DATE OF HEARING : 30 . 11 . 2015 / DATE OF PRONOUNCEMENT : 09 . 12 .2015 / O R D E R PER JASON P. BOAZ , A.M. THIS APPEAL BY THE ASSESSEE IS DIRECT ED AGAINST THE ORDER OF CIT(A) - 27 , MUMBAI DATED 27 . 01.2014 FOR A.Y. 2005 - 06. 2 . THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER: - 2.1 THE ASSESSEE FILED HIS RETURN OF INCOME FOR A.Y. 2005 - 06 ON 16.12. 2005 DECLARING TOTAL INCOME OF ` 2,93,971 / - . THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE IN COME TAX ACT, 1961 (IN SHORT THE ACT). FROM THE DETAILS IN THE ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 DATED 25.03.2013, THE ASSESSING OFFICER (AO) STATES THAT AFTER THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, 2 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA INFORMATION WAS RECEIVED THE DD IT (INV), UNIT 1(4), MUMBAI THAT SHARE BROKER M/S. MAHASGAR SECURITIES PVT. LTD. AND ITS GROUP CONCERNS WERE SEARCHED ON THE ALLEGATION THAT THEY WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND PROVIDING BOGUS SPECULATION PROFIT/LOSS AND THAT ASSESSEE HA D PROCURED PROFIT OF ` 2,93,971 / - IN SHARE TRANSACTION CARRIED OU T BY THIS GROUP. THE AO OBSERV ING THAT INCOME OF ASSESSEE AMOUNTING TO ` 2,93,971 / - HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE ABOVE TRANSACTION, INITIATED PROCEEDINGS UNDER SECTION 147 OF THE ACT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 27 .03.2012 AFTER TAKING APPROVAL OF THE ADD. CIT, RANGE 16(2), MUMBAI. THE ASSESSMENT WAS CO NCLUDED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 25.03.2013 WHEREIN INCOME OF THE ASSESSEE WAS DETERMINED AT ` 50,01,160 / - AS AGAINST THE RETURNED INCOME OF ` 2,93,971 / - IN VIEW OF ADDITION OF ` 47,07,185/ - ON ACCOUNT OF PROFIT ON SHARE TRA NSACTIONS WITH M/S. MAHASAGAR SECURITIES PVT. LTD. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 DATED 25.03.2013, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) - 27, MUMBAI, WHO DISMISSED ASSESSEES APPEAL VIDE ORDER DATED 27.01.2014. 3 . AGGRIEVED BY THE ORDER OF CIT(A) - 27, MUMBAI DATED 27.01.2014 ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS: - 1. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: 1.1 THE LEARNED CIT(A) ERRED IN NOT GIVING ANY FINDING AS REGARDS GROUND NOS. I & 2 BY OBSERVING THAT, GROUNDS ARE OF GENERAL IN NATURE WITHOUT APPRECIATING THAT, THE PRINCIPLE OF NATURAL JUSTICE WAS VIOLATED AND EVIDENCES WERE USED AGAINST THE ASSESSEE WITHOUT FURNISHING THE COPY, HENCE THE ORDER OF THE ASSESSING OFFICER CONFIRMED BY CIT(A) IS BAD IN LAW. 1.2 THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE ASSESSING OFFICER, WHO FAILED TO PROVIDE A COPY OF THE STATEMENTS OF 3 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA MR. MUKESH CHOKSI ON THE BASIS OF WHICH ASSESSMENT WAS REOPENED AND FURTHER AN OPPORTUNITY OF CROSS EXAMINATION, IN SPI TE