M/s. Genius Electricals & Electronics Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3623/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8167 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 28-01-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 17-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Tangible material; Accommodation entries; Reason to believe
• Section: 143(3); 147; 68; 148; 11; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI O.P. KANT ITA NO. 3623 /DEL/201 4 ASSESSMENT YEAR: 200 1 - 0 2 GENIUS ELECTRICALS & ELECTRONICS PVT. LTD., VS. ITO, C - 144, MAYAPURI IND. AREA, PHASE - II, WARD 12(1), NEW DELHI. NEW DELHI. (PAN: AAAC G4425G ) (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI GAUTAM JAIN, FCA DEPARTM ENT BY: MS. ANIMA BARNWA L , SR. DR DATE OF HEARING : 2 9 . 0 1 .201 6 DATE OF PRONOUNCEMENT: 22 : 0 4 .201 6 ORDER PER I.C. SUDHIR : JUDICIAL MEMBER THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON SEVERAL GROUNDS. OUT OF THESE GROUNDS IN GROUND NO.2, THE ASSESSEE HAS QUESTIONED VALIDITY OF INITIATION OF REOPENING OF PROCEEDINGS UNDER SEC. 147/148 OF THE INCOME - TAX ACT, 1961. IN GROUND NOS. 3 TO 7, THE VALIDITY OF SUSTAINING OF ADDITION OF RS.6,50,000 UNDER SEC. 68 OF THE ACT ON ACCOUNT OF ACCOMMODATION ENTRY HAS BEEN QUESTIONED. IN GROUND NO.1, THE ASSESSEE HAS QUESTIONED NON - SERVICE OF NOTICES ISSUED BY THE FIRST APPELLATE AUTHORITY RESULTING INTO PREVENTION OF THE ASSESSEE FROM REPRESENTING ITS CASE BEFORE THE LEARNED CI T(APPEALS). 2 2. DURING THE COURSE OF HEARING, THE LEARNED AR PREFERRED TO ARGUE THE ISSUE RAISED IN GROUND NO.2 WHICH IS LEGAL IN NATURE AND GOES TO THE ROOT OF THE MATTER. IN SUPPORT OF THIS GROUND, HE SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRICAL PARTS. IT MAINTAINED REGULAR BOOKS OF ACCOUNT AND THE SAME WERE AUDITED UNDER THE COMPANIES ACT. THE ASSESSEE COMPANY HAD ALSO FILED ANNUAL RETURNS WITH THE REGISTRAR OF THE COMPANIES, DELHI AND HARYANA GIVING TH E NAMES AND ADDRESSES OF ITS DIRECTORS AND SHAREHOLDERS IN THE SAID ANNUAL RETURNS BESIDES THE AUDITED BALANCE SHEET AND PROFIT AND LOSS ACCOUNT. THE ASSESSEE COMPANY HAD RECEIVED RS.6,50,000 FROM THE PRIVATE LIMITED COMPANY DURING THE YEAR UNDER CONSIDERA TION AND HAD FILED SEVERAL DOCUMENTS IN SUPPORT OF RECEIPT OF SHARE APPLICATION. HE SUBMITTED THAT THE RETURN OF INCOME FILED ON 30.10.2001 WAS PROCESSED UNDER SEC. 143(1) OF THE ACT AND NO NOTICE UNDER SEC. 143(2) OF THE ACT WAS I SSUED. SUBSEQUENTLY, ON T HE BASIS OF REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT, THE ASSESSING OFFICER INITIATED REOPENING PROCEEDINGS UNDER SEC. 147 OF THE ACT WITHOUT APPLICATION OF HIS MIND AND SOLELY BASED UPON THE SAID REPORT. STATEMENTS OF SOME PERSONS ALLEGED TO HA VE BEEN ENGAGED IN PROVIDING ACCOMMODATION ENTRY, AS PER THE ASSESSMENT ORDER WERE PROVIDED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER STATED THAT THOSE ENTRY OPERATORS HAD ADMITTED THAT THEY WERE 3 INSTRUMENTAL IN PROVIDING THE ACCOMMODATION ENTRY. IN THE LIGHT OF OBSERVATIONS MADE BY THE INVESTIGATION WING IN THEIR REPORT, THE ASSESSING OFFICER INITIATED REOPENING PROCEEDINGS AGAINST THE ASSESSEE AND NOTICE UNDER SEC. 148 OF THE ACT WAS ISSUED. IN RESPONSE, THE ASSESSEE FILED ITS LETTER DATED 26.4.2008 REQUESTING THEREIN THAT THE RETURN OF INCOME ORIGINALLY FILED BE TREATED AS RETURN FILED UNDER SEC. 148 OF THE ACT. ON REQUEST, THE ASSESSEE WAS SUPPLIED WITH THE REASONS TO BELIEVE RECORDED BY THE ASSESSING OFFICER. THE LEARNED AR REFERRED PAGE NOS. 15 T O 18 OF THE PAPER BOOK WHEREIN COPY OF THE SAID REASONS HAS BEEN MADE AVAILABLE. THE LEARNED AR SUBMITTED THAT THE REASONS RECORDED ARE VAGUE AND SIMILAR ENTRIES OF RS.2,50,000, RS.2,00,000 AND RS.2,00,000 HAVE BEEN REPEATED . IT HAS BEEN ALLEGED THAT ON IN VESTIGATION MADE BY THE INVESTIGATION WING, IT HAS BEEN FOUND THAT ASSESSEE IS A BENEFICIARIES OF TAKING THE ALLEGED ACCOMMODATION ENTRY. THEREAFTER, THE ASSESSING OFFICER HAS RECORDED THE REASON THAT HE HAD ALSO PERUSED VARIOUS MATERIAL AND REPORT RECEIVE D FROM INVESTIGATION WING FROM WHICH IT IS EVIDENT THAT ASSESSEE COMPANY HAD INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRY. HE, THEREAFTER , NOTED THAT HE HAS REASONED TO BELIEVE THAT THE INCOME AMOUNTING TO RS.13 LACS HAS ESCAPED ASSESSMENT. HE SUBMITTED THAT DURING THE YEAR THE ASSESSEE HAD RECEIVED SHARE APPLICATION MONEY OF RS.13,49,000 THROUGH 4 ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAD ALLOTTED SHARES TO THE SHARE APPLICANTS. OUT OF THE SAID SHARE APPLICATION MONEY, THE AS SESSING OFFICER HAS MADE ADDITION OF RS.6,50,000 RECEIVED FROM POLO LEASING & FINANCE PVT. LTD. (RS.2,50,000), FAIR N SQUARE EXPORTS PVT. LTD. (RS.2,00,000) AND TASHI CONTRACTORS PVT. LTD. (RS.2,00,000) . THESE AMOUNTS WERE PAID THROUGH ACCOUNT PAYEE CHEQ UES AND SUFFICIENT EVIDENCES IN THE FORM OF CONFIRMATION OF ACCOUNTS FROM ALL THE ENTITIES WHO HAD APPLIED FOR ALLOTMENT OF EQUITY SHARES OF THE ASSESSEE COMPANY, CERTIFICATE OF INCORPORATION, PROOF OF FILING OF INCOME - TAX RETURN OF THOSE ENTITIES, FORM N O. 2 FOR SHARE ALLOTMENT, BOARD RESOLUTIONS ETC. WERE FILED. IN THE REASONS RECORDED, THE ASSESSING OFFICER HAS NOT MENTIONED ABOUT THE NATURE OF ACCOMMODATION ENTRY NOR IS THERE ANY EVIDENCE TO SUPPORT THE ALLEGATION OF THE ASSESSING OFFICER THAT IT WAS M ONEY OF THE ASSESSEE WHICH ROUTED THROUGH THOSE ENTRIES. COPIES OF THE ABOVE EVIDENCES HAVE BEEN MADE AVAILABLE AT PAGE NOS. 22 TO 42 OF THE PAPER BOOK. THE ASSESSING OFFICER HAS MADE THE ADDITION ONLY ON THE BASIS THAT THE ASSESSEE COULD NOT PRODUCE THE SHARE APPLICANT. SINCE THE REASONS RECORDED ARE VAGUE AND SOLELY BASED UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WITHOUT APPLICATION OF MIND BY THE ASSESSING OFFICER, THE INITIATION OF REOPENING PROCEEDINGS BASED ON THOSE REASONS IS INVALID. IN SUPPORT, HE PLACED RELIANCE ON THE FOLLOWING DECISIONS: 5 A) SIGNATURES HOTEL (P) LTD., VS. ITO (2011) 338 ITR 51 (DEL.); B) SARTHAK SECURITIES CO. (P) LTD. VS. ITO 2010) 329 ITR 110 (DEL.); C) PR. CIT VS. G& G PHARMA INDIA LTD. - ITA 545/2015 ORDER DATED 08.10.2015 (DEL.); D) PR. CIT VS. RAKAM MONEY MATTERS PVT. LTD. ITA NO. 778/2015 ORDER DATED 13.10.2015 (DEL.); E ) ITO VS. RAJAT EXPORT IMPORTS (P) LTD., - ITA NO. 2820/DEL/2011 (A.Y. 2003 - 04) ORDER D ATED 27.11.2015; F ) UNIQUE METAL INDUSTRIES VS. ITO ITA NO. 1372/DEL/2015 (A.Y. 2006 - 07) ORDER DATED 28.10.2015; G) JITEN GURNANI VS. ITO ITA NO. 4908/DEL/2012 ; & H ) KATHIROOR SERVICE CO - OP BANK LTD. VS. CIT (2014) 360 ITR 243 (SC). 3. THE L EARNED SENIOR DR ON THE OTHER HAND OPPOSED THE GROUND WITH THIS SUBMISSION THAT THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WAS SPECIFIC SHOWING THE INVOLVEMENT OF ASSESSEE IN THE ACTIVITY OF ACCOMMODATION ENTRY AS BENEFICIARIES. IN THEIR STATEMENT, THE ENTRY PROVIDERS HAVE ADMITTED BEFORE THE INVESTIGATION WING THAT THEY ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRY IN THE NAME OF THE ENTITIES FROM WHOM THE ASSESSEE COMPANY HAS RECEIVED THE CLAIMED SHARE APPLICATION MONEY. THE ASS ESSING OFFICER AFTER APPLYING HIS MIND AND BEING SATISFIED WITH THE REPORT OF THE INVESTIGATION WING HAS FORMED HIS REASONS TO BELIEVE THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. SHE SUBMITTED THAT 6 THE INVESTIGATION WING IS THE PART OF THE DE PARTMENT AND DURING THE RECORDING OF REASON, THE ASSESSING OFFICER IS NEEDED TO RECORD A PRIMA FACIE CASE OF ESCAPEMENT OF TAXABLE INCOME. SHE CONTENDED THAT SUFFICIENCY OF REASONS RECORDED CANNOT BE QUESTIONED BEFORE THE COURT OF LAW AND IN THIS REGARD SH E PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAYMOND WOOLEN MILLS 236 ITR 34 (SC). THE LEARNED SENIOR DR SUBMITTED FURTHER THAT IN THE PRESENT CASE, THERE WAS NO ASSESSMENT UNDER SEC. 143(3) OF THE ACT BEFORE ISSUANCE OF NOTI CE UNDER SEC. 148 OF THE ACT. THE SAME ENTRY OPERATOR WAS THERE IN THE CASE OF CIT VS. NOVA PROMOTERS 342 ITR 169 (DEL.). THE LEARNED CIT(APPEALS) WAS THUS JUSTIFIED IN REJECTING THE GROUND REGARDING VALIDITY OF NOTICE ISSUED UNDER SEC. 148 OF THE ACT RA ISED BEFORE HIM. 4. HAVING GONE THROUGH THE ABOVE CITED DECISIONS ESPECIALLY THE RECENT DECISION OF HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF PRINCIPAL CIT VS. G & G PHARMA INDIA LTD. (SUPRA), FOR ACQUIRING JURISDICTION UNDER SEC. 147 OF THE ACT, T HE ASSESSING OFFICER IS REQUIRED TO FORM A PRIMA FACIE OPINION ON THE BASIS OF MATERIAL AVAILABLE BEFORE IT . IN OTHER WORDS, APPLICATION OF MIND BY THE ASSESSING OFFICER FOR FORMING REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF ASSESSMENT OF TAXA BLE INCOME IS 7 A PRE - CONDITION FOR ACQUISITION OF JURISDICTION UNDER SEC. 147 OF THE ACT. THE ASSESSING OFFICER CANNOT ACT UPON MERELY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT ALLEGING SOME ESCAPED ASSESSMENT OF TAX ABLE INCOME TO INITIATE THE REOPENING PROCEEDINGS. THE PURPOSE OF THE LEGISLATURE BEHIND IT IS THAT THE REOPENING PROCEEDINGS SHOULD NOT BE INVOKED IN A CASUAL MANNER AND IN ABSENCE OF SOME TANGIBLE MATERIAL AS ON THE DATE WHEN REASONS TO BELIEVE IN THIS R EGARD IS FORMED BY THE ASSESSING OFFICER. RELEVANT PARA NOS. 9 TO 13 OF THE RECENT DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF PR. CIT VS. G & G PHARMA INDIA LTD. (SUPRA) ARE BEING REPRODUCED HEREUNDER FOR A READY REFERENCE: 9. THE COURT AT THE OUTSET PROPOSES TO RECAPITULATE THE JURISDICTIONAL REQUIREMENT FOR REOPENING OF THE ASSESSMENT UNDER SECTION 147 / 148 OF THE AC T 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 CERTAIN 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 CAME TO THE CONCLUSION THAT THERE WERE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE S UPREME COURT DISAGREED AND OBSERVED THAT THE AO 'HAD NOT EVEN COME 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 TRANSACTIONS'.' I T WAS FURTHER EXPLAINED BY THE SUPREME COURT THAT: 8 '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 PART OF THE ASSESSEE TO MAKE A RETURN UNDER S. 139 FOR ANY ASSESSMENT YEA R TO THE ITO OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR OR ALTERNATIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONE D ABOVE ON THE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE 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 SAT ISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A NOTICE UNDER S. 148.' THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFIED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COULD SATISFY THE REQUIREMENTS UNDER SECTION 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 EXAMINE D THE RECORD, WE FIND THAT IN THIS CASE, THE DEPARTMENT SOUGHT REOPENING OF THE ASSESSMENT BASED ON THE OPINION GIVEN BY THE DVO. OPINION OF THE DVO PER SE IS NOT AN INFORMATION FOR THE PURPOSES OF REOPENING ASSESSMENT UNDER S. 147 OF THE IT ACT, 1961. THE AO HAS TO APPLY HIS MIND TO THE INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON. IN THE CIRCUMSTANCES, THERE IS NO MERIT IN THE CIVIL APPEAL. 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. 9 R ECENTLY, 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 BEYOND THE PERIOD OF FOUR YEARS. THIS COURT CONSIDERED THE DECISION 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 308 ITR 38 (DEL). THE COURT NOTED THAT A MATERIAL CHANGE HAD BEEN BROUGHT ABOUT TO SECTION 147 O F 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 APRIL, 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 ESCAPEMENT IS BY REASON OF OMISSION OR FAIL URE ON THE PART OF THE ASSESSEE TO FILE A RETURN OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. AFTER 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 ASSESSMENT. HOWEVER, THE PROVISO TO SECTION 147 OF THE ACT PROVIDES A COMPLETE BAR F OR REOPENING AN ASSESSMENT, WHICH HAS BEEN MADE UNDER SECTION 143(3) OF THE ACT, AFTER THE EXPIRY OF FOUR YEARS. HOWEVER, THIS PROSCRIPTION IS NOT APPLICABLE WHERE THE INCOME OF AN ASSESSEE HAS ESCAPED A SSESSMENT 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 REOPEN AN ASSESSMENT WHICH IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT 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 HARYA NA ACRYLIC MANUFACTURING CO. (P) LTD. (SUPRA) EXPLAINED THAT THE RATIO OF THE DECISION IN PHOOL CHAND BAJRANG LAL (SUPRA) MAY 10 NOT BE ENTIRELY APPLICABLE SINCE THE SAME WAS IN RESPECT OF SECTION 147(A) A S IT EXISTED PRIOR TO THE AMENDMENT.' 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INF ORMATION 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 IT S BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N 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 A SSESSEE, 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 ASSESSMEN T 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 11 PO ST 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 NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYZING MATERIA LS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY. 5. WHEN WE EXAMINE THE FACTS OF THE PRESENT CASE IN VIEW OF THE RATIOS LAID DOWN IN THE ABOVE CITED DECISIONS, WE FIND THAT THE ASSESSING OF FICER IN THE PRESENT CASE HAS INITIATED REOPENING PROCEEDINGS WITHOUT VERIFYING THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT ALLEGING THAT THE ASSESSEE WAS BENEFICIARY OF ACCOMMODATION ENTRY PROVIDER. FOR A READY REFERENCE, THE RE ASONS RECORDED BY THE ASSESSING OFFICER ARE BEING REPRODUCED HEREUNDER: AS PER INFORMATION RECEIVED FROM THE OFFICE OF THE DIT(INV.), NEW DELHI VIDE LETTER NO. DIT(INV.) - 1/2006 - 07/AE/1322 DATED 31.10.2007 AND NO. 1536 DATED 05.02.2007, THE ASSESSEE COM PANY HAS TAKEN FOLLOWING ACCOMMODATION ENTRIES TOTALING TO RS.13,00,000: 12 VALUE OF ENTRY TAKEN DATE OF ENTRY FROM WHOM TAKEN INSTRUMENT NO. RS.2,50,000 30 - 03 - 2001 POLO LEASING & FINANCE PVT. LTD. (A/C. NO. 598 WITH FEDERAL BANK, KAROL BAGH. 917065 RS.2,5 0,000 30 - 03 - 2001 POLO LEASING & FINANCE PVT. LTD. (A/C. NO. 598 WITH FEDERAL BANK, KAROL BAGH. 917065 RS.2,00,000 30 - 03 - 2001 TASHI CONSTRUCTION PVT. LTD. (A/C. NO. 2837 WITH VIJAYA BANK, RAMNAGAR) 429990 RS.2,00,000 30 - 03 - 2001 TASHI CONSTRUCTION PVT. LTD . (A/C. NO. 2837 WITH VIJAYA BANK, RAMNAGAR) 429990 RS.2,00,000 30 - 03 - 2001 FAIR N SQUARE EXPORTS PVT. LTD. (A/C. NO. CA2814 WITH KARUR VAISHYA BANK, KAROL BAGH) 168941 13 RS.2,00,000 30 - 03 - 2001 FAIR N SQUARE EXPORTS PVT. LTD. (A/C. NO. CA2814 WITH KARUR VAI SHYA BANK, KAROL BAGH) 168941 THE SAID AMOUNT HAS BEEN CREDITED IN TO ASSESSEES BANK ACCOUNT MAINTAINED WITH DENA BANK, SOUTH EXN. ON INVESTIGATION MADE BY THE INVESTIGATING WING IT HAS BEEN FOUND THAT ASSESSEE IS A BENEFICIARY OF TAKING THE AFORESAID ACCOMMODATION ENTRIES. I HAVE ALSO PERUSED VARIOUS MATERIAL & REPORT RECEIVED FROM INVESTIGATION WING AND ONT HAT BASIS, IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRY, THEREFORE, I HAVE REASON TO BELIEVE THAT THE INCOME AMOUNTING TO RS.13,00,000 HAS ESCAPED ASSESSMENT. THE ESCAPEMENT OF INCOME HAS BEEN ON ACCOUNT OF FAILURE ON PART OF ASSESSEE TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THEREFORE, IT I S A FIT CASE FOR INITIATION OF PROCEEDINGS U/S. 147 OF THE ACT. FURTHER, THE HONBLE APEX COURT IN ITS VARIOUS JUDGMENTS HELD THAT POSSESSION OF SPECIFIC INFORMATION BY THE ASSESSING OFFICER IS SUFFICIENT TO REOPEN THE ASSESSMENT. 6. THE VERY PERUSAL O F ABOVE REASONS RECORDED BY THE ASSESSING OFFICER TO INITIATE REOPENING PROCEEDINGS MAKES IT APPARENT THAT THERE WAS LACK OF 14 APPLICATION OF MIND BY THE ASSESSING OFFICER WHILE ACTING UPON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTME NT. THE ASSESSING OFFICER DID NOT APPRECIATE THAT THERE WAS REPETITION OF SAME ENTRIES AND THE ASSESSING OFFICER HAS TOTALLY BANKED UPON T HE INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT. HE DID NOT BOTHER HIMSELF TO VERIFY THE VERACITY OF THE INFORMATION RECEIVED NOR HAD HE CONFRONTED THE ASSESSEE WITH THE CLAIMED VARIOUS MATERIAL AND REPORT RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT , ON PERUSAL OF WHICH THE ASSESSING OFFICER HAS CLAIM ED IN THE REASONS RECORDED THAT, IT WAS EV IDENT BEFORE HIM THAT THE ASSESSEE HAD INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRY. WE THUS RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN IN THE ABOVE CITED DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT OF DELHI HOLD T HAT THE INITIATION OF RE - OPENING PROCEEDINGS IN THE PRESENT CASE BY THE ASSESSING OFFICER WAS NOT VALID AND THE ASSESSMENT MADE IN FURTHERANCE TO SUCH INITIATION IS ALSO HELD VOID AB INITIO. THE ISSUE RAISED IN GROUND NO.2 QUESTIONING THE VALIDITY OF INITI ATION OF RE - OPENING PROCEEDINGS AND THE ASSESSMENT FRAMED IN FURTHERANCE THERETO IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. GROUND NO.2 IS ACCORDINGLY ALLOWED. 7. IN VIEW OF THE ABOVE FINDING ON THE VALIDITY OF VERY ASSESSMENT, THE ISSUE S RAISED IN THE OTHER GROUNDS INCLUDING THE VALIDITY OF ADDITION OF 15 RS.6,50,000 MADE UNDER SEC. 68 OF THE INCOME - TAX ACT, 1961 HAVE BECOME INFRUCTUOUS. THE SAME ARE BEING DISPOSED OFF AS SUCH. 8 . IN RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 . 0 4 . 201 6 SD/ - SD/ - ( O.P . K A NT ) ( I.C. UDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 / 0 4 /201 6 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEA LS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED DIRECTLY ON COMPUTER 22 . 0 4 .201 6 DRAFT PLACED BEFORE AUTHOR 22 . 0 4 .2016 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED B Y SECOND MEMBER. 22 .04 .2016 APPROVED DRAFT COMES TO THE SR.PS/PS 22 . 0 4 .2016 KEPT FOR PRONOUNCEMENT ON 22 .04 .2016 FILE SENT TO THE BENCH CLERK 22 . 0 4 .2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.