Sh. Bijendra Singh S/o Sh Jodha Ram, Agra V. I.T.O, Ward-4(1), Agra

ITA 356/AGR/2014

• Counselvise Citation: 35620314 RSA 2014
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT SHUK LA
• Assessee Lawyers: VITHAL DAS
• Keywords: Reopening of assessment; Unexplained cash credit; Business income; Income from undisclosed sources; Fair market value; Difference of opinion; Corroborative evidences; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 68; 148; 143(3)

Judgement Text

I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 1 OF 10 IN THE INCOME TAX APPELLATE TRIBUNAL AGRA (SMC) BENCH, AGRA [CORAM:PRAMOD KUMAR AM ] I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR: 2008-09 BIJENDRA SINGH S/O SH. JODHA RAM, ..APPELLA NT VILL. MADYANA, POST SIKRARA, TEHSIL FATEHABAD, AGRA. [PAN:BMZPS 7721 Q ] VS. INCOME-TAX OFFICER, .RESPONDENT WARD 4(1), AGRA APPEARANCES BY: VITHAL DAS FOR THE APPELLANT AMIT SHUKLA FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JUNE 17, 2015 DATE OF PRONOUNCING THE ORDER : JUNE 24 , 2015 O R D E R 1. THIS APPEAL IS DIRECTED AGAINST THE ORDER DATED 07.04.2014 PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT U/S. 143 (3) R.W.S. 147 OF THE INCOME-TAX ACT FOR THE ASSESSMENT YEAR 2008-09. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE GRIEVANCE AGAINST CIT(A)S UPHOLDING THE VALIDITY OF RE-ASSESSMENT PR OCEEDINGS ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 2 OF 10 3. TO ADJUDICATE ON THIS GROUND OF APPEAL, ONLY A F EW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. IT IS A CASE OF REOPENED ASSESSMENT. THE ASSESSEE HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 2 ND MARCH, 2009 DECLARING TOTAL INCOME OF RS.1,93,810/-, AN AGRICULTURAL INCOME OF RS.6,57,743/-. THE CASE WAS SUBSEQUENTLY REOPENED BY NOTICE DATED 22 ND MARCH, 2011. WHILE REOPENING THE ASSESSMENT, THE ASSESSING OFFICER RECORDED THE REAS ONS AS FOLLOWS : INFORMATION IN THIS CASE WAS RECEIVED FROM INCOME T AX OFFICER 1(2), AGRA THAT WHILE COMPLETING THE ASSESSMENT IN THE CASE OF M/S. LALITA COLD STORAGE, 2/15, SWADESHI BIMA NAGAR, AGRA FOR THE A.Y. 2008-0 9 IT WAS FOND THAT SHRI BIJENDRA SINGH, GRAM MADIYANA, POST SIKRARA,TEHSIL FATEHABAD, AGRA, ONE OF THE PARTNER IN THE AFORESAID FIRM, HAD FAILED TO SU BSTANTIATE THROUGH DOCUMENTARY EVIDENCES THE SOURCE OF CASH DEPOSITS I NTRODUCED IN HIS CAPITAL ACCOUNT WITH THE FIRM M/S. LALITA COLD STORAGE. FRO M THE COPY OF CAPITAL ACCOUNT IN THE FIRM IT IS SEEN THAT THE SOURCE OF C ASH DEPOSITS OF RS.12,10,000/- MADE ON DIFFERENT DATES HAS BEEN STA TED TO BE FROM AGRICULTURE AND BUSINESS INCOME. HOWEVER, THE ASSESSEE FIRM DID NOT FILE ANY SUPPORTING EVIDENCES AS REGARDS THE PARTNERS CLAIM DURING THE COURSE OF ITS ASSESSMENT PROCEEDINGS. BECAUSE OF WHICH THE SOURCE OF DEPOSIT S IN THE CAPITAL ACCOUNT HAS REMAINED UNVERIFIED. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, I HA VE REASON TO BELIEVE THAT THE AMOUNT OFRS.12,10,000/ INTRODUCED AS CAPITAL BY WAY OF CASH DEPOSITS HAS ESCAPED ASSESSMENT IN THE CASE OF SHRI BIJENDRA SIN GH, GRAM MADIYANA, POST SIKRARA, TEHSIL FATEHABAD, AGRA FOR THE A.Y. 2 008-09 WHICH NEEDS TO BE REOPENED AND ASSESSED U/S. 147 OF THE I.T. ACT, 196 1. ISSUE NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961. 