Shraddha Jain, Delhi V. ITO, New Delhi

ITA 3280/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6611 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 08-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 22-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: V K TULSIYAN
• Keywords: Reopening of assessment; Gift; Document seized; Tangible material; Accommodation entries; Reason to believe; Documents seized; Reassessment proceedings
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC-2, NEW DELHI BEFORE SRI G.D. AGARWAL, HONBLE VICE PRESIDENT SRI C.M.GARG, JUDICIAL MEMBER ITA NO. 3280/DEL. 2015 : ASSTT. YEAR : 2004-05 SHRADDHA JAIN 2234, DHARAMPURA DELHI VS ITO WARD 29(2) NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. ADIPJ7871R ASSESSEE BY : SH. V.K.TULS IYAN, C.A. REVENUE BY : SH. P.DAM KAN UNJNA, SR. DR DATE OF HEARING : 08.12.2015 DATE OF PRONOUNCEMENT : 24.02.2016 ORDER PER C.M.GARG, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE DIRE CTED AGAINST THE ORDER OF THE CIT(A)-XVI, NEW DELHI DATED 17.03.2015 PASSE D IN FIRST APPEAL NO. 42/2012-13 FOR AY 2004-05. 2. THE GROUNDS RAISED BY THE ASSESSEE IN THIS APP EAL READ AS UNDER : 1. WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDI NG THE ASSUMPTION OF JURISDICTION WITHOUT PROPER APPRECIAT ING THE SUBMISSION IN THE FOLLOWING MANNER THAT :-. 1(A) WHERE THE LD. AO INVOKED SEC. 147 / 148 JUST B ASED ON GENERAL & MASS IN NATURE INFORMATION EVEN NEITHER IT WAS NO T BASED UPON AN ITA NO. 3280/DEL/2015 SHRADD HA JAIN 2 IOTA OF EVIDENCE NOR WAS ANY TANGIBLE EVIDENCE BROU GHT ON RECORD TO SUBSTANTIATE THE INFORMATION INTO REASONS 1(B) BY NOT DISPOSING THE OBJECTION ON THE ISSUE OF JURISDICTION AS RAISED. 1(C) BY TREATING THE DETAILS FILED DURING ASSESSMEN T PROCEEDINGS AS EQUALING AND SUFFICIENT MATERIAL FOR INVOKING SEC. 147/148. 2. WHETHER THE LD. CIT(A) WAS JUSTIFIED BY UPHOLDI NG THE ADDITION ON A/C OF GIFT OF RS. 501000/- U/S 68 WITHOUT PROPE RLY CONSIDERING THE EVIDENCE ON RECORD OR ANY CONTRARY MATERIAL ON RECO RD TO DRAW ANY ADVERSE INFERENCE. 3. WHETHER THE LD. CIT(A) WAS JUSTIFIED BY NOT ADJ UDICATING UPON GROUND NO. 2 I.E. ADDITION OF RS. 25050/- MADE BY T HE AO ON A/C OF THE ABOVE ALLEGED GIFT JUST ON SURMISES AND CONJECT URES. LEGAL GROUND NOS. 1 TO 1(C) OF THE ASSESSEE 3. THE LD. ASSESSEES REPRESENTATIVE (AR) AND LD. DEPARTMENTAL REPRESENTATIVE (DR) AGREED TO THAT THE LEGAL OBJECT IONS OF THE ASSESSEE CONTAINED IN GROUND NO. 1 TO 1(C) SHOULD BE HEARD F IRST AND HENCE, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDE ON THE SAID LEGAL GROUNDS AND ALSO CAREFULLY PERUSED THE MATERIALS PLACED ON RECORD BEFORE US. 4. THE LD. AR PLACING RELIANCE OF THE PREPOSI TIONS LAID DOWN HONBLE HIGH COURT OF DELHI IN THE CASE OF SARTHAK SECURITIES U/ S 270 329 ITR 110 (DELHI), CIT VS. VINEETA JAIN 299 ITR 383 (DELHI), CIT VS. I NSECTICIDES (INDIA) LTD. 357 ITR 330 (DELHI) AND ORDERS OF ITAT DELHI IN THE CAS E OF ITO VS. ON EXIMS PVT. LTD. (2013) 57 TTJ 633 (ITAT-DELHI) AND ACIT V S. SHRI DEVESH KUMAR IN ITA NO. 2068/DEL/2010 DATED 31.10.2014 SUBMITTED TH AT THE AO IN THE REASONS RECORDED FOR INITIATION OF PROCEEDINGS U/S 147 OF T HE ACT AND ISSUANCE OF NOTICE U/S 148 OF THE ACT, COPY AVAILABLE AT PAGE 34 OF A SSESSEES PAPER BOOK, HAS NOT MENTIONED EVEN DETAILS OF CHEQUE ETC. AND THE REAS ONS RECORDED ARE VAGUE AND HAS BEEN RECORDED WITHOUT APPLICATION OF MIND THUS THE AO WRONGLY ASSUMED ITA NO. 3280/DEL/2015 SHRADD HA JAIN 3 JURISDICTION JUST ON A PIECE OF INFORMATION WITHOUT FULFILLING INGREDIENTS AND REQUIREMENTS U/S 147/148 OF THE ACT. 5. REPLYING TO THE ABOVE, THE LD. DR SUPPORTING THE ACTION OF THE AO, CONTENDED THAT THE ASSESSEE RECEIVED ACCOMMODATION ENTRY IN THE GARB OF GIFT AND THIS FACT WAS INFORMED TO THE AO BY THE SUPPLEM ENTARY LIST OF BENEFICIARIES RECEIVED FROM DCIT CENTRAL CIRCLE-III LETTER DATED 27/01/2006 & 4/7.3. 