OF A SPECIFIC REQUEST MADE BY THE APPELLANT IN THIS BEHALF. THEREFORE, THE ASSESSMENT ORDER DT. 25/03/2013 IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE, AND HENCE, BAD IN LAW. 2. REOPENING IS BAD IN LAW: 2.1 THE LEARNED CIT(A) ERRED IN CONFIRMING THE O RDER OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT U/S. 147 OF THE ACT, WITHOUT APPRECIATING THE FACTS THAT THERE WAS NO ESCAPEMENT OF ASSESSMENT IN THE ASSESSEE'S CASE AS THE ORIGINAL RETURN WAS ACCEPTED U/S. 143(1) DTD. 26/10/2006. AND THERE IS NO NEW MATERIAL OR FACTS BROUGHT ON RECORD, THUS REOPENING IS NOTHING BUT BASED ON CHANGE OF OPINION AND HENCE BAD IN LAW. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSING OFFICER FAILED TO PROVIDE A COPY OF THE RECORDED REASONS TO THE APPELLANT ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED EVEN TILL THE COMPLETION OF ASSESSMENT. THEREFORE, THE ACTION OF THE ASSESSING OFFICER CONFIRMED BY THE CIT (A) IS CONTRARY TO LAW AND WELL ESTABLISHED PRINCIPLES OF NATURAL JUSTICE, AND HENCE, TH E REOPENING OF ASSESSMENT IS BAD IN LAW. 2.3 THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER AND FAILED TO APPRECIATE THE FACT THAT THE NOTICE U/S 148 DTD. 27/03/2012 WAS ISSUED ON THE BASIS OF THIRD PARTY'S STATEMENT RECORDED ON OATH IN THE SEARCH AND SEIZER ACTION U/S. 132 IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD., HENCE THE REOPENING IS BAD IN LAW AND IS LIABLE TO BE QUASHED. 3. ADDITION UNDER SECTION 69 OF RS. 47,07,185 / - ON ALLEGED ACCOMMODATION ENTRIES : 3.1 THE L EARNED CIT(A) ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFICER AND FAILED TO APPRECIATE THAT THE NET TRANSACTIONS ENTERED INTO BY THE APPELLANT WERE ONLY OF RS.1, 40,572 / - AND WERE DULY SUPPORTED BY ALL SUPPORTING EVIDENCE, SHOWN IN BALANCE SHEET, HENCE ADDITION OF RS. 47,07,185 / - MAY BE DELETED. 3.2 THE LEARNED CIT(A) ERRED IN TREATING RS. 47,07,185 / - AS THE UNEXPLAINED INVESTMENT OF THE APPELLANT WITHOUT BRINGING ANY EVIDENCE TO SUPPORT OF THE SAME AND THE PROVISIONS OF 4 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA SECTION 69 CANNOT BE APPLIED TO TH E FACTS OF THE APPELLANT, BASED ON THE STATEMENT OF THIRD PARTY. 3.3 WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAS SHOWN SPECULATION PROFIT OF RS.2,28,845/ - AND PAID TAX THEREON HENCE ADDITION OF ` 47,07,185/ - MA Y BE DELETED. 4 . GROUND NO. 2: REOPENING IS BAD IN LAW: 4.1.1 AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE TOOK UP THIS GROUND AND ASSAILED THE ORDERS OF AUTHORITIES BELOW ALLEGING THAT THE REOPENING WAS BAD IN LAW. IN THE GROUND RAISED, ASSESSEE HAS AL LEGED THAT AO HAD ERRED IN REOPENING THE ASSESSMENT FOR A.Y. 2005 - 06 AS THE RETURN OF INCOME FILED WAS ACCEPTED UNDER SECTION 143(1) OF THE ACT AND THAT SINCE NO NEW MATERIAL OR FACTS WERE BROUGHT ON RECORD CONTRARY TO THOSE IN THE RETURN OF