4. THE ASSESSEE OBJECTED TO THIS REOPENING OF ASSES SMENT, BUT THE ASSESSING OFFICER REJECTED HIS OBJECTIONS AND PROCEEDED WITH THE REASSESSMENT PROCEEDINGS. WHILE DOING S, THE ASSESSING OFFICER, INTER ALIA, O BSERVED AS FOLLOWS : THE FIRST POINT RAISED BY THE ASSESSEE IS THAT THE INFORMATION OF ITO 1(2), AGRA IS THE BASIS OF INITIATION OF RE-ASSESSMENT PROCEED INGS AND THERE IS NO INDEPENDENT APPLICATION OF MIND OF THE ASSESSING OF FICER WHO HAS INITIATED THE REASSESSMENT PROCEEDINGS. IN THIS REGARD IT IS STAT ED THAT THE CONTENTION OF THE ASSESSEE IS WRONG AND CANNOT BE ACCEPTED. THE INFOR MATION WAS IN POSSESSION OF THE ASSESSING OFFICER WHO AFTER DUE A PPLICATION OF MIND FORMED REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.1 2,10,000/- HAS ESCAPED ASSESSMENT. ONLY AFTER DUE RECORDING OF REASONS TO BELIEVE THE ASSESSING OFFICER ISSUED NOTICE U/S. 148. IT IS TO BE RE-EMPH ASISED AND UNDERSTOOD THAT THERE HAS TO BE SOME BASIS OF INFORMATION AND THE S AME CANNOT BE GENERATED IN VACUUM. THE REOPENING OF THE CASE IS VALID AND J USTIFIED. I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 3 OF 10 THE SECOND POINT RAISED BY THE ASSESSEE IS THAT THE SOURCE OF DEPOSIT IN THE CAPITAL ACCOUNT HAS REMAINED UNVERIFIED AND NOT THA T THE SAME REPRESENT ESCAPED ASSESSMENT. THIS CONTENTION OF THE ASSESSEE IS ALSO WRONG AND CANNOT BE ACCEPTED. THE ASSESSEE HAS FAILED TO SUBS TANTIATE THROUGH DOCUMENTARY EVIDENCE THE SOURCE OF CASH DEPOSITS OF RS.12,10,000/- IN HIS CAPITAL ACCOUNT WITH THE FIRM M/S. LALITA COLD STOR AGE. HENCE THE AMOUNT TO THE EXTENT OF RS.12,10,000/- HAS ESCAPED ASSESSMENT AND NOT REMAINED MERELY UNVERIFIED. THUS THE REOPENING OF THE CASE I S VALID AND JUSTIFIED. 5. AGGRIEVED, INTER ALIA, BY SO REOPENING OF ASSESS MENT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), BUT WITHOUT ANY SUCCESS. THE LEARNED CIT(A) UPHELD THE STAND OF THE ASSESSING OFFICER, INTER AL IA, OBSERVING AS FOLLOWS : 5.5 I HAVE CONSIDERED ALL THE ABOVE ARGUMENTS OF THE LD.AR AND I FIND THAT THE CONCLUSION DRAWN BY THE LD.AR AFTER REFERRING T O THE REASON TO BELIEVE IS NOT CORRECT BECAUSE WHILE DRAWING HIS CONCLUSION, H E HAS NOT CONSIDERED THE ENTIRE REASON TO BELIEVE RECORDED BY THE AO. THE LD .AR IN HIS ARGUMENT HAS PUT EMPHASIS ON A PARTICULAR LINE RECORDED IN THE R EASON TO BELIEVE THAT THE SOURCE OF DEPOSITS IN THE CAPITAL ACCOUNT IN THE NA ME OF THE ASSESSEE, HAS REMAINED UNVERIFIABLE AND HENCE, THE LD.AR TOOK A V IEW THAT JUST FOR MAKING OF VERIFICATION, A CASE CANNOT BE REOPENED U/5 147. IN FACT, ITO 1(2) HAS NOWHERE MENTIONED IN HIS LETTER DATED 14.03.2011 TH AT THE SOURCE OF INVESTMENT SHOWN IN THE NAME OF SHRI BIJENDRA SINGH REMAINED UNVERIFIABLE. HE HAS VERY CLEARLY MENTIONED THAT THE ASSESSEE FIR M I.E M/S LALITA COLD STORAGE WHICH WAS BEING ASSESSED BY HIM COULD NOT E STABLISH THE GENUINENESS OF THE SOURCE OF INVESTMENT SHOWN IN TH E NAME OF SHRI BIJENDRA SINGH AND HENCE, THE SAME REMAINED UNEXPLAINED IN T HE BOOKS OF ACCOUNTS OF THE FIRM. BECAUSE OF THIS REASON, THE AO IN HIS ASS ESSMENT ORDER PASSED IN CASE OF THE FIRM FOR A.Y.2008-09, HAS MADE THE ADDI TION OF RS.12,10,000/- U/S 68 AS UNEXPLAINED CASH CREDIT. ON FILLING OF APPEAL BY THE FIRM, THE LD. CIT(A)- I, AGRA VIDE HIS ORDER A.NO.172/CIT(A)-I/AGRA/ITO1( 2)/AGRA/ 2010-11 DATED 29.04.2011 DELETED THIS ADDITION AFTER RELYING ON T HE DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF INDIA RICE MILLS VS CIT 218 ITR 508 BECAUSE THE ASSESSMENT YEAR 2008-09 IS THE FIRST YE AR OF THE OPERATION OF THE SAID FIRM. IN THIS DECISION, IT HAS BEEN HELD BY TH E HONBLE ALLAHABAD HIGH COURT