2005 AND THESE FACTS HAS BEEN MENTIONED IN THE REASONS RECORDED, WHICH ARE SUFFICE TO ASSUME VALID JURISDICTION FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT. 6. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBM ISSIONS OF BOTH THE SIDES AT THE OUTSET WE FIND IT APPROPRIATE TO REPRODUCE THE REASONS RECORDED BY THE AO ON 20.3.2005, FOR SAKE OF COMPLETENESS, WHICH IS AS UNDER :- SMT. SHARDHA JAIN, 2234, DHARAMPURA, DELHI. 110 006. (ASSTT. YEAR 2004-05) AS PER THE SUPPLEMENTARY LIST OF BENEFICIAR IES PROVIDED/ RECEIVED FROM DCIT CENTRAL CIRCLE III, VIDE F. NO. DCIT/CENTRAL CIRCLE-III/0 5-06 DATED 27.01.2006 AND 4/7.3.2005 THE ABOVE MENTIONED ASSESSEE IS A BENEFICIARIES OF ENTR Y OPERATOR AS DETAILS GIVEN BELOW: S.NO . NAME OF THE ENTRY GIVE R VALUE OF ENTRY DATE OF ENTRY 01. MS. SITA DEVI 5, 01,000/- 24.01.2004 THE ABOVE MENTIONED PERSON HENCEFORTH REFE RRED TO AS ASSESSEE ALSO APPEAR IN THE LIST OF SUCH BENEFICIARIES OF HAVING CHANNELIZED HIS UND ISCLOSED INCOME IN THE GARB OF GIFT/FAKE TRANSACTIONS FROM THE ABOVE MENTIONED PERSON TO THE TUNE OF RS. 5,01,000/- FOR THE FINANCIAL YEAR 2003-04 RELEVANT TO ASSESSMENT YEAR 2004-05. T HE MODUS OPERANDI IS THAT THE ASSESSEE ACTUALLY PAID AN AMOUNT EQUIVALENT TO THE AMOUNT OF DRAFT/CHEQUE RECEIVED IN THE FORM OF GIFT, FROM THE ABOVE MENTIONED PERSON. SO, IN VIEW OF THE ABOVE I HAVE REASON TO BELIEVE THAT THE SAID INCOME OF RS. 5,01,000/- CHARGEABLE TO TAX HAD ESCAPED THE ASSESS MENT FOR THE RELEVANT ASSESSMENT YEAR, AND IT IS A FIT CASE TO ISSUE NOTICE U/S 148. NOTICE U/S 148 IS, THEREFORE, BEING ISSUED IN THIS CASE. DATED 20.3.2008 SD/- (K.A.KURIAN) INCOME TAX OFFICER WARD 20(2), NEW DELHI ITA NO. 3280/DEL/2015 SHRADD HA JAIN 4 7. FURTHER, FROM ABOVE IT IS APPARENT THAT THE AO HAS SIMPLY RELIED ON THE LIST OF SO CALLED BENEFICIARIES AND NOTED THAT AS THE AS SESSEE ALSO APPEAR IN THE LIST AND WITHOUT ANY VERIFICATION FROM THE ASSESSMENT RE CORDS OF THE ASSESSEE FOR AY 2004-05 PROCEEDED TO ISSUE NOTICE U/S 148 OF THE ACT IN A MECHANICAL MANNER EVEN WITHOUT MENTIONING DETAILS OF SO CALLED ALLEGED ENTRY AND ITS NATURE. ON VIGILANT READING OF REASONS RECORDED, AS REPRODUCED IT IS VIVID THAT THE AO PROCEEDED TO ISSUE NOTICE ONLY ON THE BASIS OF VAGUE INFORMATION WHICH WAS A LIST OF SO CALLED BENEFICIARIES WITHOUT ANY V ERIFICATION, EXAMINATION OR APPLICATION OF MIND TO THE DETAILS AND INFORMATION RECEIVED. 8. IN THE LIGHT OF ABOVE WHEN WE ANALYSE THE PREPOSITION LAID DOWN BY ITAT DELHI A BENCH IN THE CASE OF G & G PHARMA U/ S ITO REPORTED AS 2015 TIOL- 191 ITAT-DEL, AS RELIED BY THE LD. AR, TH EN WE OBSERVE THAT REOPENING OF ASSESSMENTS U/S 147/148 OF THE ACT CAN BE CONSIDERED AS BAD IN LAW WHEN THE AO HAS NOT APPLIED HIS MIND SO AS TO C OME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT DURING THE YEAR, MERE A REFERENCE IS MADE TO CERTAI N INFORMATION RECEIVED FROM INVESTIGATION WING. THE RELEVANT OPERATIVE PART OF THIS TRIBUNAL ORDER IS BEING REPRODUCED BELOW WHEREIN RESPECTFULLY FOLLOWING TH E DICTA LAID DOWN BY HONBLE JURISIDCTIONAL HIGH COURT OF DELHI IN THE C ASE OF SARTHAK SECURITIES LTD. VS. ITO (SUPRA) AND REFERRING TO THE OTHER DE CISIONS/ ORDERS OF HONBLE HIGH COURT & THE TRIBUNAL, IT WAS HELD THUS :- 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH US PECIALLY THE CONTENTIONS RAISED BY THE ASSESSEE ALO NGWITH VARIOUS DECISIONS CITED BY THE SSESSEES COUNSEL ON THE ISSUE IN DISPUTE AS WELL AS THE DOCUMENTARY EVIDENCE FILED BY THE LD.DR IN THE SHAPE OF PAPER B OOK AND ORDERS OF THE REVENUEAUTHORITIES. BEFORE COMMENTING UPON THE MERI TS OF THE CASE AND ON ITA NO. 3280/DEL/2015 SHRADD HA JAIN 5 THE ARGUMENTS ADVANCED BY BOTH THE PARTIES, WE WANT TO DISCUSS THEREASONS RECORDED FOR REOPENING OF ASSESSMENT IN THE CASE OF THEASSESSEE VIDE AOS LETTER DATED 15.9.2010, WHICH IS REPRODUCEDHEREUNDER:- CERTAIN INVESTIGATION