INCOME, THE RE OPENING ON THE SAME SET OF FACTS CONSTITUTED ONLY A CHANGE OF OPINION BASED ON A THIRD PARTYS STATEMENT RECORDED IN THE CASE OF MAHANAGAR SECURITIES PVT. LTD. IN THE GROUNDS RAISED IT WAS ALSO CONTENDED THAT THE AO HAD NOT PROVIDED ASSESSEE WITH COPY OF T HE REASONS RECORDED FOR REOPENING ASSESSMENT, TILL THE COMPLETION OF ASSESSMENT AND THAT IN VIEW OF THE ABOVE CONTENTIONS, ASSESSMENT WAS BAD IN LAW. 4.1.2 BEFORE US, THE LEARNED A.R. FOR THE ASSESSEE , TOOK US THROUGH THE PAPER BOOK - 1 (PAGES 1 TO 54 ) FILED BY ASSESSEE. O UR ATTENTION WAS DRAWN TO PAGE 6 THEREOF, WHEREIN THE AO, BY LETTER DATED 04.10.2012, HAD PROVIDED ASSESSEE THE RECORDED REASONS FOR REOPENING THE ASSESSMENT, IN THE CASE ON HAND FOR A.Y. 2005 - 06, AS PER ASSESSEES REQUEST VIDE LETTER DATED 27.04.2012. THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT IT WAS EVIDENT FROM THE RECORDING OF REASONS BY AO, THAT THEY WERE MADE WITHOUT APPLICATION OF MIND AS THEY ARE FACTUALLY INCORRECT SINCE THE ASSESSEE DID NOT ENTER INTO ANY TRANSACTIONS AMOUNT ING TO ` 29,95,981/ - DURING THE 5 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA RELEVANT PERIOD, WITH THE PARTY CITED IN THE REASONS RECORDED BY AO I.E. M/S. GOLD STAR FINVEST SECURITIES PVT. LTD. THE LEARNED A.R. FOR THE ASSESSEE THEN TOOK US THROUGH THE ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 AND BROUGHT TO OUR NOTICE THAT NEITHER HAS ANY ADDITION ON ACCOUNT OF ESCAPEMENT OF INCOME BEEN MADE BY AO ON ACCOUNT OF TRANSACTIONS BY ASSESSEE WITH GOLD STAR FINVEST SECURITIES LTD. NOR IS THERE A WHISPER IN THIS REGARD IN THE ORDER OF ASSESSMENT. THE LEARNED A .R. FOR THE ASSESSEE CONTENDS THAT THIS ESTABLISHED THAT THE REASONS RECORDED BY AO FOR REOPENING THE CASE ON HAND FOR A.Y. 2005 - 06 WAS MADE WITHOUT ANY APPLICATION OF MIND AND BEING FACTUALLY INCORRECT, AND HAVING NO NEXUS WITH ASSESSEES CASE, THE VERY B ASIS OF REASONING FOR INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT BEING FACTUALLY FLAWED, THE CONSEQUENT NOTICE UNDER SECTION 148 IS INVALID AND CONSEQUENTLY THE ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 BEING NULL AND VOID REQUIRES TO BE CANCELLED. 4.1 .3 THE LEARNED A.R. FOR THE ASSESSEE FURTHER SUBMITTED THAT EVEN THOUGH ON APPEAL THE ABOVE FACTS WERE PLACED BEFORE THE LEARNED CIT(A) IN THE GROUNDS RAISED CHALLENGING THE VALIDITY OF REOPENING THE ASSESSMENT FOR A.Y. 2005 - 06 AT B, 1 & 2 RECORDED AT PAGE 3 OF THE IMPUGNED ORDER, THE LEARNED CIT(A) HAS NOT ADDRESSED/ CONSIDERED OR ADJUDICATED ON THESE GROUNDS WHILE DISMISSING ASSESSEES APPEAL. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT IT IS OBLIGATORY ON THE PART OF THE AO TO APPLY HIS MIND IN PUTT ING FORTH COGENT AND GENUINE REASONS THAT ARE THE BASIC POSTULATE FOR FORMATION OF BELIEF THAT ANY INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THAT ASSESSMENT YEAR IN ORDER TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IT IS SUBMITTED THAT S INCE THE REASONS RECORDED BY THE AO HAVE FACTUALLY NO NEXUS WITH THE TRANSACTIONS, INCOME OR BUSINESS OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION AND THE SAME NOT 6 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA BEING CONSIDERED FOR ADDITION OR DISCUSSED IN THE ORDER OF ASSESSMENT, THERE WAS ABSOLUTE LY NO BASIS FOR THE AO TO FORM A BELIEF THAT INCOME OF ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF ASSESSEES NON - EXISTENT TRANSACTION WITH GOLD STAR FINVEST SECURITIES PVT. LTD. THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT IN THESE CIRCUMSTANCES, THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT IS BAD IN LAW AND THEREFORE LIABLE TO BE QUASHED AS THE REOPENING OF ASSESSMENT FOR A.Y. 2005 - 06 WAS BAD IN LAW. IN SUPPORT THEREOF, THE LEARNED A.R. FOR THE ASSESSEE PLACED RELIANCE ON TH E DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. VS. ITO (2010) 329 ITR 110 (DEL). 4.2 THE LEARNED D.R. FOR REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. IT WAS SUBMITTED THAT EVEN THOUGH THERE WAS SOME VAR IATION IN THE REASONS RECORDED BY THE AO, MADE AVAILABLE TO ASSESSEE, VIS - - VIS THE FACTS AND FINDINGS OF THE AO IN THE ORDER OF ASSESSMENT, ASSESSEE HAD PARTICIPATED IN THE COMPLETION OF ASSESSMENT PROCEEDINGS AND THEREFORE THE REOPENING OF THE ASSESSMENT WAS IN ORDER. 4.3 .1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD, INCLUDING THE JUDICIAL DECISION CITED. THE FACTS OF THE MATTER AS EMERGE FROM THE RECORD ARE THAT THERE WAS A SEARCH AND SEIZURE ACTION UN DER SECTION 132 OF THE ACT ON 26.10.2006 IN THE CASE OF SHARE BROKER M/S. MAHASAGAR SECURITIES PVT. LTD. AND ITS GROUP CONCERNS. PURSUANT THERETO, THE AO INITIATED PROCEEDINGS UNDER SECTION 147 OF THE ACT IN ORDER TO REOPEN THE ASSESSMENT FOR A.Y. 2005 - 06 WHICH WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND ISSUED NOTICE UNDER SECTION 148 OF THE ACT TO ASSESSEE ON 27.03.2012 (COPY PLACED ON PAGES 4 & 5 OF PAPER BOOK). THE ASSESSEE, VIDE LETTER DATED 27.04.2012 , SUBMITTED THAT THERE WAS 7 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA NO ESCAPEMENT OF I NCOME AND THAT THE RETURN OF INCOME FOR A.Y. 2005 - 06 FILED ON 17.12.2005 BE TREATED AS FILED IN RESPONSE TO THE AFORESAID NOTICE ISSUED UNDER SECTION 1 4 8 OF THE ACT. THE ASSESSEE ALSO REQUESTED THE AO TO FURNISH THE REASONS RECORDED FOR REOPENING THE ASSES SMENT WITHIN REASONABLE TIME . IN RESPONSE THERETO, THE AO VIDE LETTER DATED 04.10.2012 (COPY PLACED AT PAGE 8 OF THE PAPER BOOK) , PROVIDED THE ASSESSEE WITH THE REASONS RECORDED BY HIM FOR REOPENING OF THE ASSESSMENT FOR A.Y. 2005 - 06 AND WHICH WERE AS UNDE R: - THE ASSESSEE HAS OBTAINED ACCOMMODATION ENTRIES AMOUNTING TO ` 47,07,185 / - FOR F.Y. 2004 - 05 RELEVANT TO A.Y. 2005 - 06 FROM M/S. GOLD STAR FINVEST SECURITIES PVT. LTD. YOU ARE REQUESTED TO FILE THE DETAILS AS PER THE REASONS MENTIONED ABOVE. 4.3.2 FROM THE ABOVE, IT IS SEEN THAT THE AO MADE AVAILABLE A COPY OF THE REASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT BY LETTER DATED 27.10.2012. WE FIND THAT THE ORDER OF ASSESSMENT CONCLUDED UNDER SECTION 143(3) R.W.S. 147 OF THE ACT WAS PASSED VIDE O RDER DATED 25.03.2013. IN THIS VIEW OF THE MATTER, WE FIND THAT THE AVERMENT MADE BY ASSESSEE IN TH E GROUND NO. 2.2 THAT THE AO FAILED TO PROVIDE IT WITH A COPY OF THE REASONS RECORDED BEFORE COMPLETION OF THE ORDER OF ASSESSMENT TO BE A FACTUALLY INCORRE CT ALLEGATION. 4.3.3 ON AN APPRECIATION OF THE DETAILS ON RECORD WE FIND THAT THE REASONS RECORDED BY THE AO AND PROVIDED TO ASSESSEE VIDE LETTER DATED 04.10.2012 EXTRACTED AT PARA 4.2.1 (SUPRA) ARE AT VARIANCE WITH THE FACTS NARRATED IN THE ORDER OF ASSE SSMENT WHEREIN THE AO IN PARA 1 ON PAGE 1 RECORDS: - .. DURING THE YEAR THE ASSESSEE HAD TAKEN THE PROFIT OF ` 47,07,185 / - IN THE SHARES, THE TRANSACTIONS WERE CARRIED OUT THROUGH M/S. MAHASAGAR SECURITIES PVT. LTD. SINCE THE TAXABLE 8 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA INCOME OF ` 2,93,971 / - HAS ESCAPED ASSESSMENT FOR THE REASONS ATTRIBUTABLE TO THE ASSESSEE, THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTICE UNDER SECTION 148 OF THE I.T. ACT ON 27 .03.201 2 . THIS VARIANCE IN THE REASONS RECORDED BY THE AO AS PROVIDED TO THE ASSESSEE VIDE LETTER DATED 04.10.2012 AND THAT RECORDED IN THE ORDER OF ASSESSMENT, IN OUR VIEW, PREVENTED THE ASSESSEE FROM PUTTING UP ANY DEFENCE IN RESPECT OF THE REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. THIS HAS CLEARLY VIOLATED THE PRINCIPLES OF NATURAL JUST ICE AS THE AO PROCEEDED ON A DIFFERENT PREMISE WHILE FINALIZING THE ORDER OF ASSESSMENT DATED 25.03.2013. 4. 3 .4 AS CONTENDED BY THE LEARNED A.R. FOR THE ASSESSEE IT IS CLEARLY EVIDENT THAT THE REASONS RECORDED BY THE AO AND PROVIDED TO THE ASSESSEE VIDE L ETTER DATED 04.10.2012 (SUPRA) WERE FACTUALLY INCORRECT AND HAD NEITHER ANY BEARING OR NEXUS ON THE ASSESSEES ASSESSMENT NOR WAS IT PART OF THE FACTS CONSIDERED OR ADDITIONS MADE BY THE AO WHILE DISPOSING OFF THE CASE. THERE IS NOT A MENTION OF OR EXAMINA TION OF WHETHER THE ASSESSEE HAD ENTERED INTO ANY TRANSACTION WITH M/S. GOLD STAR FINVEST SECURITIES PVT. LTD. THIS, IN OUR VIEW, ESTABLISHES THAT THERE WAS NO APPLICATION OF MIND BY THE AO RESULTING IN LACK OF COGENT OR GENUINE OR FACTUALLY CORRECT REASON S BEING RECORDED WHILE INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT AS THERE WAS NO NEXUS BETWEEN THE FORMATION OF BELIEF BY THE AO AND THE FACTS OF THE CASE. THE LEARNED D.R. , APART FROM SUPPORTING THE ORDERS OF THE AUTHORITIES BELOW, WAS NOT ABLE TO CONTROVERT THE ARGUMENTS PUT FORTH BY THE ASSESSEE AND THE FACTUAL ERRORS IN THE REASONS RECORDED BY THE AO FOR INITIATING THE PROCEEDINGS UNDER SECTION 147 OF THE ACT IN THE CASE ON HAND FOR A.Y. 2005 - 06. 4. 3 .5 IT IS ALSO A MATTER OF RECORD THAT THOUGH THE ASSESSEE HAD RAISED GROUNDS IN THIS RE GARD, WHICH ARE RECORDED AT B, 1 & 2 AT 9 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA PAGES 3 OF THE IMPUGNED ORDER, THE LEARNED CIT(A) HAS FAILED TO CONSIDER AND ADJUDICATE THE GROUNDS RAISED BY THE ASSESSEE. 4.2.6 IN THE FACTS AND CIRCUMSTANCES OF THE CASE, ON THE ISSUE OF THE REOPENING OF ASSESSMEN T FOR A.Y. 2005 - 06 UNDER SECTION 147 OF THE ACT, AS DISCUSSED AT PARAS 4.1 T O 4. 3 .5 OF THIS ORDER (SUPRA), WE ARE OF THE VIEW THAT FORMATION OF BELIEF BY THE AO WAS A CO NDITION PRECEDENT AS REGARDS THE ESCAPEMENT OF TAX PERTAINING TO THE RELEVANT ASSESSMEN T YEAR. BEFORE PROCEEDING TO ISSUE THE NOTICE UNDER SECTION 147 OF THE ACT, THE AO WAS REQUIRED TO FORM AN OPINION, THE VALIDITY OF WHICH ARE SUPPOSED TO SUSTAIN THE FORMATION OF AN OPINION, WHICH CAN BE CHALLENGED. THOUGH CONCLUSIVE EVIDENCE IS NOT REQUIS ITE AT THE STAGE OF FORMATION OF BELIEF, IT MUST BE BASED ON APPLICATION OF MIND WHICH A REASONABLE PERSON WOULD APPLY. IN OUR VIEW, THE REASONS RECORDED , AS COMMUNICATED TO THE ASSESSEE BY LETTER DATED 04.10.2012 , DOES NOT REMOTELY EVIDENCE INDEPENDENT APPLICATION OF MIND AS THERE IS CLEARLY NO NEXUS , WHATSOEVER , BETWEEN THE REASONS RECORDED AND THE FACTUAL FINDINGS IN THE ORDER OF ASSESSMENT. IN THESE CIRCUMSTANCES WE HOLD THAT INITIATION OF PROCEEDINGS UNDER SECT ION 147 OF THE ACT IS BAD IN LAW AND CONSEQUENTLY THE NOTICE ISSUED UNDER SECTION 148 OF THE ACT AND THE ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 DATED 25.03.2013 IS TO BE QUASHED. IT IS ORDERED ACCORDINGLY. 5 . IN VIEW OF OUR FINDING AT PARA 4. 3. 6 HOLDING THE INIT IATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AS BAD IN LAW AND CONSEQUENTLY QUASHING THE NOTICE UNDER SECTION 148 OF THE ACT AND RESULTANT ORDER OF ASSESSMENT FOR A.Y. 2005 - 06 DATED 25.03.2013, WE ARE OF THE VIEW THAT AT THIS STAGE, THERE IS NO REQUI REMENT FOR US TO ADJUDICATE THE GROUNDS AT SL. NO. 1 & 3 OF THE INSTANT APPEAL AND REFRAIN FROM DOING SO. 10 ITA NO. 281 0/MUM/2014 SHRI HARAKCHAND K. GADA 6 . THE GROUND AT SL. NO. 4 IS GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 7 . IN THE RESULT, ASSESSEES APPEAL FOR A.Y. 2008 - 09 IS ALLOWED AS INDICATED ABOVE . ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER , 2015. 09.12.2015 SD/ - SD/ - ( AMIT SHUKLA ) ( JASON P. BOAZ ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI , DATED 9 TH DECEMBER , 2015 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) - 27 , MUMBAI 4. / THE CIT - 1 6 , MUMBAI 5. , , / DR, H BENCH ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER //TRUE COPY// /ASSTT. REGISTRAR) , /ITAT, MUMBAI N.P.