THAT IN CASE, THE CAPITAL CONTRIBUTION MADE B Y THE PARTNER ON FORMATION OF A FIRM REMAINED UNEXPLAINED IN THE BOOKS OF THE SAI D FIRM, THE ADDITION IF ANY IS REQUIRED TO BE MADE, IT SHOULD BE MADE IN THE HANDS OF THE PARTNER WHO HAS MADE THE CAPITAL CONTRIBUTION. THEREFORE, IT IS NOT CORRECT TO SAY THAT THE CAPITAL CONTRIBUTION SHOWN IN THE NAME OF SHRI BIJENDRA SIN GH REMAINED UNVERIFIED. IN FACT THE ITO 1(2), AGRA PROCEEDED AS PER LAW WHILE DOING SCRUTINY ASSESSMENT OF M/S LALITA COLD STORAGE IN WHICH, THE ASSESSEE F IRM FAILED ITS PARTNER SHRI BIJENDRA SINGH AND, THEREFORE THE AMOUNT OF RS.12,1 0,000/- OF CAPITAL CONTRIBUTION SHOWN IN THE NAME OF SHRI BIJENDRA SIN GH HAS BEEN HELD TO BE UNEXPLAINED. THIS FACT HAS BEEN CLEARLY MENTIONED I N THE REASON TO BELIEVE WHEREIN IT HAS BEEN STATED THAT WHILE COMPLETING T HE ASSESSMENT IN THE CASE OF MR. LALIT COLD STORAGE, 2/15, SWADESHI BIMA NAGA R, AGRA FOR THE A.Y.2008- I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 4 OF 10 09, IT WAS SHOWN THAT SHRI BIJENDRA SINGH, GRAM MAD IYANA, POST SIKRARA, TEHSIL , FATEHABAD, AGRA, ONE OF THE PARTNER IN THE AFORESAID FIRM HAD FAILED TO SUBSTANTIATE THROUGH DOCUMENTARY EVIDENCE THE SOURC E OF CASH DEPOSIT INTRODUCED IN HIS CAPITAL ACCOUNT WITH THE FIRM M/S LALITA COLD STORAGE. THIS PARTICULAR PARAGRAPH OF THE REASON TO BELIEVE HAS N OT BEEN CONSIDERED BY THE LD.AR AND THEREFORE, HE DREW AN ERRONEOUS CONCLUSIO N THAT THE ASSESSMENT PROCEEDINGS OF THE ASSESSEE WAS REOPENED BECAUSE OF SOURCE OF DEPOSIT IN THE CAPITAL ACCOUNT OF THE ASSESSEE (APPELLANT) HAS REMAINED UNVERIFIED. THOUGH THE AO HAS MENTIONED IN THE LAST LINE OF FIR ST PARAGRAPH OF REASON TO BELIEVE THAT SOURCE OF DEPOSIT IN THE CAPITAL ACCOU NT HAS REMAINED UNVERIFIED, THIS PARTICULAR LINE WOULD NOT MAKE MUCH MATERIAL D IFFERENCE TO THE FACT THAT THE SOURCE OF CASH DEPOSIT IN THE CAPITAL ACCOUNT OF TH E ASSESSEE MAINTAINED WITH THE FIRM, M/S LALITA COLD STORAGE REMAINED UNEXPLAI NED AND THEREFORE, THE AO OF M/S LALITA COLD STORAGE MADE ADDITION U/S 68 IN THE HAND OF THE FIRM. THE SAID ADDITION COULD NOT BE SUSTAINED IN THE NAME OF THE FIRM ON A TECHNICAL GROUND BECAUSE OF THE DECISION OH HONBLE ALLAHABAD HIGH COURT IN THE CASE OF INDIA RICE MILLS VS CIT(SUPRA) BUT THE CONCLUSION HAD ALREADY BEEN DRAWN BY THE ITO1(2) THAT THIS PARTICULAR AMOUNT HAS BEEN FOUND TO BE UNEXPLAINED AND, THEREFORE, HE ALSO SENT INFORMATION TO ITO 4(1 ) TO CONSIDER THIS UNEXPLAINED AMOUNT IN THE HAND OF THE ASSESSEE FOR NECESSARY ACTION. IN VIEW OF THE FACTS AND LEGAL POSITION LAID DOWN BY THE HO NBLE JURISDICTIONAL HIGH COURT, THE ITO 4(1) HAD PRIMA FACIE A DEFINITE INFO RMATION IN HIS POSSESSION AFTER RECEIVING THE LETTER DATED 14.03.2011 OF ITO 1(20 AS DISCUSSED BY ME IN DETAIL IN PREVIOUS PARAS THAT CERTAIN INVESTMENT SH OWN BY THE ASSESSEE IN A FIRM TO THE EXTENT OF RS.12,10,000/- WAS UNEXPLAIN ED AND ACCORDINGLY, THE AO RECORDED HIS REASON TO BELIEVE THAT THE AMOUNT OF R S.12,10,000/- INTRODUCED AS CAPITAL BY WAY OF CASH DEPOSIT HAS ESCAPED ASSES SMENT. IN VIEW OF THE ABOVE FACTS AS CULLED OUT OF ME AFTER READING THE E NTIRE REASON TO BELIEVE ALONG WITH THE LETTER DATED 14.03.2011 OF ITO 1(2) AD ALSO CONSIDERING THE ASSESSMENT ORDER AND APPELLATE ORDER PASSED IN THE CASE OF M/S LALITA COLD STORAGE, I DO NOT FOUND THE LD AR AS BEING CORRECT IN HIS ARGUMENT RAISING HIS VIEW THAT THE INFORMATION OF THE REPORTING OFFICER WAS NOT CONCLUSIVE BUT HAS RAISED DOUBT FOR WANT OF VERIFICATION. IN FACT IN T HE LETTER DATED 14.03.2011 OF ITO1(2), NO DOUBT HAS BEEN RAISED FOR WANT OF VERIF ICATION. CONTRARY TO THE VIEW TAKEN BY THE LD AR, IT HAS BEEN CLEARLY STATED IN THE SAID LETTER THAT THE SOURCE OF INVESTMENT SHOWN IN THE NAME OF SHRI BIJE NDRA SINGH IN THE BOOKS OF THE ASSESSEE COULD NOT BE SUSTAINED WITH SUPPORT ING EVIDENCE AND THEREFORE, HE HAS ALSO CONSIDERED THE INVESTMENT IN THE BOOKS OF THE FIRM, M/S LALITA COLD STORAGE AS UNEXPLAINED. IT IS DIFFERENT MATTER THAT THE SAID ADDITION WAS DELETED IN VIEW OF THE DECISION OF JURISDICTION AL HIGH COURT BUT NOW, ON THE BASIS OF THE SAME FINDING CONVEYED BY ITO 1(2) TO ITO 4(1) IN HIS LETTER DATED 14.03.2011, NO FAULT CAN BE FOUND WITH REOPEN ING OF THE ASSESSMENT PROCEEDING OF THE PARTNER I.E. ASSESSEE(APPELLANT). THE NEXT CONCLUSION DRAWN BY THE LD AR THAT THERE WAS NO DOCUMENT ETC IN THE POSSESSION OF THE REPORTING OFFICER AS W ELL AS WITH THE OFFICER WHO INITIATED THE RE-ASSESSMENT PROCEEDINGS SHOWING THA T THE CAPITAL INTRODUCED ARE PRESENTLY UNDISCLOSED OR UNREPORTED INCOME, IS ALSO NOT CORRECT. IN FACT DURING THE COURSE OF DOING THE SCRUTINY OF THE CASE OF THE FIRM, M/S LALITA COLD I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 5 OF 10 STORAGE, THE AO HAS GIVEN FULL OPPORTUNITY TO THE S AID FIRM IN WHICH THE ASSESSEE HIMSELF IS A PARTNER TO ESTABLISH THE GENU INENESS OF THE CAPITAL CONTRIBUTION SHOWN IN HIS NAME BUT THE CAPITAL CONT RIBUTION SHOWN IN THE NAME OF THE ASSESSEE(APPELLANT) COULD NOT BE SUSTAINED B Y FILLING THE SUPPORTING DOCUMENT EVIDENCE. THEREFORE, ITO 1(2) HAS DRAWN A CONCLUSION AS PER LAW IN ACCORDANCE WITH THE PROVISION OF SEC.68 TO TREAT TH E AMOUNT AS UNEXPLAINED AS DISCUSSED BY HIM IN THE ASSESSMENT ORDER OF M/S LAL ITA COLD STORAGE AND THIS ASSESSMENT ORDER ITSELF IS A SUFFICIENT DOCUMENT TO DRAW A PRIMA FACIE CONCLUSION THAT THE INVESTMENT OF RS.12,10,000/- SH OWN IN THE NAME OF ASSESSEE IS NOT MADE FROM HIS ACCOUNTED SOURCE OF I NCOME. IN ANOTHER ARGUMENT THE LD AR PUTS A GREAT EMPHA SIS RAISING A POINT THAT THE ASSESSING OFFICE DID NOT APPLY HIS OWN MIN D TO THE INFORMATION AND EXAMINED THE BASIS AND THE MATERIAL OF THE INFORMAT ION AND IN HIS VIEW, THE INFORMATION SENT BY THE ITO 1(2) WAS VAGUE, INDEFIN ITE AND REMOTE INFORMATION AND DO NOT AUTHORIZED TO INITIATE THE REASSESSMENT PROCEEDINGS. I DONT AGREE WITH THE LD AR AFTER CONSIDERING THE DECISION OF HO NBLE OF SUPREME COURT IN THE CASE OF ITO VS PURSHOTAM DASS BHANGUR AND ANOTHER (SC) 224 ITR 362. IN THIS CASE, THE ASSESSMENT PROCEEDING WAS REOPEN ED ON THE BASIS OF THE REPORT OF THE INVESTIGATION WING. IN THE SAID R EPORT, INFORMATION WAS PROVIDED ABOUT THE MANIPULATION IN THE RATES OF SHA RES ON WHICH, IT WAS CLAIMED TO HAVE BEEN SOLD TO SHOW CAPITAL LOSS IN T HE RETURN OF INCOME. THE AO REOPENED THE ASSESSMENT PROCEEDINGS AFTER CONSID ERING THIS INVESTIGATION REPORT. THE REOPENING OF THE ASSESSMENT PROCEEDING WAS CHALLENGE BEFORE HONBLE RAJASTHAN HIGH COURT. THE HONBLE RAJASTHAN HIGH COURT QUASHED THE INITIATION REASSESSMENT PROCEEDINGS U/S 147 TAK ING A VIEW THAT THE LETTER OF THE DY. DIRECTOR OF INCOME TAX (INV) DID NOT CONTA IN ANY INFORMATION ANF THERE WAS NEITHER EVIDENCE OF MANIPULATION NOR EVIDENCE O F COLLUSIVE TRANSACTION REFERRED TO IN THAT LETTER AND THAT NO ENQUIRES WAS MADE BY THE ITO AFTER THE RECEIPT OF THE LETTER SO AS TO CONSTITUTE INFORMATI ON. ON FILING THE APPEAL BY THE REVENUE AGAINST THE DECISION OF THE HONBLE RAJASTH AN HIGH COURT, THE HONBLE SUPREME COURT HAS HELD THAT THE SAID VIEW O F THE HONBLE HIGH COURT COULD NOT BE ACCEPTED. THE CONTENTS OF THE LETTER R EFERRED TO THE STATEMENT CONTAINING DEFINITE INFORMATION REGARDING M.S.U.L( THE COMPANY WHOSE SHARES WERE CONSIDERED ) WHICH WAS ANNEXED TO THE LETTER A S PER THE HONBLE SUPREME COURT, THE SAID STATEMENT CONTENTED INFORMA TION DERIVED FROM THE BOMBAY STOCK EXCHANGE ABOUT THE FINANCIAL CONDITIO N OF M.S.U.L DURING THE PERIOD 65-70 WHICH INDICATED THAT DURING THESE PERI OD, THE COMPANY HAS PROSPERED AND THAT THE BOOK VALUE PER EQUITY HAS AR ISEN FROM RS.318.55 FOR THE YEAR ENDING 31.12.1965 TO RS.401/ FOR THE YEAR ENDING 31.12.1970, THE EARNING PER SHARE ROSE FROM RS.8.37/- TO RS.44/- PE R SHARE AND THE DIVIDEND PERCENTAGE HAS ALSO RAISE FROM 2% TO 10% FOR THE SA ME PERIOD. AFTER GOING THROUGH THESE DETAILS GIVEN IN THE REPORT OF THE IN VESTIGATION WING, THE HONBLE SUPREME COURT HAS HELD THAT ON THE BASIS OF THE INF ORMATION CONTAINED IN THE LETTER AND THE DOCUMENTS ANNEXED TO IT, THE ITO COU LD HAVE HAD REASON TO BELIEVE THAT THE FAIR MARKET VALUE OF THAT PARTICUL AR SHARE WAS FAR MORE THAN THE SALE PRICE AND THE MARKET PRICE TAKEN FROM THE CALCUTTA STOCK ASSOCIATION , SHOWN BY THE ASSESSEE AS THE TIME OF ORIGINAL ASS ESSMENT WERE MANIPULATED ONE AND AS A RESULT INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT. IT HAS I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 6 OF 10 BEEN FURTHER HELD IN THIS DECISION THAT IT COULD NO T BE SAID THAT THE INFORMATION THAT WAS CONTAINED IN THE LETTER WAS NOT DEFINITE I NFORMATION AND IT COULD NOT BE ACTED UPON BY THE ITO TAKEN ACTION U/S 147(B) BECAU SE THE IMPUGNED NOTICE WAS SENT ON THE NEXT DAY AFTER RECEIPT OF THE LETTE R DID NOT MEAN THAT THE ITO DID NOT APPLY HIS MIND TO THE INFORMATION CONTAINED IN THE SAID LETTER. THE HONBLE SUPREME COURT HAS VERY CLEARLY LAID DOWN TH E RATIO ON THE LEGAL POSITION OF RECODING OF THE REASON TO BELIEVE ON TH E BASIS OF REPORT HOLDING THAT IF ANY REPORT IS RECEIVED BY THE AO FROM THE INVEST IGATION WING, ON THE BASIS IF THE FACTS AND INFORMATION CONTAINED IN THE SAID REPORT, THE ITO WITHOUT ANY FURTHER INFORMATION, COULD HAVE FOUND O PINION THAT THERE WAS REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND IT HAS BEEN POINTED OUT THAT THE HIGH COURT WAS IN ERROR IN PROCEEDING ON THE BASIS THAT IT COULD NOT BE SAID THAT THE ITO HAD IN HIS POSSESSION INFORMATION ON THE BASIS OF WHICH HE COULD HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. IN VIEW OF THE ABOVE POSITION OF THE HONBLE APEX C OURT, IT HAS VERY CLEAR THAT IF THE AO HAS ANY DEFINITE INFORMATION RECEIVED BY HIM THROUGH A LETTER EITHER FROM THE INVESTIGATION WING OR FROM ANY OTHER ASSES SING OFFICER, THERE IS NO NEED FOR HIM TO MAKE FURTHER ENQUIRY BEFORE RECORDI NG OF REASON TO BELIEVE AS CONTENTED BY LD AR. AS FAR AS THE NATURE OF THE INF ORMATION RECEIVED BY THE ITO 4(1) IS CONCERNED, I HAVE ALREADY DISCUSSED IN DETAIL THAT THE ITO 1(2) HAS PROVIDED THE DEFINITE INFORMATION ABOUT UNEXPLAINED NATURE OF INFORMATION MADE BY THE ASSESSEE IN THE FIRM, M/S LALITA COLD S TORAGE. THEREFORE, I DO NOT FIND THAT THE AO HAS COMMITTED ANY ERROR IN REOPENI NG THE ASSESSMENT PROCEEDING U/S 147 ON THE BASIS ON INFORMATION RECE IVED BY THE ITO 1(2). 5.6 AS FAR AS THE ARGUMENT TAKEN BY THE LD AR THERE WAS NO OMISSION OR FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT IS CONCERNED, THIS ARG UMENT DOES NOT HOLD GOOD IN THE CASE OF THE PRESENT ASSESSEE BECAUSE TH E ASSESSMENT PROCEEDINGS IN HIS CASE HAS BEEN REOPENED BEFORE TH E EXPIRY OF FOUR YEARS AND THIS ASSESSMENT PROCEEDINGS WAS EARLIER NOT COM PLETED US/ 143(3). THEREFORE, DISCLOSURE MADE BY THE ASSESSEE IN THE R ETURN OF INCOME WAS NEVER EXAMINED IN ANY EARLIER ASSESSMENT PROCEEDING S AND HENCE, QUESTION OF EXAMINED THE FACTS WHETHER THERE IS ANY OMISSION OR FAILURE ON THE PART OF THE ASSESSEE IN DISCOURSING ANY FACTS AND MATERIAL FULLY OR TRULY DOES NOT ARISE. 5.7 IN VIEW OF MY ABOVE FINDING AFTER EXAMINATION OF REASON TO BELIEVE AND THE FACTS AND THE CIRCUMSTANCE OF THE CASE UNDER WHICH IT WAS REOPENED US/ 147, I DO NOT FIND ANY FORCE IN THE ARGUMENTS OF THE LD AR CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT PROCEEDINGS U/S 147 AND THEREFORE, ALL THE OBJECTIONS TAKEN BY HIM ARE REJECTED. AS FAR AS VAR IOUS CASE LAWS SIGHTED BY HIS CONCERN, I HAVE GONE THROUGH ALL THESE CASE LAW S AND I FIND THAT THE RATIOS LAID DOWN IN THAT CASE LAWS ARE RELATING TO RECORDI NG OF THE REASON ON THE BASIS OF DEFINITE MATERIAL AND INFORMATION IN POSSESSION OF THE AO AND I HAVE ALREADY FOUND THAT THE INFORMATION IN THE POSSESSIO N OF AO ON THE BASIS OF THE I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 7 OF 10 LETTER WRITTEN BY THE ITO 1(2) WAS A DEFINITE INFOR MATION, THEREFORE, EVEN AFTER CONSIDERING THESE CASE LAWS, I DO NOT FIND THAT TH E AO HAS COMMITTED ANY ERROR. SOME OF THE CASE LAWS SIGHTED BY THE LD AR S UCH AS COMMISSIONER OF INCOME TAX VS KELVINATOR INDIA LTD (SC) 320 ITR 561 (SUPRA) IN WHICH CONCEPT OF CHANGE OF OPINION ON THE PART OF THE A O HAS BEEN EXECUTED UPON HAS ALSO BEEN CONSIDERED BY ME. SUCH CASE LAWS CANN OT BE APPLICABLE IN THE PRESENT CASE BECAUSE INITIALLY NO ASSESSMENT ORDER IN THE CASE OF THE ASSESSEE (APPELLANT) WAS PASSED U/S 143(3) AND HENC E, THE QUESTION OF CHANGE OF OPTION IN THIS CASE DOES NOT ARISE. THERE FORE, PLACING RELIANCE ON SUCH CASE LAWS BY THE LD AR HAS BEEN FOUND TO BE A FUTILE ARGUMENT BY HIM. SIMILARLY THE LD AR HAS REFERRED IN SOME OF THE CAS E LAWS EMPHASIZING HIS OPINION THERE IS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. THIS PARTICULAR RATIO WOULD ALSO NOT APPLY IN THE CASE OF PRESENT ASSESSE E AS I HAVE ALREADY DISCUSSED IN THE PREVIOUS PARA THAT THE CASE OF THE ASSESSEE HAS NOT BEEN REOPENED AFTER THE EXPIRY OF THE FOUR YEARS AND EAR LIER NO ASSESSMENT ORDER U/S 143(3) WAS PASSED. THE LD. AR HAS REFERRED TO C ERTAIN OTHER CASE LAWS SUCH AS SIGNATURE HOTELS PVT LTD VS INCOME TAX OFFICER 338 ITR 51(DELHI HC) (SUPRA) IN WHICH REOPENING OF THE ASSESSMENT PROCEEDING WAS QUASHED ON THE BASIS OF A LETTER FROM THE INVESTIGATION WIN G WITHOUT HAVING ANY SUPPORTING REPORT WITH RELEVANT DOCUMENTS. THIS CAS E LAW WOULD ALSO NOT APPLY IN THE PRESENT CASE UNDER APPEAL BECAUSE THE ASSESS MENT PROCEEDING HAVE BEEN REOPENED ON THE BASIS OF THE INFORMATION FROM AN ITO WHO HAS COMPLETED THE ASSESSMENT ORDER OF A FIRM IN WHICH T HE ASSESSEE SHOWN AS A PARTNER MAKING THE CAPITAL CONTRIBUTION BUT DURING THE COURSE OF THE ASSESSMENT PROCEEDING OF THAT FIRM, THE SOURCE OF I NVESTMENT MADE BY THE ASSESSEE(APPELLANT) COULD NOT BE ESTABLISHED AND, T HEREFORE, THE AO PASSING THE ASSESSMENT ORDER OF THE FIRM HELD SUCH INVESTME NT SHOWN BY THE ASSESSEE (APPELLANT) IN THE FIRM AS UNEXPLAINED. TH EREFORE, THE INFORMATION PROVIDED BY AO OF THE FIRM I.E. ITO 1(2) CAN CERTAI NLY BE SAID TO BE DEFINITE INFORMATION AND IT CANNOT BE EQUATED WITH THE LETTE R OF THE INVESTIGATION WING WITHOUT HAVING SUPPORTING DOCUMENTS AND REPORTS AS FOUND IN THE CASE OF SIGNATURE HOTELS PVT LTD VS INCOME TAX OFFICER (SUP RA). THE LD.AR HAS ALSO REFERRED THE NUMBER OF CASE LAWS FROM PAGE NO. 5 ONWARDS OF HIS WRITTEN SUBMISSION. THESE CASE LAWS ARE LISTED ON THE PAGE NO.8 & 9 OF THE APPEAL ORDER BUT NONE OF THESE CASE LAWS HAVE BEEN FOUND T O BE APPLICABLE IN THE CASE OF THE PRESENT ASSESSEE(APPELLANT) AFTER IT HA S BEEN CLEARLY ESTABLISHED THAT THE INFORMATION PROVIDED BY THE ITO 1(2) WAS A DEFINITE INFORMATION AND THE ACTION OF ITO 4(1) TO REOPEN THE ASSESSMENT PRO CEEDINGS US/ 147 WAS LEGALLY VALID. THEREFORE, I HOLD THAT THE ASSESSMENT PROCEEDINGS R EOPENED U/S 147IN CASE OF THE ASSESSEE(APPELLANT) AND SUBSE QUENT ASSESSMENT ORDER PASSED U/S 143(3) IS A LEGALLY VALID ASSESSME NT ORDER AND ACCORDINGLY, GROUND NO.1 IS DISMISSED. 6. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 7. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 8 OF 10 8. I FIND THAT REASONS, AS RECORDED FOR REOPENING T HE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING CAN BE ADDE D TO THE REASONS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REASONS SO REC ORDED. HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR [(2004) 268 IT R 332, HAS, INTER ALIA, OBSERVED THAT '. IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY TH E AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE T O THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS O F REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHO ULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE.'. THEREFORE, THE REASONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. LEARNED DRS CONTENTION TH AT THIS OBSERVATION WAS MADE IN THE CONTEXT OF FAILURE OF THE ASSESSEE, WHICH WAS N OT SPECIFICALLY POINTED OUT IN THE REASONS RECORDED DOES NOT REALLY CHANGE THE IMPACT OF THE OBSERVATION. THE FACT REMAINING THAT WHAT IS NOT STATED IN THE REASONS RE CORDED CAN BE PRESSED INTO SERVICE TO JUSTIFY THE REOPENING OF ASSESSMENT. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH REASONS, AS RECORDED, MAY NOT NECESSARILY PR OVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MU ST POINT OUT TO AN INCOME ESCAPING ASSESSMENT AND NOT MERELY NEED OF AN INQUI RY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBT EDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE A SSESSMENT AND IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESCAPED AS SESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE S OMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSE SSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN INCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE SOME FURTHER INVESTIGATI ONS HAVE NOT BEEN CARRIED OUT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN I NCOME ESCAPING ASSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOM E HAS ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IM PORTANT DISTINCTION BETWEEN FACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS A ND THE FACTORS WHICH INDICATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSE SSMENT. THE FORMER CATEGORY I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 9 OF 10 CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE C ORRECT, WILL HAVE A CAUSE AND EFFECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMEN T. THE LATTER CATEGORY CONSISTS OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER INQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS TO BE SOME KIND OF A CAUSE AND EFFECT REL ATIONSHIP BETWEEN REASONS RECORDED AND THE INCOME ESCAPING ASSESSMENT. WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE FOLLOWING OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 ITR 437], THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING ON THE FORMATIO N OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT N EXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND TH E FORMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FA ILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPI NION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FARFETCHED, W HICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. 9. LET ME, IN THE LIGHT OF THIS LEGAL POSITION, REV ERT TO THE FACTS OF THIS CASE BEFORE ME. ALL THAT THE REASONS RECORDED FOR REOPENING OF ASSESSMENT INDICATE IS THAT THE ASSESSEE HAS INTRODUCED CAPITAL OF RS.12,10,000/- B UT THEN MERE FACT THAT THIS CAPITAL WAS INTRODUCED DOES NOT INDICATE THAT THE CAPITAL S O INTRODUCED CONSTITUTED AN INCOME WHICH ESCAPED ASSESSMENT. THE REASONS RECORD ED FOR REOPENING THE ASSESSMENT DO NOT MAKE OUT A CASE THAT THE ASSESSEE HAD OTHER UNACCOUNTED INCOME WHICH WERE INTRODUCED OR THAT THE SOURCE OF DEPOSIT INDICATED ANY INCOME WHICH HAS ESCAPED ASSESSMENT. IT IS IMPORTANT TO BE AR IN MIND THE FACT THAT ONE CANNOT HAVE LIBERTY OF EXAMINING THE CORRECTNESS OF THESE REASONS ON THE BASIS OF ANY OTHER MATERIAL OR FACT OTHER THAN THE FACTS JUS TIFYING THE VALIDITY OF REOPENING REFERRED TO AND REPRODUCED FROM A COMMUNICATION REC EIVED FROM THE ASSESSING I.T.A. NO. 356/AGR/2014 ASSESSMENT YEAR 2008-09 PAGE 10 OF 10 OFFICER OF LALITA COLD STORAGE WHEREIN THE CAPITAL WAS INTRODUCED, TO THE ASSESSING OFFICER OF THIS ASSESSEE WHICH INDICATED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO SUBSTANTIATE THE SOURCE OF CASH DEPOSIT ED IN THE CAPITAL ACCOUNT. HOWEVER, THAT ASPECT OF THE MATTER HAS NOT BEEN SET OUT IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT. THE ASSESSING OFFICER HAS SIMPLY STATED THAT SOURCE OF DEPOSITS IN THE CAPITAL ACCOUNT HAS REMAINED UNVERI FIABLE, BUT THEN EVERYTHING UNVERIFIED CANNOT BE EQUATED WITH AN INCOME ESCAPIN G ASSESSMENT. I AM OF THE CONSIDERED VIEW THAT NO MATTER HOW DESIRABLE IS VER IFICATION OF SOURCE IN RESPECT OF INTRODUCTION OF CAPITAL, THE MERE FACT THAT SOURCE OF SUCH DEPOSITS HAS REMAINED UNVERIFIED, CANNOT LEAD TO AN ESCAPEMENT OF INCOME. IN THIS VIEW OF THE MATTER AND IN VIEW OF THE FACT THAT NO SPECIFIC MENTION HAS BEEN MADE ABOUT ANY INCOME ESCAPING THE ASSESSMENT IN THE COURSE OF RECORDING OF THE RE ASONS, I AM OF THE CONSIDERED VIEW THAT IT WAS NOT A FIT CASE FOR REOPENING THE A SSESSMENT. I, THEREFORE, QUASH THE REASSESSMENT PROCEEDINGS. 10. IN VIEW OF THE FACT THAT THE REASSESSMENT ITSEL F IS QUASHED, I SEE NO NEED TO DEAL WITH OTHER ARGUMENTS SO STRENUOUSLY ADVANCED B Y THE LEARNED COUNSEL ON MERITS OF THE CASE. THE SAME IS RENDERED WHOLLY ACADEMIC. 11. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCE D IN THE OPEN COURT ON THIS 24 TH DAY OF JUNE, 2015. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) DATED: THE 24 TH DAY OF JUNE 2015 *AKS/- COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA