Sh. Satya Sheel Gupta, New Delhi V. ITO, New Delhi

ITA 2886/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6875 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 03-10-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 20-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Unexplained cash credit; Question of law; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 142(1); 153A; 147; 68; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A.NO.2886/DEL/2016 A.Y. : 2006-07 SH. SATYA SHEEL GUPTA, T-5/237, MANGOLPURI INDUL. AREA, PHASE-I, NEW DELHI 110 083 (PAN: AAJPG3279J) VS. ITO, WARD 41(3), E-2 BLOCK, CIVIC CENTRE, NEW DELHI 110 002 (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RS SINGHVI, CA DEPARTMENT BY : SH. ANIL SHARMA, SR. DR DATE OF HEARING : 05-10-2016 DATE OF ORDER : 17-10-2016 ORDER PER H.S. SIDHU : JM THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 29/3/2016 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-14, NEW DELHI ON THE FOLLOWING GROUNDS:- 1. THAT UPON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. AO IS NOT JUSTIFIED TO COMPUTE THE TOTAL INCOME AT RS. 8,43,876/- AGAINST RS. 2,82,050/- SHOWN IN THE RETU RN AND LD. CIT IS ALSO NOT JUSTIFIED TO DISMISS THE APPEA L WHICH IS ARBITRARY, ILLEGAL AND BAD IN LAW AND BASED ON T HE SURMISES AND CONJECTURE TOTALLY DISREGARDING THE FA CTS OF THE CASE. 2. THAT DETERMINATION AND INCLUSION IN INCOME OF RS. 5,61,826/- OF ASSESSE U/S. 68 OF THE ACT AS TREATIN G IT AS 2 UNEXPLAINED CASH CREDIT IS WRONG, PERVERSE, UNJUST IFIABLE, NOT BASED ON EVIDENCES, OPPOSED TO EVIDENCES ON REC ORDS AND BASED ON SURMISES AND CONJECTURES. 3. THAT NO NOTICE U/S. 148 HAS BEEN SERVED UPON THE APPELLANT, THEREFORE, ALL THE PROCEEDINGS U/S. 147/ 148 IS INVALID. 4. THAT THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 5,61,826/- ON ACCOUNT OF UNEXPLAINED CASH CREDITS U /S. 68 OF THE ACT AS THE APPELLANT COULD NOT PRODUCE ANY DOCUMENTARY EVIDENCE IN RESPECT OF THE CASH CREDI TS WHICH IS WRONG, PERVERSE, UNJUSTIFIABLE, NOT BASED ON EVIDENCES, OPPOSED TO EVIDENCES ON RECORDS AND BASE D ON SURMISES AND CONJECTURE. 5. THE APPLICANT CRAVES LEAVE TO MAKE ADDITION OR ALT ERATION, IF ANY ON THE GROUNDS OF APPEAL AT THE TIME OF HEAR ING, IF REQUIRED. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI LED HIS RETURN ON 31.10.2006 BY DECLARING TOTAL TAXABLE INCOME OF RS. 2,82,050/- AFTER CLAIMING DEDUCTION OF RS. 1,10,000/- UNDER CHAPTER VIA OF THE INCOME TAX ACT, 1961. AS PER THE INFORMATION RECEIVED FROM ACIT, CENTRAL CIRCLE10, J HANDEWALAN EXTENSION, NEW DELHI IT HAS COME TO THE NOTICE THAT SH. SATY A SHEEL GUPTA, THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF RS. 5,61,826/- F ROM SH. RAKESH GUPTA, SH. VISHESH GUPTA, SH. NAVNEET JAIN AND SH. VAIBHAV JAI N ENTRY PROVIDERS. ON THE BASIS OF THE INFORMATION, THE CASE WAS REOPENED U/S . 147 OF THE IT ACT, 1961 BY TAKING NECESSARY APPROVAL U/S. 151(2) OF THE ACT FO R INITIATING PROCEEDINGS U/S. 148 OF THE I.T. ACT. LATER ON NOTICE U/S. 148 DATED 30.3.2013 WAS SERVED AND ANOTHER NOTICE U/S. 142(1) DATED 19.6.2013 WAS ALSO SERVED REQUIRING HIM TO FILE THE RETURN. BUT IN RESPONSE THERETO THE ASSESSEE HA S STATED THAT EARLIER RETURN FILED 3 BY HIM ON 31.10.2006 MAY BE TREATED AS FILED IN RES PONSE TO NOTICE U/S. 148 OF THE ACT. STATUTORY NOTICE U/S. 143(2) DATED 13.9.2 013 ALONGWITH QUESTIONNAIRE ISSUED TO THE ASSESSEE FIXING THE CASE FOR 24.9.201 3 AND IN RESPONSE TO THE SAME ASSESSEES AR ATTENDED THE HEARING AND FILED THE DE TAILS. THEREAFTER, THE AO MADE AN ADDITION OF RS.5,61,826/- AND ASSESSED THE INCOME OF THE ASSESSEE AT RS. 8,43,880/-U/S. 147/143(3) OF THE I.T. ACT, 196 1 ON 28.2.2014. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C AME IN APPEAL BEFORE THE LEARNED CIT(A), WHO VIDE IMPUGNED ORDER DATED 29.3 .2016 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGAINST THE ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, LD. COUNSEL HAS STATED T HE ISSUES IN DISPUTE ARE SQUARELY COVERED BY THE ITAT, DELHI DECISION DATED 28.10.2015 IN THE CASE OF UNIQUE METAL INDUSTRIES VS. ITO IN ITA NO. 1372/DEL /2015. HE STATED THAT THE ASSESSMENT IN THIS CASE WAS ALSO REOPENED ON THE SA ME ALLEGATION. HE FURTHER SUBMITTED THAT THE FACTS OF THE CASE ARE IDENTICAL AS NUMBER OF ASSESSMENTS WERE OPENED BY THE SAME AO ON THE BASIS OF THE SAME SET OF INFORMATION AND BY RECORDING SIMILAR REASONS. HE DRAW OUR ATTENTION TO WARDS THE PAGE NO. 9 VIDE PARA 7 TO 13 OF THE TRIBUNALS ORDER DATED 28.10.20 15 WHEREIN, THE ISSUE OF REOPENING WAS HELD TO BE INVALID AND ACCORDINGLY TH E SAME WAS QUASHED. THEREFORE, HE REQUESTED THAT BY FOLLOWING THE SAID PRECEDENT, THE REOPENING PROCEEDINGS MAY BE QUASHED AND APPEAL OF THE ASSESS EE MAY BE ALLOWED. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND REQUESTED THAT THE SAME MAY BE UPHELD. 7. I HAVE HEARD THE BOTH PARTIES AND PERUSED AND C ONSIDERED THE RELEVANT RECORD AVAILABLE WITH US SPECIALLY THE IMPUGNED ORD ERS PASSED BY THE REVENUE AUTHORITIES AND THE COPY OF THE TRIBUNALS ORDER DA TED 28.10.2015 PASSED IN THE 4 CASE UNIQUE METAI INDUSTRIES VS. ITO IN ITA NO. 137 2/DEL/2015. IN MY VIEW, IT WILL BE RELEVANT TO REFER TO THE REASONS RECORDE D BY THE AO AND THE APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX WHICH READS AS UNDER:- 11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAP ED ASSESSMENT AN INFORMATION HAS BEEN RECEIVED FROM THE ACIT, CEN TRAL CIRCLE 10, NEW DELHI THAT SH. RAKESH GUPTA, SH. VIS HESH GUPTA, SH. NAVNEET GUPTA AND SH. VAIBHAV JAIN HAD PROVIDE D THE ACCOMMODATION ENTRIES THROUGH 37 FIRMS/ COMPANIES MANAGED / CONTROLLED BY THEM. THE LIST OF SUCH PERSONS / FIRM S/ COMPANIES INCLUDES THE NAME OF M/S GALAXY INDIA HAVING TAKEN ACCOMMODATION ENTRIES AMOUNTING TO RS. 5,61,826/-. WITH THIS PRECISE INFORMATION, I HAVE REASON TO BEL IEVE THAT THE ASSESEE HAS EVADED TAXES AND THE ABOVE TRANSACT IONS NEEDS VERIFICATION. KEEPING IN VIEW OF THE ABOVE FACTS, IT IS REQUESTED THAT NECESSARY APPROVAL U/S. 151(2) MAY KINDLY BE ACCORD ED FOR INITIATING PROCEEDINGS U/S. 148 OF THE I.T. ACT IN ORDER TO BOOK INCOME WHICH HAS ESCAPED ASSESSMENT. DATED: 30.03.2013 SD/- (SS SAHU) INCOME TAX OFFICER, WARD 25(1), NEW DELHI 12. WHETHER THE COMMISSIONER / BOARD / ADDL. CIT IS SATISFIED ON THE REASONS RECORDED BY THE ITO/A C/THAT 5 IS A FIT CASE FOR THE ISSUE OF A NOTICE U/S. 148. YES, I AGREE SD/- JOINT COMMISSIONER OF INCOME TAX RANGE-25, NEW DELHI 8. ON GOING THROUGH THE ABOVE REASONS IT IS EVID ENT THAT THIS ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF THE INFORMATION REC EIVED FROM THE LD. ACIT, CENTRAL CIRCLE-10, NEW DELHI. AS PER THIS, ACCOMMO DATION ENTRIES WERE OBTAINED BY VARIOUS PERSONS FROM SH. RAKESH GUPTA A ND SH. VISHESH GUPTA AS WELL AS SH. NAVNEET JAIN AND SH. VAIBHAV JAIN. COP Y OF THIS LIST WAS FORWARDED IN A CD TO THE ASSESSING OFFICER. THUS THIS LIST C ONTAINED THE NAME OF THE ASSESSEE. THE ASSESSING OFFICER REOPENED THE ASSESS MENT ON THE BASIS OF THIS INFORMATION. THE BASIS GIVEN BY THE ASSESSING OFFI CER IN THE REASONS IS THAT THESE PERSONS HAVE ADMITTED THAT THEY HAVE GIVEN AC COMMODATION ENTRIES TO THE PARTIES WHOSE LISTS HAVE BEEN PROVIDED BY THEM. FR OM THE ABOVE FACTS IT IS APPARENT THAT THE ASSESSING OFFICER AT THAT POINT O F TIME WHEN HE RECORDED THE REASONS WAS NOT HAVING THE COPY OF THE STATEMENT OR ANY OTHER MATERIAL IN WHICH THESE PEOPLE HAVE ALLEGED TO HAVE PROVIDED ACCOMMOD ATION ENTRIES TO THE ASSESSEE. THIS POSITION GETS ALSO CORROBORATED FRO M THE FACTS STATED BY THE ASSESSING OFFICER HIMSELF IN THE REASSESSMENT ORDER . 9. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I FIND CONSIDERABLE COGENCY IN THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE A RE SIMILAR TO THAT OF UNIQUE 6 METAL INDUSTRIES (SUPRA) AND THE LEGAL ISSUE OF R EOPENING IN THE ASSESSEES APPEAL IS SQUARELY COVERED BY THE ORDER DATED 28.1 0.2015 OF THIS BENCH PASSED IN THE CASE OF UNIQUE METAI INDUSTRIES VS. ITO IN I TA NO. 1372/DEL/2015 DATED 28.10.2015 WHEREIN, THE TRIBUNAL HAS ADJUDICATED T HE LEGAL ISSUE AT PAGE NO. 9 TO 23 VIDE PARA NO. 7 TO 13 AS UNDER:- 7. I HAVE PERUSED THE ASSESSMENT ORDER, ORDER PASS ED BY THE LEARNED CIT(A) AS WELL AS THE PAPER BOOK. IT WILL BE RELEVANT TO REFER TO THE REASONS RECORDED BY THE ASSESSING OFFI CER AND THE APPROVAL OF THE JOINT COMMISSIONER OF INCOME TAX WH ICH READS AS UNDER:- REASONS FOR THE BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF M/S UNIQUE METAL IND FOR THE ASSESSMENT YEAR 2006-07 A LETTER BEARING F.NO. ADDL. CIT/(HQ)/(COORD.)/ACCO MMODATION ENTRY/2012-13/15016 DATED 26.03.2013 WAS RECEIVED F ROM THE OFFICE OF THE CHIEF COMMISSIONER OF I. TAX, DELHI-I , NEW DELHI HEREIN FORWARDING LETTER BEARING F. NO. CIT-II/201 2-13/3898 DATED 19.3.2013 RECEIVED FROM THE COMMISSIONER OF I . TAX, CENTRAL-II, NEW DELHI ALONG WITH A CD CONTAINING TH E DETAILS OF ACCOMMODATION ENTRIES PROVIDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA AND SH. NAVNEET JAIN & SH. VAIBHAV JA IN AND DIRECT THIS OFFICE TO TAKE NECESSARY ACTION AS PER SECTION 148 IN RESPECT OF ENTRIES PERTAINING TO A.Y. 2006-07, WHICH IS TIME B ARRING ON 31.03.2013. THE INFORMATION PROVIDED BY THE CIT, CENTRAL-II, NE W DELHI VIDE HIS LETTER DATED 19.03.2013 READS AS UNDER:- 7 KINDLY FIND ENCLOSED HEREWITH LETTER DATED 13.03.2 013 OF ACIT, CENTRAL CIRCLE-10 DULY FORWARDED BY THE ADDL. CIT, CENTRAL RANGE- IV, ALONG WITH ITS ENCLOSURES ON THE SUBJECT MENTIO NED ABOVE. 2. THE ASSESSMENT OF SEARCH CASES OF SH. RAKESH GUP TA, SH. VISHESH GUPTA, SH. NAVNEET JAIN & SH. VAIBHAV JAIN ARE UNDER PROCESS WITH THE ACIT, CENTRAL CIRCLE-10. DURING T HE ASSESSMENT PROCEEDINGS U/S 153A IN THE AFORESAID CASES, DETAIL S REGARDING ACCOMMODATION ENTRIES GIVEN BY THE ABOVE ENTRY PROV IDERS HAS BEEN OBTAINED BY THE AO. 3. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS HAS B EEN OBTAINED FROM SH. RAKESH GUPTA AND SH. VISHESH GUPT A. HARD COPY OF THE LIST IS ENCLOSED AS ANNEXURE A, DULY SI GNED BY SH. VISHESH GUPTA. THE LIST GIVES THE NAME OF THE FIRM WHICH HAS PROVIDED THE ACCOMMODATION ENTRY ALONG WITH THE NAM E AND ADDRESS OF RECIPIENTS OF ACCOMMODATION ENTRY. 4. SH. NAVEEN JAIN & SH. VSAIBHAV JAIN HAS PROVIDED ACCOMMODATION ENTRY THROUGH THIRTY-SEVEN PAPER ENTI TIES. THE LIST OF THE FIRMS GIVING ACCOMMODATION ENTRY IS ENCLOSED AS ANNEXURE- B. THE LIST OF ACCOMMODATION ENTRY RECIPIENTS, HAS BEEN OBTAINED FROM SH. NAVNEET JAIN & SH. VAIBHAV JAIN. IT DOES NOT GIVE YEAR WISE BIFURCATION. HARD COPY OF THE LOST IS ENCLOSE D AS ANNEXURE-C, DULY SIGNED BY SH. VAIBHAV JAIN. THUS, THE FIRMS ME NTION IN THE LIST B HAVE PROVIDED ACCOMMODATION ENTRIES TO THE FIRM S MENTIONED IN LIST C. 5. THE SOFT COPY OF THE INFORMATION IN RESPECT TO A NNEXURE A, B & C IS ALSO ENCLOSED. 