WERE CARRIED OUT BY THEDIREC TORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI IN RESPECT OF THE BOGUS / AC COMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUAL / COMPANIES.THE NAME OF THE ASSESSEE FIGURES AS ONE OF THE BENEFICIARIE OF THESE ELECTED BOGUS TRAN SACTIONS GIVEN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. I T HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAVE BEEN RECEIVED BY THE ASSESSE E. BENEFICIARY S NAME BENEFICIARYS BANK NAME BENEFICIARY S BANK BRANCH VALUE OF ENTRY TAKEN INSTRUMEN T NO BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK FROM WHIC H ENTRY GIVEN BRANC H OF ENTRY GIVING BANK A/C. NO. ENTRY GIVING ACCOUN T G&G PHARMA (INDIA) LTD. STATE BANK OF HYDERABA D . KAROL BAGH 500,00 0 8603 8603 10.2.0 3 SHUBHAM ELECTRONIC S AND ELECTRONIC S SBH KB 50038 G&G PHARMA (INDIA) LTD. STATE BANK OF HYDERABA D . KAROL BAGH 500,00 0 10373 10.2.0 3 GARNER FINANCE & SECURITY SBH KB 50029 G&G PHARMA (INDIA) LTD. STATE BANK OF HYDERABA D . KAROL BAGH 500,00 0 11112 10.2.0 3 GARNER FINANCE & SECURITY SBH KB 50030 G&G PHARMA (INDIA) LTD. STATE BANK OF HYDERABA D . KAROL BAGH 500,00 0 12302 10.2.0 3 GARNER FINANCE & SECURITY SBH KB 50025 THE ABOVE AMOUNT OF RS. 20,00,000/- HAS BEEN CREDIT EDINTO ASSESSES'S BANK ACCOUNT ON VARIOUS DATES.INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT HAS FOUND THAT ASSESSE IS A BENEFICIARY OFITA NO. 3149/DEL/2013 6TAKING THE AFORESAID ACCOMMODATION ENTRIES. L HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSE COMPANY HAS INTRODUCED ITS OWN UNACCOUN TED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THER EFORE, I HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE COMPANY AMO UNTING TO RS 20,00,0001- HAS ESCAPED ASSESSMENT. THE ESCAPEMENT OF INCOME HA S BEEN CLEARLY ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSE COMPANY TO TR ULY AND FULLY DISCLOSED ALL ITA NO. 3280/DEL/2015 SHRADD HA JAIN 6 MATERIAL FACTS NECESSARY FOR ASSESSMENT THUS, IT IS FIT CASE FOR INITIATION OF PROCEEDINGS U/S 147 OF THE INCOME TAX ACT,1961.' 8. WE HAVE PERUSED THE AFORESAID REASONS RECORDED B Y THE AO FOR REOPENING THE ASSESSMENT IN DISPUTE AND WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CO NCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. A MERE REFERENCE IS MADE TO CERTAIN INFORMATION RECEIVED FROM THE INVESTIGAT ION WING WHICH WAS SUPPLIED TO THE ASSESSEE VIDE AOS LETTER DATED 15.9.2010. I N OUR VIEW THE REASONS ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAD MECHANICALLY ISSUED NOTICES U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY H IM FROM THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI. KEEPING IN V IEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE LAW APPLI CABLE IN THE ITA NO. 3149/DEL/2013CASE OF THE ASSESSEE, WE ARE OF THE CO NSIDERED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT . YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. WE DRAW OUR SUPPORT FRO M THE JUDGMENTS OF THE HONBLE HIGH COURT OF DELHI IN THE FOLLOWING CASES: - (A) SIGNATURE HOTELS (P)_ LTD. VS. ITO AND ANOTHER REPORTED IN 338 ITR 51 (DEL) HAS UNDER SIMILAR CIRCUMSTANCES AS FOLLOWS:- FOR THE A.Y. 2003-04, THE RETURN OF INCOME OF THE ASSESSEE COMPANY WAS ACCEPTED U/S.143(1) OF THE INCOME-TAX ACT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUE D NOTICE U/S.148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJ ECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME-TAX ACT, 1961, IS WI DE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIRED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. (II) A NOTICE U/S.148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NONSPECIFIC INFORMATION. T HE BASIS OF THE BELIEF SHOULD BE ITA NO. 3149/DEL/2013 8 DISCERNIBLE FROM THE MATERIAL ON RECORD, WHICH WA S AVAILABLE WITH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. TH ERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAIL ABLE WITH THE ASSESSING OFFICER. (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED O N THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGA TION) THAT THE PETITIONER HAD ITA NO. 3280/DEL/2015 SHRADD HA JAIN 7 INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y . 2002-03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE A SSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIR EMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STAT EMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESC APEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY H IS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATI ON. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO A LLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, IT COULD NO T BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WER E LIABLE TO THE QUASHED. (B). IN THE CASE OF CIT VS. ATUL JAIN REPORTED IN 2 99 ITR 383 IT HAS BEEN HELD AS UNDER:- ITA NO. 3149/DEL/2013 9 HELD, DISMISSING THE APPEALS, THAT THE ONLY INFO RMATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. THE IN FORMATION DID NOT INDICATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANSFERRED AND W ITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE AO DID NOT VERIFY THE CORRECTN ESS OF INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE I NFORMATION IN A MECHANICAL MANNER. THE AO HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE U /S 148. WHAT HAD BEEN RECORDED BY THE AO AS HIS REASONS TO BELIEVEWAS N OTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORDING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE AO HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE AO WAS NOT SUSTAINABLE. 9. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ABOVE ISSUE IS EXACTLY THE SIMILAR TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE AFORESAID DECISIONS OF THE HONBLE HIGH COURT OF DE LHI. HENCE, RESPECTFULLY FOLLOWING THE ITA NO. 3149/DEL/2013 10 ABOVE PRECEDENT, WE DECIDE THE LEGAL ISSUE IN DI SPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QUASH THE R EASSESSMENT PROCEEDINGS. ITA NO. 3280/DEL/2015 SHRADD HA JAIN 8 THE OTHER ISSUES ARE NOT DEALT WITH AS THE SAME HAV E BECOME ACADEMIC IN NATURE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE . 9. IT IS RELEVANT TO NOTE THAT THE ORDER OF THE TRIBUNAL IN THE CASE OF G & G PHARMA (SUPRA) HAS BEEN UPHELD BY HONBLE JURISDICT IONAL HIGH COURT AT DELHI BY RODER DATED 8.10.2015 IN ITA NO. 545/2015 DISMIS SING THE APPEAL FO THE REVENUE. THE RELEVANT OPERATIVE PARAS 7 TO 13 OF TH IS DECISION ARE BEING RESPECTFULLY REPRODUCED BELOW FOR SAKE OF COMPLETEN ESS IN OR CONCLUSION : 7. MR. SAWHNEY, HAS PLACED EXTENSIVE RELIANCE ON T HE DECISION DATED 21ST MARCH 2012 PASSED BY THIS COURT IN ITA NO. 643 OF 2011 ( CIT V. INDIA TERMINAL CONNECTOR SYSTEM LTD.) WHERE, ACCORDING TO MR. SAWHNEY, IN SIMILAR CIRCUMSTANCES, THE APPEAL OF THE REVENUE WAS ALLOWED AND THE MATTER WAS REMANDED TO THE ITAT FOR EXAMINA TION OF THE CASE ON MERITS. HE ALSO RELIED UPON THE DECISION OF THE SUPREME COURT IN PHOOL CHAND BAJRANG LAL V. INCOME-TAX OFFICER (1993) 203 ITR 456 SC . THE MAIN THRUST OF THE SUBMISSION OF MR. SAWHNEY IS THAT, AS WAS IN THE CASE OF INDIA TERMINAL CONNECTOR SYSTEM ( SUPRA ), IN THE PRESENT CASE AS WELL, THERE WAS SPECIFIC INFORMATION REGARDING THE NAME O F THE ENTRY PROVIDER, THE DATE ON WHICH THE ENTRY WAS TAKEN, THE CHEQUE DETAILS AS WELL AS THE AMOUNT CREDITED TO THE ACCOUNT OF THE ASSESSEE. HE ACCORDINGLY SUBMITTED THAT THIS BY ITS ELF CONSTITUTED SUFFICIENT MATERIAL FOR THE AO TO FORM AN OPINION THAT THE ASSESSEE COMPANY HA S INTRODUCED HIS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ACCOMMODATION E NTRIES. 8. MR. KAPIL GOEL, LEARNED COUNSEL FOR THE ASSESSEE , PLACED RELIANCE ON OTHER DECISIONS OF THIS COURT INCLUDING CIT V. PRADEEP KUMAR GUPTA (2008) 303 ITR 95 ; THE DECISION DATED 27TH MARCH 2015 IN W.P.(C) NO. 5330 OF 2014 ( KROWN AGRO FOODS PVT. LTD. V. ACIT ); THE DECISION DATED 4TH AUGUST 2015 IN ITA NO. 486 OF 20 15 ( CIT V. SHRI GOVIND KRIPA BUILDERS P.LTD. ) AND THE DECISION DATED 24TH AUGUST 2015 IN ITA NO . 226 OF 2015 ( CIT V. ASHIAN NEEDLES PVT. LTD. ) 9. THE COURT AT THE OUTSET PROPOSES TO RECAPITULATE THE JURISDICTIONAL REQUIREMENT FOR REOPENING OF THE ASSESSMENT UNDER SECTION 147/148 OF THE ACT BY REFERRING TO TWO DECISIONS OF THE SUPREME COURT. IN CHHUGAMAL RAJPAL V. SP CHALIHA (1971) 79 ITR 603 , THE SUPREME COURT WAS DEALING WITH A CASE WHERE THE AO HAD RECEIVED C ERTAIN COMMUNICATIONS FROM THE COMMISSIONER OF INCOME TAX SHOWING THAT THE ALLEGED CREDITORS OF THE ASSESSEE WERE NAME- LENDERS AND THE TRANSACTIONS ARE BOGUS. THE AO CAM E TO THE CONCLUSION THAT THERE WERE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE SUPREME COURT DISAGREED AND OBSERVED THAT THE AO HAD NOT EVEN CO ME 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 TRANSACTIO NS'.' IT WAS FURTHER EXPLAINED BY THE SUPREME COURT THAT: BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE ON THE PA RT OF THE ASSESSEE TO MAKE A ITA NO. 3280/DEL/2015 SHRADD HA JAIN 9 RETURN UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT Y EAR OR ALTERNATIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON THE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENC E 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 SATISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A N OTICE UNDER S. 148. THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFI ED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COULD SATISFY THE REQUIREMENTS UNDER SECT ION 147 AND THEREFORE 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 C ASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GI VEN BY THE DVO. OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOS ES OF REOPENING ASSESSMENT UNDER S. 147 OF THE IT ACT, 1961. THE AO HAS TO APP LY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELI EF THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEA L. THE DEPARTMENT WAS NOT ENTITLED TO REOPEN THE ASSESSMENT. 11. THE ABOVE BASIC REQUIREMENT OF SECTIONS 147/148 HAS BEEN REITERATED IN NUMEROUS DECISIONS OF THE SUPREME COURT AND THIS COURT. RECE NTLY, THIS COURT RENDERED A DECISION DATED 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 BE YOND 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 3 08 ITR 38 (DEL) . THE COURT NOTED THAT A MATERIAL CHANGE HAD BEEN BROUGHT ABOUT TO SECTION 147 OF THE ACT WITH EFFECT FROM 1ST APRIL 1989 AND OBSERVED: 29. IT IS AT ONCE SEEN THAT THE AMENDMENT IN SECTION 147 OF THE ACT BROUGHT ABOUT A MATERIAL CHANGE IN LAW W.E.F. 1ST A PRIL, 1989. SECTION 147(A) AS IT STOOD PRIOR TO 1ST APRIL 1989 REQUIRED THE AO TO HAVE A REASON TO BELIEVE THAT (A) THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND (B) THAT SUCH E SCAPEMENT IS BY REASON OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETUR N OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. A FTER THE AMENDMENT, ONLY ONE SINGULAR REQUIREMENT IS TO BE FULFILLED UNDER SECTION 147(A) AND THAT IS, THAT THE AO HAS REASON TO BELIEVE THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSE SSMENT. HOWEVER, THE PROVISO TO SECTION 147 OF THE ACT PROVIDES A COMPLETE BAR FOR REOPENIN G AN ASSESSMENT, WHICH HAS BEEN MADE UNDER SECTION 143(3) OF THE ACT, AFTER THE EXPIRY O F 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 MAKE 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 A SSESSMENT YEAR, THE CONDITION THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE 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 ACRYLIC MANUFACTURING CO. (P) LTD. ( SUPRA ) EXPLAINED THAT THE RATIO OF THE DECISION IN ITA NO. 3280/DEL/2015 SHRADD HA JAIN 10 PHOOL CHAND BAJRANG LAL ( SUPRA ) MAY NOT BE ENTIRELY APPLICABLE SINCE THE SAME WAS IN RESPECT OF SECTION 147(A) AS IT EXISTED PRIOR TO TH E AMENDMENT. 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENT RIES, 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 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 WHET HER 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 THE 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 HEREINBEFORE, 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) TO 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 REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASIS THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NO T 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 BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SAT ISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 10. FURTHERMORE, THE ITAT, DELHI IN THE CASE OF ITO VS. ARTI KHATTAR REPORTED AS (2014) 41 CCH 0025 (DEL-TRIB) HELD AS F OLLOWS :- 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. FROM A PERUSAL OF THE RE ASONS RECORDED, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS MENTIONED ABOUT SOME INFORMAT ION BY WHICH THE ASSESSEE IS THE BENEFICIARY OF AN ACCOMMODATION ENTRY OF `6 LAKHS B ECAUSE SOME BANK INSTRUMENT WAS GOT PREPARED ON 19.04.2002 OF `6 LAKHS IN FAVOUR OF THE ASSESSEE PRESENTABLE AT BANK OF BARODA, FARIDABAD. NOW, IN THE REASONS RECORDED, TH ERE IS NO MENTION ABOUT THE NAME OF THE PERSON WHO ARE THE ALLEGED ENTRY PROVIDER. THE NATURE OF THE ENTRY I.E. IN WHICH FORM THE ASSESSEE IS ALLEGED TO BE TAKING ENTRIES IS GIV EN. THE INFORMATION ONLY SAYS THAT SOME ITA NO. 3280/DEL/2015 SHRADD HA JAIN 11 BANK INSTRUMENT OF `6 LAKHS WAS GOT PREPARED. HOWEV ER, THIS INFORMATION IS FOUND TO BE FACTUALLY INCORRECT BECAUSE IN THE ASSESSMENT ORDER WHICH IS PASSED IN PURSUANCE TO NOTICE UNDER SECTION 148 , THE ASSESSING OFFICER HAS RECORDED THE FOLLOWING FINDING:- 'DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WA S NOTICED THAT THE ASSESSEE RECEIVED GIFTS AMOUNTING TO RS.2 LACS EACH FROM 6 PERSONS NA MELY MS. MALA KHATRI, MRS. RENU MAINI, MR. KARAN SHARMA, MR. ISHWAR SHARMA, MR. BAL VENDER SINGH & MR. RAJAN JASSAL. THE ASSESSEE FILED VARIOUS DOCUMENTS RELATING TO TH E DONORS TO JUSTIFY THE SOURCE, CAPACITY TO PAY, IDENTIFICATION AND GENUINENESS OF THE TRANS ACTIONS. FROM THE PERUSAL OF THE BANK ACCOUNTS OF THE DONORS, IT WAS NOTICED THAT THERE W AS A CREDIT ENTRY OF 2 LACS EACH AND ON THE SAME DAY I.E. 19.04.2002 IN ALL THE SIX CASES A ND ALL THE DONORS MADE GIFTS OF RS.2 LACS EACH ON THE SAME DAY I.E. 19.04.2002 TO THE ASSESSE E. FROM THE BANK ACCOUNTS OF THE DONORS, THE CAPACITY TO MADE GIFT IS NOT PROVED.' 7. WHEN THESE FACTUAL DETAILS ARE COMPARED WITH THE REASONS RECORDED, WE FIND THAT THE REASONS RECORDED ARE VAGUE AND FACTUALLY INCORRECT ALSO. NO BANK INSTRUMENT OF `6 LAKHS WAS RECEIVED BY THE ASSESSEE. ON THESE FACTS, THE D ECISION OF HON'BLE JURISDICTIONAL HIGH 5 ITA-2395/DEL/2012 COURT IN THE CASE OF SMT. PARAMJI T KAUR (SUPRA) WOULD BE SQUARELY APPLICABLE, WHEREIN THEIR LORDSHIPS HELD AS UNDER:- 'HELD, THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED ONLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASE D ON BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE ASSESSING OFFICER HAD T O ACT ON THE BASIS OF 'REASONS TO BELIEVE' AND NOT ON 'REASONS TO SUSPECT'. THE TRIBU NAL RIGHTLY CONCLUDED THAT THE ASSESSING OFFICER HAD FAILED TO INCORPORATE THE MAT ERIAL AND HIS SATISFACTION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID.' 8. THAT THE CIT(A) HAS ALSO ALLOWED RELIEF TO THE A SSESSEE FOLLOWING THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT. THE FACTS OF THE ASSESSEE'S CASE CLEARLY SHOW THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM INVESTIGATION WING BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPEMENT OF INCOME. THOUGH HE HAS MENTIONED IN THE REASONS RECORDED THAT HE HAS EXAMINED THE IN FORMATION AND DETAILS SO AVAILABLE. BECAUSE HAD HE EXAMINED THE DETAILS AND INFORMATION , HE WOULD HAVE CERTAINLY KNOWN THAT THE INFORMATION IS FACTUALLY INCORRECT AND INCOMPLE TE. IN VIEW OF THE ABOVE, IN OUR OPINION, THE CIT(A) RIGHTLY FOLLOWED THE ABOVE DECISION OF H ON'BLE JURISDICTIONAL HIGH COURT. LEARNED DR RELIED UPON THE DECISION OF HON'BLE DELH I HIGH COURT IN THE CASE OF ADITYA KHANNA (SUPRA). HOWEVER, THE FACTS WERE QUITE DIFFE RENT IN THE ABOVE CASE WHICH WOULD BE EVIDENT FROM THE FOLLOWING FACTS NOTED BY HON'BLE D ELHI HIGH COURT:- 'THE RECORD PRODUCED BY THE REVENUE SHOWS THAT THE ASSESSEE HAD GIVEN STATEMENTS BEFORE THE SPECIAL DIRECTOR, ENFORCEMENT DIRECTORATE. IN T HE STATEMENT GIVEN, THE ASSESSEE STATED HOW MUCH WAS HIS SHARE FOR INTRODUCING 6 ITA-2395/D EL/2012 MASEFIELD TO ANDALEEB SEHGAL. HE ALSO STATED THAT HE WAS OFFERED THE PROP OSAL BY ANDALEEB SEHGAL TO UTILIZE THE ITA NO. 3280/DEL/2015 SHRADD HA JAIN 12 OPPORTUNITY TO GET SOME CRUDE OIL ALLOCATION FROM I RAQ WHICH CAN BE BROUGHT BY SOME COMPANY INTERESTED IN THE SAME. THE ASSESSEE APPARE NTLY ACTED ON THE PROPOSAL AND CONTACTED GEORGE CURMI, WHO WAS ABLE TO FIND MASEFI ELD, WHO WAS INTERESTED IN GETTING THE OIL. GEORGE CURMI INTRODUCED THE ASSESSEE AND ANDAL EEB SEHGAL TO MASEFIELD. INDRUS WAS A COMPANY IN WHICH ANDALEEB SEHGAL WAS I NTERESTED. IN THE STATEMENT, THE ASSESSEE HAD ADMITTED HIS ROLE UNDER THE OIL ALLOCA TIONS AS AN INTRODUCER. THE STATEMENTS MADE BY THE ASSESSEE BEFORE THE ENFORCEMENT DIRECTO RATE WERE BEFORE THE ASSESSING OFFICER WHEN HE RECORDED THE REASONS. ANDALEEB SEHGAL HAD ALSO GIVEN A STATEMENT BEFORE T HE ENFORCEMENT DIRECTORATE. THIS STATEMENT WAS ALSO BEFORE THE ASSESSING OFFICER WHE N HE RECORDED THE REASONS. IN THIS STATEMENT, ANDALEEB SEHGAL HAD REFERRED TO THE ARGU MENTS WHICH HE HAD WITH THE ASSESSEE REGARDING INDRUS NOT RECEIVING ANY REMUNERATION FRO M THE SECOND OIL CONTRACT. ULTIMATELY SOME MONEY APPEARS TO HAVE BEEN RECEIVED BY INDRUS FROM MASEFIELD AS COMMISSION. ANDALEEB SEHGAL HAD ASKED GEORGE CURMI TO TRANSFER HIS SHARE OF US$ 17500 TO HAMDAAN INDIA. IN ADDITION TO THIS STATEMENT, THE ASSESSEE HAS ALSO MADE A STATEMENT BEFORE THE ENFORCEMENT DIRECTORATE IN WHICH HE CONFIRMED RECEI PT OF US$ 146247 BY INDRUS. HE ALSO STATED THAT THE MONEY WAS RECEIVED AS 5 PER CENT PR OFIT FOR 30 LACS BARRELS OF OIL CONTRACTED WITH MASEFIELD UNDER THE 'OIL FOR FOOD PROGRAMME'. THE ASSESSEE CLARIFIED IN THE STATEMENT THAT HE DID NOT DO ANY BUSINESS WITH INDRUS OUTSIDE THE 'OIL FOR FOOD PROGRAMME'. IN ADDITION TO THE STATEMENTS MADE BY THE ASSESSEE AND ANDALEEB SEHGAL BEFORE THE ENFORCEMENT DIRECTORATE, THE DOCUMENTS SEIZED BY TH E ENFORCEMENT DIRECTORATE FROM THE PREMISES OF ANDALEEB SEHGAL AND HAMDAAN EXPORTS WER E ALSO BEFORE THE ASSESSING OFFICER WHEN HE RECORDED THE REASONS. THE SEIZED DOCUMENTS INCLUDED FACSIMILE TRANSMISSION OF MESSAGES WITH RESPECT TO DIFFERENT BUSINESS TRANSAC TIONS ENTERED INTO BY INDRUS. SOME OF THE DOCUMENTS WERE FOUND TO HAVE BEEN ADDRESSED TO THE ASSESSEE AND ANDALEEB SEHGAL, WHICH ACCORDING TO THE ASSESSING OFFICER INDICATED THAT THE ASSESSEE, WHILE BEING PRESENT IN INDIA, TOOK STRATEGIC DECISIONS FROM THE INDIAN SOIL AND RENDERED SERVICES ON BEHALF OF INDRUS. ACCORDING TO 7 ITA-2395/DEL/2012 THE ASSESS ING OFFICER, THESE DOCUMENTS ESTABLISHED THAT THE OPERATIONS OF INDRUS WERE MANA GED FROM THE PREMISES OF ANDALEEB SEHGAL IN INDIA AND SINCE CERTAIN MESSAGES WERE ADD RESSED TO THE ASSESSEE AT THE ADDRESS OF ANDALEEB SEHGAL, THE BUSINESS CONNECTION BETWEEN THE ASSESSEE AND INDRUS WAS ESTABLISHED.' 9. THUS, IN THE ABOVE MENTIONED CASE, THERE WAS MAT ERIAL BEFORE THE ASSESSING OFFICER WHICH ENABLED HIM TO REACH A PRIMA FACIE CONCLUSION WITH REGARD TO THE BUSINESS CONNECTION OF THE ASSESSEE IN INDIA. THEREFORE, ON THE FACTS, THE DECISION OF HON'BLE DELHI HIGH COURT RELIED UPON BY THE LEARNED DR IS DIFFERE NT THAN THE FACTS IN THE ASSESSEE'S CASE AND MOREOVER, LEARNED COUNSEL FOR THE ASSESSEE RELI ED UPON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WHICH WOULD BE BINDING ON ALL THE AUTHORITIES WORKING WITHIN THE TERRITORIAL JURISDICTION OF THE SAID HIGH COURT. WE , THEREFORE, FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNED CIT(A). THE SAM E IS SUSTAINED AND GROUND NO.1 & 2 OF THE REVENUE'S APPEAL ARE REJECTED. ITA NO. 3280/DEL/2015 SHRADD HA JAIN 13 10. GROUND NO.3 OF THE REVENUE'S APPEAL IS AGAINST THE DELETION OF THE ADDITION OF `12 LAKHS. IN OUR OPINION, ONCE THE REOPENING OF ASSESS MENT ITSELF HAS BEEN HELD TO BE INVALID, CONSEQUENTIALLY, THE ASSESSMENT ORDER PASSED IN PUR SUANCE TO SUCH NOTICE UNDER SECTION 148 WOULD NOT SURVIVE. THEREFORE, GROUND NO.3 OF THE R EVENUE'S APPEAL HAS BECOME INFRUCTUOUS AND REJECTED AS SUCH. 11. IN THE LIGHT OF ABOVE PREPOSITIONS, WHEN WE DEEPLY ANALYSE THE FACTS OF THE PRESENT CASE THEN WE OBSERVE THAT THE AO MERELY MENTIONED THAT THE NAME OF THE ASSESSEE APPEAR IN THE LIST OF BENEFICIARIES HAVING CHANNELIZED HER UNDISCLOSED INCOME IN THE GARB OF GIFT. ADMITTEDLY. IN THE PRESENT CASE GIFT WAS FROM HER PATERNAL AUNT, A CLOSE RELATIVE AND THE DO NOR SMT. SITA DEVI CANNT BE ALLEGED AS BOGUS OR ACCOMMODATION ENTRY PROVIDER IN ABSENCE OF ANY SUBSTANTIAL EVIDENCE, SPECIALLY WHEN THE ASSESSEE H AS ESTABLISHED HER IDENTITY, CAPACITY AND GENUINENESS OF THE TRANSACTION OF GIFT BY FURNISHING BANK STATEMENT OF THE DONOR, AFFIDAVIT OF THE DONE (ASSE SSEE) AND THE DONOR (SMT. SITA DEVI) GIFT DEED DATED 23.1.2004, COPY OF ACKNOWLEDG EMENT AND BALANCE SHEET OF SMT SITA DEVI SHOWING HER CAPITAL AND ASSETS, CO PY OF PAN CARD ETC. THE AO HAS NOT MENTIONED IN THE REASONS RECORDED THAT H E EITHER EXAMINED THE INFORMATION OR VERIFIED IT FROM THE RELEVANT ASSESS MENT RECORD OF THE ASSESSEE FOR AY 2004-05 WHICH CLEARLY SHOWS NOT APPLICATION OF MIND AND ISSUANCE OF NOTICE U/S 148 OF THE ACT IN A MECHANICAL MANNER. B ECAUSE HAD THE AO EXAMINED THE DETAILS AND THE ALLEGED INFORMATION, H E WOULD HAVE CERTAINLY KNOWN THAT INFORMATION AND ALLEGATION OF ACCOMMODAT ION ENTRY IS FACTUALLY INCORRECT AND BASELESS. IN VIEW OF ABOVE, WE ARE I NCLINED TO HOLD THAT THE AO PROCEEDED TO INITIATE REASSESSMENT PROCEEDINGS AND TO ISSUE NOTICE U/S147/148 OF THE ACT ON THE VAGUE INFORMATION WITHOUT VERIFYI NG AND EXAMINING THE SAME AND WITHOUT APPLICATION OF MIND IN A MECHANICAL MAN NER AND HENCE, THE AO DID NOT ASSUME VALID JURISDICTION TO ISSUE NOTICE U/S 1 48 OF THE ACT AND THUS NOTICE U/S 148 OF THE ACT AND IMPUGNED NECESSARY ORDER PAS SED IN PURSUANT THERETO U/S ITA NO. 3280/DEL/2015 SHRADD HA JAIN 14 143(3) R.W.S. 147 OF THE ACT IS NOT SUSTAINABLE AND WE QUASHED. ACCORDINGLY, LEGAL GROUND NO. 1 TO 1(C) OF THE ASSESSEE ARE ALLO WED. 12. SINCE BY THE EARLIER PART OF THIS ORDER INIT IATION OF PROCEEDINGS U/S 147 OF THE ACT, ISSUANCE OF NOTICE U/S 148 OF THE ACT, ISS UANCE OF NOTICE U/S 148 OF THE ACT HAS BEEN HELD TO BE INVALID, CONSEQUENTLY, THE REASSESSMENT ORDER PASSED U/S 143(3)/ 147 OF THE ACT IN PURSUANT TO SUCH INVA LID NOTICE U/S 148 OF THE ACT WOULD NOT SURVIVE AND THUS APPELLANTS GROUNDS ON ME RITS BECOMES ACADEMIC AND INFRUCTUOUS AND WE DISMISS THE SAME BEING INFRU CTUOUS. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALL OWED ON LEGAL GROUND. ORDER PRONOUNCED IN THE COURT ON 24/02/2011. SD/- SD/- ( G.D.AGARWAL ) (C.M.GARG) VICE PRESIDENT J UDICIAL MEMBER DATED: 24 / 02/2016 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) ITA NO. 3280/DEL/2015 SHRADD HA JAIN 15 DATE INITIAL 1. DRAFT DICTATED ON 08.02.2016 2. DRAFT PLACED BEFORE AUTHOR 08.02.2016 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.