8 6. THE INFORMATION OF ACCOMMODATION ENTRY INCLUDES A.Y. 2006- 07 ALSO, WHICH IS A TIME BARRING YEAR FOR TAKING AC TION U/S 148. 7. THE INFORMATION IS FORWARDED TO YOU FOR EARLY DI SSEMINATION TO VARIOUS FIELD OFFICERS IN DELHI (SOFT COPY ALSO ENCLOSED). ON EXAMINING THE LIST OF ACCOMMODATION ENTRIES PROV IDED BY SH. RAKESH GUPTA & SH. VISHESH GUPTA DN SH. NAVNEET JAIN & SH. VAIBHAV JAIN PERTAINING TO A.Y. 2006-07, IT IS NOTED THAT THE FO LLOWING ACCOMMODATION ENTRIES HAVE BEEN TAKEN BY THE ASSESSEE NAMELY M/S UNIQUE METAL INDUSTRIES:- SL. NO. ACCOMMODATION ENTRY PROVIDED BY NAME OF PARTY TO WHOM ACCOMMODATION ENTRY IS PROVIDED AMOUNT OF ACCOMMODATION ENTRY 1 SHREE SHYAM TRADING CO. M/S UNIQUE METAL INDUSTRIES RS.2,44,399/- 2 VISHNU TRADING CO. M/S UNIQUE METAL INDUSTRIES RS .8,12,542/- 3 SHREE BANKEYBIHARI M/S UNIQUE METAL INDUSTRIES RS .3,28,368/- TOTAL AMOUNT OF ENTRIES= RS.13,85,309/- SINCE SH. RAKEH GUPTA & SH. VISHESH GUPTA DN SH. NA VNEET JAIN & SH. VAIBHAV JAIN DURING THE COURSE OF ASSESSMENT PROCEE DINGS U/S 153A OF I. TAX ACT HAVE ADMITTED THAT THEY HAVE GIVEN ACCOMMOD ATION ENTRIES TO THE PARTIES WHOSE LISTS HAVE BEEN PROVIDED BY THEM TO T HE ACIT, CENTRAL CIRCLE-10, NEW DELHI, THEREFORE, IT IS FAIR TO CONC LUDE THAT M/S UNIQUE METAL INDUSTRIES WHOSE NAME IS APPEARING IN THE SAI D LIST, HAS TAKEN 9 ACCOMMODATION ENTRIES FROM SH. RAKEH GUPTA & SH. VI SHESH GUPTA DN SH. NAVNEET JAIN & SH. VAIBHAV JAIN PERTAINING TO A .Y. 2006-07. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T INCOME CHARGEABLE TO TAX OF M/S UNIQUE METAL INDUSTRIES AMOUNTING TO RS. 13,85,309/-FOR THE F.Y. 2005-06 RELEVANT TO A.Y. 2006-07 HAS ESCAPED A SSESSMENT AND IT IS A FIT CASE FOR INITIATION OF PROCEEDINGS U/S 147 OF T HE ACT. PROPOSAL IN THE PRESCRIBED FORM FOR THE A.Y. 2006-0 7 (F.Y. 2005-06) IS SUBMITTED HEREWITH FOR KIND CONSIDERATION AND NECES SARY APPROVAL U/S 2006-07 (F.Y. 2005-06) IS SUBMITTED HEREWITH FOR KI ND CONSIDERATION AND NECESSARY APPROVAL U/S 151(2) OF THE I. TAX ACT, 19 61 AS THE SAME IS GETTING BARRED BY LIMITATION ON 31/3/2013. IF APPROVED, NOTICE U/S 148 OF THE ACT MAY BE ISSU ED. SD/- 28.3.2013 (PAWANKUMARVASHIST) INCOME TAX OFFICER WARD-39(3), NEW DELHI JOINT CIT, RANGE-39, N.DELHI FOR THE REASONS RECORDED BY THE AO, ITO WARD 39(3 ), IT IS A FIT CASE FOR ISSUE OF NOTICE U/S 148 OF THE I.T. SCT, 1 961. ACCORDINGLY NECESSARY APPROVAL FOR REOPENING THE ABOVE CASE FOR A.Y. 2006-07 IS HEREBY GIVEN S PER THE PROVISION OF SECTION 151(2) OF I.T. ACT, 1961. ITO, WARD 39(3) SD/- 28.3.2013 (VIJAY BABUVASANTA) JT. COMMISSION OF INCOME TAX RANGE-39, NEW DELHI 10 8. ON GOING THROUGH THE ABOVE REASONS IT IS EVID ENT THAT THIS ASSESSMENT HAS BEEN REOPENED ON THE BASIS OF THE LETTER RECEIV ED FROM THE LD. CIT, CENTRAL-2, NEW DELHI WITH THE DIRECTION TO TAKE NEC ESSARY ACTION AS PER SECTION 148 OF THE ACT. AS PER THIS, ACCOMMOD ATION ENTRIES WERE OBTAINED BY VARIOUS PERSONS FROM SH. RAKESH GUPTA A ND SH. VISHESH GUPTA AS WELL AS SH. NAVNEET JAIN AND SH. VAIBHAV J AIN. COPY OF THIS LIST WAS FORWARDED IN A CD TO THE ASSESSING OFFICER. TH US THIS LIST CONTAINED THE NAME OF THE ASSESSEE. THE ASSESSING OFFICER REO PENED THE ASSESSMENT ON THE BASIS OF THIS INFORMATION. THE BASIS GIVEN BY THE ASSESSING OFFICER IN THE REASONS IS THAT THESE PERSONS HAVE ADMITTED THAT THEY HAVE GIVEN ACCOMMODATION ENTRIES TO THE PARTIES WHOSE LISTS HA VE BEEN PROVIDED BY THEM. FROM THE ABOVE FACTS IT IS APPARENT THAT THE ASSESSING OFFICER AT THAT POINT OF TIME WHEN HE RECORDED THE REASONS WAS NOT HAVING THE COPY OF THE STATEMENT OR ANY OTHER MATERIAL IN WHICH THE SE PEOPLE HAVE ALLEGED TO HAVE PROVIDED ACCOMMODATION ENTRIES TO THE ASSES SEE. THIS POSITION GETS ALSO CORROBORATED FROM THE FACTS STATED BY THE ASSESSING OFFICER HIMSELF IN THE REASSESSMENT ORDER IN PARA 3 PAGE 5 WHICH READ AS UNDER:- HERE IT IS PERTINENT TO MENTION THAT IN THE INTERV ENING PERIOD, THIS OFFICE HAD CONVERSATIONS WITH THE ACIT, CENTRAL CIR CLE-10, NEW DELHI FROM WHOM VIDE THIS OFFICES LETTER DATED 23. 07.2013, 02.09.2013, 14.10.2013, 06.11.2013, 22.11.2013, 09. 12.2013 & 11 24.12.2013 AND VIDE JOINT CIT, RANGE-39, NEW DELHI S LETTER DATED 16.12.2013, THE FOLLOWING DETAILS/DOCUMENTS WERE SO UGHT:- I) COPIES OF THE STATEMENTS RECORDED OF SH. RAKEH GUPT A & SH. VISHESH GUPTA DN SH. NAVNEET JAIN & SH. VAIBHAV JAIN IN SEA RCH/POST SEARCH/ASSESSMENT PROCEEDINGS. II) SOFT COPIES OF THE TATEMENTS RECORDED OF SH. RAKEH GUPTA & SH. VISHESH GUPTA DN SH. NAVNEET JAIN & SH. VAIBHAV JAI N IN SEARCH/POST SEARCH/ASSESSMENT PROCEEDINGS.\ III) HARD COPY OF ASSESSMENT ORDERS PASSED IN THESE CASE S FOR A.Y. 2006-7 IV) SOFT COPY OF ASSESSMENT ORDERS PASSED IN THESE CASE S FOR A.Y. 2006-07 V) ANY OTHER DETAIL/DOCUMENT YOU MAY DEEM FIT THAT NEE D TO BE CONFRONTED WITH THE PARTIES WHOSE CASES HAVE BEEN R EOPENED U/S 148 OF I. TAX ACT. 4. IN RESPONSE TO THESE LETTERS, THE ACIT, CENTRAL CIRCLE-10, NEW DELHI VIDE HIS LETTER DATED 20.12.2013, RECEIVED BY THIS OFFICE ON 27.12.2013, FORWARDED HIS REPLY ALONG WITH SUPPORTI NG DOCUMENTS, WHICH WERE RUNNING INTO 92 PAGES. AFTER GOING THROUGH TH E REPLY FORWARDED BY THE ACIT, CENTRAL CIRCLE-10, NEW DELHI AND THE ANNE XURE ENCLOSED THEREIN, THIS OFFICE WAS OF THE VIEW THAT THE PURCH ASE BILLS PROVIDED BY THE 11 FIRMS/CONCERS CONTROLLED AND MANAGED BY SH. RAKE SH GUPTA AND SH. VISHESHGUPT OR THEIR FAMILY MEMBERS IS NOTHING BUT BOGUS PURCHASE BILLS/ACCOMMODATION BILLS. 9. THE ABOVE FACTS STATED BY THE ASSESSING OFFICER MAKES IT ABUNDANTLY CLEAR THAT AT THE TIME OF FORMATION OF T HE BELIEF TO REOPEN ASSESSMENT THE ASSESSING OFFICER WAS NOT HAVING THE ABOVE SAID INFORMATION. ONLY THAT HE WAS HAVING THE LETTER AL ONG WITH LIST WHICH WAS FORWARDED BY THE CIT, CENTRAL-2, NEW DELHI. 12 10. THE ABOVE OBSERVATION OF THE ASSESSING OFFICER ALSO SHOWS THAT IT WAS LETTER DATED 20.12.2013 RECEIVED BY HIM ON 27.1 2.2013 ON THE BASIS OF WHICH THE ASSESSING OFFICER COULD MAKE A VIEW TH AT THE PURCHASE BILLS PROVIDED BY THESE PERSONS OR THEIR FAMILY MEMBERS I S NOTHING BUT BOGUS PURCHASE BILLS. AT THE TIME OF RECORDING OF THE RE ASONS THE ASSESSING OFFICER APPARENTLY WAS NOT HAVING ANY IDEA ABOUT TH E NATURE OF THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE. IN THE REASONS RECORDED THERE IS NO MENTION ABOUT THE NATURE OF THE TRANSACTIONS. AS PER PROVISION OF SECTION 147 AN ASSESSMENT CAN BE REOPENED IF THE AS SESSING OFFICER HAS REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT. THE REASONS TO BELIEVE HAS TO BE THAT OF THE ASSESSING OFFICER AND FURTHER THERE HAVE TO BE APPLICATION OF MIND BY THE ASSESSING OFFICER THOUGH THE REASONS TO BELIEVE DOES NOT MEAN THAT TH E ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT THAT INCOM E HAS ESCAPED ASSESSMENT BUT AT THE SAME TIME, IT ALSO MEANS THAT THE ASSESSING OFFICER IS REQUIRED TO EXAMINE THE FACTS ON THE BASIS OF TH E INFORMATION AND SATISFY HIMSELF THAT THE TAXABLE INCOME HAS ESCAPED ASSESSM ENT. IN THE PRESENT CASE, ON GOING THROUGH THE REASONS IT IS QUITE EVID ENT THAT THE ASSESSING OFFICER WAS ALSO NOT AWARE OF THE NATURE OF THE ACC OMMODATION ENTRIES. IN THE REASONS RECORDED HE HAS SIMPLY MENTIONED THE NAME OF THE PARTY AND THE AMOUNT AND NOWHERE HAS STATED THE NATURE OF SUCH ENTRY. THIS ALSO SHOWS THAT THE ASSESSING OFFICER HAS MADE NO E FFORT TO LOOK INTO THE 13 RETURN OF THE ASSESSEE WHICH WAS AVAILABLE WITH HIM . THIS FACT GETS FURTHER SUPPORTED FROM THE SHEET APPENDED TO THE RE ASONS AND QUOTED ON PAGE 4 OF THE ASSESSMENT ORDER WHEREBY AGAINST ITEM NO. 7, WHETHER THE ASSESSMENT IS PROPOSED TO BE MADE FOR THE FIRST TIM E, THE ASSESSING OFFICER HAS STATED YES, AND IN COLUMN NO. 7(A), WHETHER A NY VOLUNTARY RETURN HAD ALREADY BEEN FILED AND IN COLUMN NO. 8 (B), DAT E OF FILING THE SAID RETURN NA HAS BEEN STATED. THUS THIS IS A CLEAR CASE OF NON-APPLICATION OF MIND BY THE ASSESSING OFFICER. IT MAY ALSO BE RE LEVANT THAT ON PAGE 2 OF THE ASSESSMENT ORDER, THE ASSESSING OFFICER HIMSELF HAS STATED THAT IN THIS CASE THE RETURN OF INCOME FOR THE YEAR UNDER CONSID ERATION WAS FILED WITH THIS WARD ON 27.09.2006. THESE FACTS CLEARLY DEMON STRATE THAT THE RETURN WAS WITH THE SAME WARD AND AT THE TIME OF RECORDING OF THE REASONS FOR REOPENING THE ASSESSMENT, THE ASSESSING OFFICER HAS NOT LOOKED AT THE RETURN AND IN A MECHANICAL WAY, ON RECEIPT OF THE L ETTER FROM THE CIT, CENTRAL-2, NEW DELHI THE ASSESSMENT HAS BEEN REOPEN ED. IT IS A SETTLED POSITION OF LAW THAT THERE MUST BE MATERIAL FOR FOR MATION OF A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. FURTHER REASONS REF ERRED TO MUST DISCLOSE PROCESS OF REASONING BY WHICH THE ASSESSIN G OFFICER HOLDS REASON TO BELIEVE. THERE MUST BE NEXUS BETWEEN SUC H MATERIAL AND BELIEF. FURTHER AND MOST IMPORTANTLY THE REASONS REFERRED T O MUST SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER. IT I S ALSO A SETTLED LAW THAT THE VALIDITY OF THE INITIATION OF THE REASSESSMENT PROCEEDING IS TO BE 14 JUDGED WITH REFERENCE TO THE MATERIAL AVAILABLE WIT H THE ASSESSING OFFICER AT THE POINT OF TIME OF THE ISSUE OF NOTICE UNDER S ECTION 148. IN THE PRESENT CASE, AS IS EVIDENT FROM THE ASSESSMENT ORD ER, THE ASSESSING OFFICER WAS HAVING NOTHING EXCEPT THE LIST PROVIDED BY THE CIT, CENTRAL-2, NEW DELHI ABOUT THE LIST OF ACCOMMODATION ENTRIES. BEYOND THAT HE WAS NOT HAVING THE COPIES OF THE STATEMENT OF ANY OF TH ESE PERSONS. HE WAS NOT HAVING COPY OF THE ASSESSMENT ORDERS AND OTHER DETAILS OR DOCUMENT WHICH WOULD HAVE ENABLED THE ASSESSING OFFICER TO A PPLY HIS MIND AND FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IN FACT THIS INFORMATION WAS NOT WITH THE ASSESSING OFFICER TILL FAG END OF THE REASSESSMENT PROCEEDINGS, A FACT ADMITTED BY THE AS SESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER. THE JUDGMENT RELI ED UPON BY THE LEARNED AR ALSO SUPPORTS THE CASE OF THE ASSESSEE. IN THE CASE OF SARTHAK SECURITIES PVT. LTD. VS. ITO (2009) 329 ITR 110 THE HONBLE JURISDICTIONAL DELHI HIGH COURT HAS HELD THAT UNDER THE CIRCUMSTAN CES NARRATED HEREINABOVE THE REOPENING CANNOT BE SAID TO BE A VA LID REOPENING. THE HONBLE COURT HAS HELD AS UNDER:- IN THE CASE AT HAND, AS IS EVINCIBLE, THE AO WAS A WARE OF THE EXISTENCE OF FOUR COMPANIES WITH WHOM THE ASSESSEE HAD ENTERED INTO TRANSACTION. BOTH THE ORDERS CLEARLY EXPOSIT T HAT THE AO WAS MADE AWARE OF THE SITUATION BY THE INVESTIGATION WI NG AND THERE IS NO MENTION THAT THESE COMPANIES ARE FICTITIOUS C OMPANIES. NEITHER THE REASONS IN THE INITIAL NOTICE NOR THE C OMMUNICATION 15 PROVIDING REASONS REMOTELY INDICATE INDEPENDENT APP LICATION OF MIND. TRUE IT IS, AT THAT STAGE, IT IS NOT NECESSAR Y TO HAVE THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME BUT WHAT I S NECESSARY IS THAT THERE IS RELEVANT MATERIAL ON WHICH A REASONAB LE PERSON COULD HAVE FORMED THE REQUISITE BELIEF. TO ELABORAT E, THE CONCLUSIVE PROOF IS NOT GERMANE AT THIS STAGE BUT T HE FORMATION OF BELIEF MUST BE ON THE BASE OR FOUNDATION OR PLATFOR M OF PRUDENCE WHICH A REASONABLE PERSON IS REQUIRED TO APPLY. AS IS MANIFEST FROM THE PERUSAL OF THE SUPPLY OF REASONS AND THE O RDER OF REJECTION OF OBJECTIONS, THE NAMES OF THE COMPANIES WERE AVAILABLE WITH THE AUTHORITY. THEIR EXISTENCE IS NO T DISPUTED. WHAT IS MENTIONED IS THAT THESE COMPANIES WERE USED AS C ONDUITS. THE SAME HAS NOT BEEN REFERRED TO WHILE PASSING THE ORD ER OF REJECTION. THE ASSESSEE IN HIS OBJECTIONS HAD CLEAR LY STATED THAT THE COMPANIES HAD BANK ACCOUNTS AND PAYMENTS WERE M ADE TO THE ASSESSEE COMPANY THROUGH BANKING CHANNEL. THE IDENT ITY OF THE COMPANIES WAS NOT DISPUTED. UNDER THESE CIRCUMSTANC ES, IT WOULD NOT BE APPROPRIATE TO REQUIRE THE ASSESSEE TO GO TH ROUGH THE ENTIRE GAMUT OF PROCEEDINGS. IT IS TOTALLY UNWARRAN TED. RESULTANTLY, THE INITIATION OF PROCEEDINGS UNDER S. 147 AND ISSUANCE OF NOTICE UNDER S. 148 ARE HEREBY QUASHED. 11. SIMILARLY IN SIGNATURE HOTELS (P) LTD. VS. ITO (2011) 338 ITR 51 (DEL) THE HONBLE COURT HAS ALSO QUASHED THE REOPEN ING OF THE ASSESSMENT ON THE GROUND THAT THE AO DID NOT INDEPE NDENTLY APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME TAX (INV.). THE RELEVANT OBSERVATION OF THE COURT READS AS UNDE R:- 16 THE FIRST SENTENCE OF THE REASONS STATES THAT INFO RMATION HAD BEEN RECEIVED FROM DIRECTOR OF IT (INV.) THAT THE P ETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING FIN ANCIAL YEAR 2002-03 AS PER THE DETAILS GIVEN IN ANNEXURE. THE S AID ANNEXURE RELATES TO A CHEQUE RECEIVED BY THE PETITIONER ON 9 TH OCT., 2002 FROM SS LTD. FROM THE BANK AND THE ACCOUNT NUMBER M ENTIONED THEREIN. THE LAST SENTENCE RECORDS THAT AS PER THE INFORMATION, THE AMOUNT RECEIVED WAS NOTHING BUT AN ACCOMMODATION EN TRY AND THE ASSESSEE WAS THE BENEFICIARY. THE AFORESAID REA SONS DO NOT SATISFY THE REQUIREMENTS OF S. 147. THE REASONS AND THE INFORMATION REFERRED TO IS EXTREMELY SCANTY AND VAG UE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT A NNEXURE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDEN CE THAT PRIMA FACIE SHOWS OR ESTABLISHES NEXUS OR LINK WHIC H DISCLOSES ESCAPEMENT OF INCOME. ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, IT IS APPAR ENT THAT THE AO DID NOT APPLY HIS OWN MIND TO THE INFORMATION AN D EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THE AO A CCEPTED THE PLEA ON THE BASIS OF VAGUE INFORMATION IN A MECHANI CAL MANNER. THE CIT ALSO ACTED ON THE SAME BASIS BY MECHANICALL Y GIVING HIS APPROVAL. THE REASONS RECORDED REFLECT THAT THE AO DID NOT INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION REC EIVED FROM THE DIRECTOR OF IT (INV.) AND ARRIVE AT A BELIEF WH ETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT. COMPANY SS LTD. HAD APPLIED FOR AND WAS ALLOTTED SHARES IN THE PETITIONER COMPA NY ON PAYMENT BY CHEQUE OF RS. 5 LACS. SS 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 INC ORPORATED ON 4TH JAN., 1989 AND WAS ALSO ALLOTTED PAN IN SEPTEMB ER, 2001. 17 THE FACTS INDICATED ABOVE DO NOT SHOW THAT SS LTD. IS A NON- EXISTING AND A FICTITIOUS ENTITY/PERSON. FOR THE RE ASONS STATED ABOVE, WRIT OF CERTIORARI IS ISSUED QUASHING THE PR OCEEDINGS UNDER S. 148 12. IN THE CASE OF CIT VS. SFIL STOCKBROKING CO. (2 010) 325 ITR 285 (DEL) ALSO THE HONBLE HIGH COURT HAS QUASHED THE R EOPENING PROCEEDINGS ON THE GROUND THAT FROM THE REASONS IT IS NOT DISCERNIBLE AS TO WHETHER THE AO HAS APPLIED HIS MIND TO THE INFORMAT ION AND INDEPENDENTLY ARRIVED AT A BELIEF THAT INCOME HAS E SCAPED ASSESSMENT. THE HONBLE COURT HAS HELD AS UNDER:- THE FIRST SENTENCE OF THE SO-CALLED REASONS RECORD ED BY THE AO IS MERE INFORMATION RECEIVED FROM THE DY. DIRECTOR OF IT (INV.). THE SECOND SENTENCE IS A DIRECTION GIVEN BY THE VERY SA ME DY. DIRECTOR TO ISSUE A NOTICE UNDER S. 148 AND THE THI RD SENTENCE AGAIN COMPRISES OF A DIRECTION GIVEN BY THE ADDL. C IT TO INITIATE PROCEEDINGS UNDER S. 148 IN RESPECT OF CASES PERTAI NING TO THE RELEVANT WARD. THESE THREE SENTENCE ARE FOLLOWED BY THE FOLLOWING SENTENCE, WHICH IS THE CONCLUDING PORTION OF THE SO -CALLED REASONS : 'THUS, I HAVE SUFFICIENT INFORMATION IN MY POSSES SION TO ISSUE NOTICE UNDER S. 148 IN THE CASE OF M/S SFIL STOCK B ROKING LTD. ON THE BASIS OF REASONS RECORDED AS ABOVE.' FROM THE A BOVE, IT IS CLEAR THAT THE AO REFERRED TO THE INFORMATION AND T HE TWO DIRECTIONS AS 'REASONS' ON THE BASIS OF WHICH HE WA S PROCEEDING TO ISSUE NOTICE UNDER S. 148. THESE CANNOT BE THE REAS ONS FOR PROCEEDING UNDER S. 147/148. THE FIRST PART IS ONLY AN INFORMATION AND THE SECOND AND THE THIRD PARTS OF THE BEGINNING PARA OF THE 18 SO-CALLED REASONS ARE MERE DIRECTIONS. FROM THE SO- CALLED REASONS, IT IS NOT AT ALL DISCERNIBLE AS TO WHETHER THE AO HAD APPLIED HIS MIND TO THE INFORMATION AND INDEPENDENT LY ARRIVED AT A BELIEF THAT, ON THE BASIS OF THE MATERIAL WHICH H E HAD BEFORE HIM, INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, T HE TRIBUNAL HAS ARRIVED AT THE CORRECT CONCLUSION ON FACTS. THE RE IS NO SUBSTANTIAL QUESTION OF LAW WHICH ARISES FOR CONSID ERATION. 13. IN VIEW OF THE ABOVE DISCUSSED FACTS OF THE P RESENT CASE, THE REOPENING OF THE ASSESSMENT IS WITHOUT APPLICATION OF MIND AND EXAMINATION OF THE FACTS AND ACCORDINGLY THE REOPEN ING IS HELD TO BE INVALID AND ACCORDINGLY THE SAME IS QUASHED. AC CORDINGLY THE REOPENING IS HELD TO BE BAD IN LAW AND GROUND NOS.2 AND 3 ARE ALLOWED. 10. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE FACTS AND CIRCUMSTANCES OF THE PRESE NT CASE ARE EXACTLY SIMILAR AND IDENTICAL TO THE FACTS AND CIRCUMSTANCES OF THE CAS E OF UNIQUE METAL INDUSTRIES VS. ITO DECIDED BY THE ITAT, SMC-2, BENCH, DELHI VI DE ORDER DATED 28.10.2015 PASSED IN ITA NO. 1372/DEL/2015 (AY 2006 -07). THEREFORE, RESPECTFULLY, FOLLOWING THE PRECEDENT OF THE COORDI NATE BENCH, AS AFORESAID, I ALLOW THE APPEAL OF THE ASSESSEE BY HOLDING THAT THE REOPENING IN THE PRESENT CASE IS BAD IN LAW AND THEREFORE, I QUASH THE REOP ENING PROCEEDINGS. 19 11. SINCE I HAVE QUASHED THE REOPENING IN THE PRES ENT CASE, THE OTHER ISSUES HAVE NOT BEEN ADJUDICATED UPON. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/10/2016. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE 17/10/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES