ITO, New Delhi V. M/s Contel Medicare Systems Pvt. Ltd., New Delhi

ITA 3642/DEL/2011

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53062 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 26-07-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A K SRIVASTAVA
• Keywords: Reopening of assessment; Gift; Opportunity of being heard; Accommodation entries; Onus to prove
• Section: 142(1); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH B DELHI ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RANJAN, AM I. T. APPEAL NO. 3642 (DEL) OF 2011. ASSESSMENT YEAR : 2001-02. THE INCOME-TAX OFFICER, M/S. CONTEL MEDICARE SYSTEMS PVT. LTD., W A R D : 3 (4), VS. F 301, ASHI SH 2, PLOT NO. 2, N E W D E L H I. LOCAL SHOPPING COMPLEX, SU RAJ MAL VIHAR, N E W D E L H I. P A N / G I R NO. A AA CC 0705 D. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI A. K. SRIVASTAVA, C. A.; DEPARTMENT BY : SHRI ROHIT GARG, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE REVENUE FOR ASSESSMENT YEAR 200 1-02 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)IV, NEW DELHI. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS:- THE LD. CIT (APPEALS) HAS ERRED ON FACTS AN D IN LAW IN INVALIDATING NOTICE ISSUED UNDER SECTION 148 OF THE I. T. ACT IGNORING THAT THE CASE WAS REOPENED UNDER SECTION 147 OF THE I. T. ACT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING. RELIANCE IS PLACED ON THE DECI SIONS IN ITO VS. SMT. GURINDER KAUR [2006] 102 ITD 189 (DELHI); BADRI VISHAL AGGAR WAL VS. DCIT [2007] 14 SOT 42 (DELHI) (URO); AND AMBICA STEELS LTD. VS. DCIT [2009] 118 ITD 116 (DELHI). 2 I. T. APPEAL NO. 3642 (DEL) OF 2011 . 3. THE ONLY ISSUE FOR CONSIDERATION RELATES TO RE-O PENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 29/10/2001 ADMITTING TAXABLE INCOME OF RS.2,65,753/ -. THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, AN INFORMATION WAS RECEIVED FROM INVESTIGATION WING, NEW DELHI, THAT CERTAIN PERSONS CALLED BENEFI CIARIES, HAVE RESORTED TO MONEY-LAUNDERING BY GIVING UNACCOUNTED CASH TO PERSONS CALLED ENTRY OPERATORS AND IN TURN TAKING FROM THEM CHEQUES / DDS IN THE GARB OF SHARE APPLICATION MONE Y OR SALE PROCEEDS OF NON-EXISTENT GOODS THEREBY PLOUGHING BACK THEIR UNDECLARED CASH INTO ACCOUNTS / BUSINESS. THE ASSESSING OFFICER AFTER RECORDING REASONS ISSUED NOTICE UNDER SECTION 147 OF THE ACT ON 27 TH MARCH, 2008 TO WHICH THE ASSESSEE DID NOT FILE RETURN OF INCOME. THE AO ISSUED NOTICE UNDER SECTION 142(1) ON 24/07/2008, IN RESPONSE THERETO, THE ASSESSEE FILED LETTER DATED 14/08/2008 STATING THAT THE ASSESSEE HAD ALREADY FILED RETURN VIDE ACKNOWLEDGEM ENT NUMBER 319 ON 29/10/2001.THE ASSESSEE WAS AGAIN SPECIFICALLY ASKED TO FILE THE RETURN UND ER SECTION 148. THE ASSESSEE THEN VIDE LETTER DATED 17/11/2008 FILED THE RETURN OF INCOME UNDER S ECTION 148 OF THE ACT. THE ASSESSEE ASKED THE COPY OF REASONS RECORDED WHICH WERE PROVIDED. THE ASSESSEE FILED CERTAIN OBJECTIONS, WHICH WERE ALSO DISPOSED OFF BY THE ASSESSING OFFICER AS MENTIONED IN THE ASSESSMENT ORDER. 4. DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE R ECEIVED SHARE APPLICATION MONEY OF RS.20,00,000/-. THE ASSESSING OFFICER AFTER DETAILE D DISCUSSION ADDED THE AMOUNT OF RS.20,00,000/- AS UNDISCLOSED INCOME ON THE GROUND THAT THE ASSESSEE COULD NOT DISCHARGE ITS ONUS TO PROVE THE GENUINENESS OF TRANSACTIONS AND C REDITWORTHINESS OF THE SHARE APPLICANTS. 5. BEFORE THE LD. CIT (APPEALS) THE ASSESSEE CHALLE NGED THE ASSESSMENT ON ISSUE OF NOTICE UNDER SECTION 147 OF THE ACT AND ALSO ON MERITS. I T WAS SUBMITTED BEFORE THE LD. CIT (APPEALS) THAT THE ASSESSING OFFICER WHILE RECORDING THE REAS ONS RELATING ONLY TO THREE SHARE APPLICANTS, WHICH WERE SUPPLIED TO THE ASSESSEE, BUT COPIES OF DOCUMENTS RELIED UPON BY THE AO WAS NOT PROVIDED EVEN TILL COMPLETION OF ASSESSMENT. DURIN G THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSEE FILED PAPER BOOK, WHICH WAS REFERRED TO BY THE LD. CIT(A) FOR HIS COMMENTS. AFTER REMINDERS THE AO TOOK THE STAND THAT THE CASE WAS R EOPENED UNDER SECTION 148 OF THE ACT BECAUSE 3 I. T. APPEAL NO. 3642 (DEL) OF 2011 . THERE WAS REASON TO BELIEF THAT INCOME HAD ESCAPED ASSESSMENT TO THE TUNE OF RS.16,00,000/-. IT WAS ALSO SUBMITTED THAT FROM THE PERUSAL OF REASONS RECORDED BY THE ASSESSING OFFICER IT WAS CLEAR THAT REFERENCE HAD BEEN MADE TO SURVEY PROCEEDINGS IN THE CASE OF ONE M/S. GURCHARAN JEWELLERS AND THEREAFTER HE HAD DISCUSSED THE MODUS OPERANDI UTILIZED BY THE BY THE ASSESSEE TO PLOUGH MONEY. IT WAS FURTHER STATED THAT THE ASSESSEE HAD NO CONNECTION WHATSOEVER WITH M/S. GURCHARAN JEWELLERS. THE AO HAD BLINDLY RELIED UPO N THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WITHOUT MAKING ANY INDEPENDENT ENQUIRY REGARDING INFORMATION RECEIVED BY HIM. IT WAS ALSO ALLEGED TH AT THE AO DID NOT APPLY HIS MIND INDEPENDENTLY BEFORE REOPENING THE ASSESSMENT. THE LD. CIT (APPEALS) IN ORDER TO EXAMINE THE CONTENTION OF THE ASSESSEE THAT THE ASSESSING OFFIC ER HAD NOT APPLIED HIS MIND INDEPENDENTLY AND PROCEEDED TO REOPEN THE ASSESSMENT ON THE REPORT OF THE INVESTIGATION WING, OBSERVED THAT PARAS 1 TO 3 OF REASONS RECORDED WERE GENERAL IN NATURE W HEREIN CERTAIN ALLEGATIONS HAD BEEN MENTIONED. IN PARA 3 THE GIST OF INVESTIGATION MAD E BY INVESTIGATION WING HAD BEEN SUMMARIZED. IN PARA 4 IT IS STATED THAT THE ASSESS EE HAD CREDITS IN THE BANK ACCOUNT OF SHRI PARMANAND GARG, SHRI ASHOK KUMAR SINGHAL AND SHRI B RAHM DUTT. EVEN THOUGH NOT MENTIONED, THIS WAS AN ALLEGATION MADE BY THE INVESTIGATION WI NG IN ITS REPORT, WHICH GAVE THE AO THE REASONS TO BELIEVE THAT AN AMOUNT HAD ESCAPED ASSES SMENT. THE LD. CIT (APPEALS) AFTER DISCUSSING THE DECISIONS OF HONBLE DELHI HIGH COUR T IN THE CASE OF UNITED ELECTRICAL COMPANY P. LTD. VS. CIT [2002] 178 CTR (DEL.) 192; CIT VS. ATUL JAIN [2008] 299 ITR 383 (DEL.); & CIT VS. VARDHMAN ESTATES LTD. [2007] 165 TAXMAN 473 (DEL.) HAS HELD THAT THE AO WHILE REOPENING ASSESSMENT DID NOT INDEPENDENTLY MAKE AN ENQUIRY ON THE VERACITY OF THE REPORT FILED BY THE INVESTIGATION WING, WHICH HAD BEEN FORWARDED TO HIM BY THE OFFICE OF THE LD. COMMISSIONER OF INCOME-TAX. THE STATEMENTS RELIED UPON BY HIM WERE GENERAL IN NATURE. THE RETURN OF INCOME, AS ORIGINALLY FILED BY THE ASSESS EE, IF ANY, HAS NOT BEEN PERUSED BY THE AO. STILL HE HAS DECIDED TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE LD. CIT (A) RELYED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SFIL STOCK BROKING LTD. 41 DTR (DEL.) 98 WHEREIN IT HAS BEEN HELD THAT MERE IN FORMATION RECEIVED BY THE DY. DIRECTOR, INCOME-TAX INVESTIGATION AND DIRECTIONS OF THE SENI OR OFFICERS TO INITIATE PROCEEDINGS UNDER SECTION 147 CANNOT CONSTITUTE VALID REASONS FOR INI TIATING RE-ASSESSMENT PROCEEDINGS IN THE ABSENCE OF ANYTHING TO SHOW THAT THE AO HAS INDEPEN DENTLY APPLIED HIS MIND TO ARRIVE AT A BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. THE LD. CIT (A ) RELYING UPON THE DECISION OF HONBLE 4 I. T. APPEAL NO. 3642 (DEL) OF 2011 . DELHI HIGH COURT HAS HELD THAT REASSESSMENT PROCEED INGS INITIATED UNDER SECTION 147 OF THE ACT WERE BAD IN LAW. HE ACCORDINGLY DECLARED THE ASSES SMENT AS VOID. 6. BEFORE US THE LD. SR. DR SUBMITTED THAT THE ASSE SSING OFFICER ON RECEIPT OF INFORMATION FROM INVESTIGATION WING HAS RECORDED REASONS BY APP LYING HIS MIND. SPECIFIC INSTANCES HAVE BEEN GIVEN SUGGESTING THAT THE ASSESSEE HAD ROUTED ITS MONEY IN THE NAME OF THREE PERSONS IN THE GARB OF SHARE APPLICATION. SUFFICIENCY OF REASONS CANNOT BE CHALLENGED BY THE ASSESSEE. THE ASSESSING OFFICER HAD, THEREFORE, APPLIED HIS MIND WHILE REOPENING THE ASSESSMENT. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE RE IS NO APPLICATION OF MIND WHILE RECORDING THE REASONS. IT IS NOT DISCERNIBLE FROM THE REASON S RECORDED BY THE ASSESSING OFFICER. THEREFORE, THE LD. CIT (APPEALS) IS JUSTIFIED IN CANCELLING TH E REOPENING OF ASSESSMENT. THE LD. AR OF THE ASSESSEE RELIED ON THE DECISION OF HONBLE DELHI HI GH COURT IN THE CASE OF SIGNATURE HOTELS P. LTD. VS. INCOME-TAX OFFICER IN WRIT PETITION (CIVIL ) NO. 8067/2010 DATED 21 ST JULY, 2011 TO SUPPORT HIS CONTENTION. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSING OFFICER HAD RECORDED DETAILED REASONS ON RECEIPT OF INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT. IT IS A FACT THE ASSESSING OFFIC ER HAD NOT CONDUCTED ANY INQUIRY TO VERIFY INFORMATION RECEIVED BY HIM BEFORE ISSUE OF NOTICE U/S 148 OF THE ACT. LD CIT(A) HAS CANCELLED THE ASSESSMENT ON THE GROUND THAT ASSESSEE OFFICER BEFORE ISSUE OF NOTICE U/S 148 HAD NEITHER CONDUCTED INQUIRY NOR VERIFIED INFORMATION WITH THE RETURN OF INCOME AND HENCE IT WAS A CASE OF NON-APPLICATION OF THE MIND. IN THE CASE OF SIGNATU RE HOTELS P. LTD. VS. ITO (SUPRA) HONBLE DELHI HIGH COURT HAS HELD THAT THE FIRST SENTENCE O F REASONS STATES THAT INFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCOME-TAX [INVESTIGATION ] THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5,00,000/- DURING THE FINANCIAL YEA R 2002-03 AS PER DETAILS GIVEN IN THE ANNEXURE. THE LAST SENTENCE RECORDS THAT AS PER IN FORMATION, THE AMOUNT RECEIVED WAS NOTHING, BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS BEN EFICIARY. UNDER THESE CIRCUMSTANCES HONBLE DELHI HIGH COURT HAD HELD THAT AFORESAID RE ASONS DO NOT SATISFY THE REQUIREMENT OF SECTION 148 OF THE ACT. THE REASONS AND THE INFORM ATION REFERRED TO WAS EXTREMELY SCANTY AND 5 I. T. APPEAL NO. 3642 (DEL) OF 2011 . VAGUE. THERE WAS NO REFERENCE TO ANY DOCUMENT OR S TATEMENT, EXCEPT ANNEXURE. ANNEXURE COULD NOT BE REGARDED AS MATERIAL OR EVIDENCE THAT PRIMA FACIE COULD SHOW OR ESTABLISH NEXUS OR LINK WITH ESCAPEMENT OF INCOME . ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE THE ESCAPEMENT OF INCOME. FURTHER IT WAS APPARENT THAT THE AO DID NO T APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF INFORMATION. THE AO ACCEPTED THE PLEA ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANNER. THE REASONS REC ORDED REFLECT THAT THE AO DID NOT INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION REC EIVED FROM THE DIRECTOR OF INCOME-TAX [INVESTIGATION] AND ARRIVED AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT. UNDER THESE CIRCUMSTANCES HONBLE DELHI HIGH COURT QUASHE D THE PROCEEDINGS INITIATED UNDER SECTION 68 OF THE ACT. WE HAVE GONE THROUGH THE DECISION O F HONBLE DELHI HIGH COURT CAREFULLY. IN THIS CASE THE REASONS RECORDED BY THE AO FOR APPROV AL OF LD. COMMISSIONER OF INCOME-TAX AND THE APPROVAL ACCORDED BY THE LD. COMMISSIONER ARE REPRO DUCED AS BELOW :- 11. REASONS FOR THE BELIEF THAT INCOME HAD ESCAPED ASSE SSMENT . INFORMATION IS RECEIVED FROM THE DIT [INV.-1], NEW DELHI THAT A SSESSEE HAS INTRODUCED MONEY AMOUNTING TO RS.5,00,000/- DURING THE F.Y. 2002-03 RELATING TO AY 2003-04. DETAILS ARE CONTAINED IN ANNEXURE. AS PER INFORMAT ION AMOUNT RECEIVED IS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE IS A B ENEFICIARY. ON THE BASIS OF THE AFORESAID REASONS, THE COMMISSI ONER, INCOME-TAX GAVE APPROVAL RECORDING AS UNDER :- YES, I AM SATISFIED ON THE REASONS RECORDED BY TH E AO FOR APPROVAL AND ISSUE OF NOTICE UNDER SECTION 148 OF THE I. T. ACT, 1961. 8. WE MAY ALSO LIKE TO REPRODUCE THE ANNEXURE RECEI VED BY THE ASSESSING OFFICER ON THE BASIS OF WHICH THE ABOVE-MENTIONED REASONS WERE RECORDED IN THE CASE OF SIGNATURE HOTELS P. LTD. AS BELOW:- 13. ANNEXURE ATTACHED TO THE SAID PROFORMA PLACED ON RECORD OF THE PETITIONER READS AS UNDER :- 6 I. T. APPEAL NO. 3642 (DEL) OF 2011 . BENEFICIARYS VALUE OF ENTRY INSTRUMENT NO. BY DATE ON WHICH N A M E. T A K E N. ENTRY TAKEN. ENTR Y TAKEN SIGNATURE HOTELS 500000 09-OCT-02. PVT. LTD. (AC NO. 21060) NAME OF ACCOUNT HOLDER BANK FROM WHICH BRA NCH OF ENTRY ACCOUNT NO. ENTRY OF ENTRY GIVING ACCOUNT. ENTRY GIVEN. GIVING BANK. GIVING ACCOUNT. SWETU STONE PV SBP DG 50106 FROM THE INFORMATION CONTAINED IN ANNEXURE AND REAS ONS RECORDED BY THE ASSESSING OFFICER AS ABOVE, THE HONBLE DELHI HIGH COURT HAD CONCLUDED T HAT THERE WAS NO LIVE NEXUS BETWEEN THE REASONS RECORDED AND INFORMATION THAT INCOME OF RS. 5,00,000/- HAD ESCAPED. ALSO THERE WAS NON- APPLICATION OF MIND. 9. HOWEVER, IN THE CASE BEFORE US THE ASSESSING OF FICER HAS RECORDED THE FOLLOWING REASONS :- REASONS FOR ISSUING NOTICE U/S 148 IN THE CASE O F M/S. CONTEL MEDICARE SYSTEMS PVT. LTD. FOR AY 2001 -02. A REPORT ON ENQUIRIES MADE BY THE DIRECTORATE OF IN COME TAX (INVESTIGATION), NEW DELHI INTO ACCOMMODATION ENTRIES GIVEN BY ENTRY OPE RATORS HAS BEEN RECEIVED. THIS REPORT WAS RECEIVED IN THE OFFICE OF COMMISSIONER OF INCOM E TAX, DELHI-1, NEW DELHI AND WAS SUBSEQUENTLY FORWARDED VIDE F. NO. CIT-1/2005-06/21 32 DATED 13/03/2006. THESE ENQUIRIES WERE INITIATED TO PROBE INTO SOME BANK ACCOUNT WHIC H WERE USED TO ISSUE CHEQUES TO ENTRY SEEKERS OF BENEFICIARIES AGAINST CASH PAID BY THEM TO THE E NTRY OPERATORS. SUCH A CAMOUFLAGED TRANSACTION CAME TO LIGHT DURING THE COURSE OF SURV EY IN THE CASE OF M/S. GURCHARAN JEWELERS WHOSE PROPRIETOR SHRI ASHOK KUMAR CHAUHAN HAD ADMIT TED TO HAVE TAKEN CHEQUES UNDER THE GARB OF GIFTS AFTER GIVING CASH TO THE ENTRY OPERATOR. PROBE WAS INITIATED INTO THE ACCOUNTS WHICH WERE USED TO PROVIDE THESE ENTRIES. THESE INVESTIGATION S LED TO REVEALING OF MANY MORE BANK ACCOUNTS WHICH WERE BEING USED BY THE ENTRY OPERATORS FOR TH E PURPOSE OF GIVING ACCOMMODATION ENTRIES. 7 I. T. APPEAL NO. 3642 (DEL) OF 2011 . 2. EXTENSIVE ENQUIRIES WERE MADE INTO NUMEROUS SUCH BANK ACCOUNTS, THE ACCOUNT HOLDERS, THE PERSONS OPERATING THESE ACCOUNTS AND THE PERSON S FOR WHOM SUCH ACCOUNT HOLDERS WERE WORKING. THESE ENQUIRIES REVEALED INTER ALIA THE F OLLOWING:- 2.1 ENTRIES WERE BEING BROADLY TAKEN FOR TWO PURPOS ES : TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURP OSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC., IN THE FORM OF GIFTS, SHARE APPLICATION MONEY, LOANS ETC. TO INFLATE EXPENSES IN THE TRADING AND PROFIT AND L OSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREBY PAY LESS TAXES. 2.2 THE ASSESSEE WHO HAD UNACCOUNTED MONEY (CALLED AS ENTRY TAKERS OR BENEFICIARIES) AND WANTED TO INTRODUCE THE SAME IN THE BOOKS OF AC COUNTS WITHOUT PAYING TAX, APPROACHED ANOTHER PERSON (CALLED AS ENTRY OPERATOR) AND HANDE D OVER THE CASH (PLUS COMMISSION) AND HAD TAKEN CHEQUES / DDS / POS. THE CASH WAS BEING DEPO SITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT EITHER IN HIS OWN NAME OR IN THE NAME OF RE LATIVE / FRIENDS OR OTHER PERSON HIRED BY HIM, FOR THE PURPOSE OF OPENING BANK ACCOUNT. IN M OST OF THESE BANK ACCOUNTS THE INTRODUCER WAS THE MAIN ENTRY OPERATOR AND THE CASH DEPOSIT SLIPS AND OTHER INSTRUMENTS WERE FILLED BY HIM. THE OTHER PERSONS (IN WHOSE NAME THE A/C IS OPENED) ONL Y USED TO SIGN THE BLANK CHEQUE BOOK AND HAND OVER THE SAME TO THE MAIN ENTRY OPERATOR. THE ENTRY OPERATOR THEN USED TO ISSUE CHEQUES / DDS / POS. IN THE NAME OF THE BENEFICIARY FROM THE SAME ACCOUNT (IN WHICH THE CASH IS DEPOSITED) OR ANOTHER ACCOUNT IN WHICH FUNDS WERE TRANSFERRED THROUGH CLEARING IN TWO OR MORE STAGES. THE BENEFICIARY IN TURN DEPOSITED THESE INSTRUMENTS IN HIS BANK ACCOUNTS AND THE MONEY CAME TO HIS REGULAR BOOKS OF ACCOUNT IN THE FORM OF GIFT, SHARE APPLICATION MONEY, LOAN ETC. THROUGH BANKING CHANNELS. 2.3 THE OPERATORS GAVE THE ACCOUNT HOLDERS AMOUNTS RANGING FROM RS.1000 TO 2000 PER MONTH. THESE ACCOUNT HOLDERS WERE MASONS, PLUMBERS , ELECTRICIANS, PEONS, DRIVERS ETC. WHOSE EARNINGS ARE NOT SUFFICIENT FOR A LIVING. THEY EAR NED NORMALLY RS. 3 TO 5 THOUSAND PER MONTH IN THEIR NORMAL WORK AND BY WORKING FOR THE ENTRY OPER ATORS EARNED EXTRA INCOME OF RS. 2 TO 4 THOUSAND PER MONTH. THEIR SIGNATURES WERE TAKEN ON BLANK GIFT DEEDS, CHEQUE BOOKS, SHARE APPLICATION MONEY ETC. IN FACT THESE PERSONS SIGNE D ALL TYPES OF PAPERS THEY WERE ASKED TO SIGN. THEY WERE MADE DIRECTORS OF COMPANIES, PARTNERS OF FIRMS AND PROPRIETOR OF DIFFERENT CONCERNS SOLELY FOR OPERATION OF THESE ACCOUNTS. ACTUALLY, MANY OF THEM WERE NOT EVEN AWARE OF THE TAX IMPLICATIONS ETC. THEIR ONLY CONCERN WAS WITH T HE FEW THOUSAND RUPEES GIVEN TO THEM BY THE ENTRY OPERATORS. 8 I. T. APPEAL NO. 3642 (DEL) OF 2011 . 3. SUMMING UP, THE REPORT AS A RESULT OF THESE EXTE NSIVE ENQUIRIES CARRIED OUT BY THE DIT [INV.], NEW DELHI HAS ASSAILED GENUINENESS OF T RANSACTIONS, WHETHER SHOWN BY BENEFICIARIES AS INFLOW OF SHARE CAPITAL OR RECEIPT OF GIFTS OF C ONSIDERATION FOR SALE-PURCHASE. IT HAS ALSO DEALT A BODY BLOW TO THE CREDITWORTHINESS OF THE PE RSONS / PERSONS CONTROLLING THE CONCERNS WHO HAVE GIVEN THESE CREDIT ENTRIES / SHARE CAPITAL / GIFTS / SALE CONSIDERATION AS THEY HAVE BEEN SEEN TO BE MAN OF NO MEANS. 4. IN THE INSTANT CASE OF THE ASSESSEE, M/S. CONTEL MEDICARE SYSTEM PVT. LTD. THE FOLLOWING CREDITS HAVE BEEN SHOWN IN THE BANK ACCOU NT OF THE ASSESSEE COMPANY:- BANK OF THE BRANCH OF AMOUNT INSTRUMENT DATE CREDIT ENTRY COMING ASSESSEE. THE BANK. NO. FROM THE ACCOUNT OF UNION BANK CHANDER 50000 175178 26-A UG-00 PARMANAND OF INDIA. NAGAR. GARG. UNION BANK CHANDER 55000 273080 26-A UG-00 ASHOK KUMAR OF INDIA. NAGAR. SINGHAL. UNION BANK CHANDER 55000 285730 26-A UG-00 BRAHAM DUTT. OF INDIA. NAGAR. IN VIEW OF THE FINDINGS OF THE INVESTIGATION REPORT IN THESE CASES HAVE BEEN PROVED TO BE MEN / PARTIES OF NO CREDITWORTHINESS. THE STATE MENTS ON OATH AND THE ORDERS OF ADMISSION CLEARLY SHOW THAT THESE TRANSACTION ARE NON GENUINE . THEREFORE AFORESAID CREDIT ENTRIES ARE SQUARELY HIT BY SECTION 68 OF THE I. T. ACT. I, T HEREFORE, HAVE REASONS TO BELIEVE THAT THIS AMOUNT OF RS.1,60,000/- REPRESENTS INCOME OF THE ASSESSEE CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2001-02. 10. FROM THE PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER IT IS SEEN THAT IN PARAGRAPH 1 THE ASSESSING OFFICER HAS MENTIONED ABO UT THE RECEIPT OF REPORT FROM THE OFFICE OF THE 9 I. T. APPEAL NO. 3642 (DEL) OF 2011 . COMMISSIONER OF INCOME-TAX INDICATING THAT ENQUIRIE S WERE INITIATED BY DIRECTORATE OF INCOME TAX [INVESTIGATION] TO PROBE INTO BANK ACCOUNT WHIC H WERE USED BY ENTRY OPERATORS FOR THE PURPOSE ISSUE OF CHEQUES TO BENEFICIARIES AGAINST C ASH PAID BY THEM. IN PARAGRAPH 2 THE ASSESSING OFFICER HAS MENTIONED THE OUT-COME OF ENQUIRIES CON DUCTED BY THE INVESTIGATION WING. IN PARAGRAPH 3 THE ASSESSING OFFICER HAS SUMMED UP THE RESULT OF ENQUIRIES CONDUCTED BY INVESTIGATION WING OF THE DEPARTMENT INDICATING THE NON-GENUINENESS OF THE SHARE CAPITAL OR RECEIPT OF GIFTS OR CONSIDERATION FOR SALE PURCHASE . IN PARAGRAPH 4, THE ASSESSING OFFICER HAS GIVEN DETAILS OF CREDIT ENTRIES APPEARING IN THE BANK ACC OUNT OF THE ASSESSEE COMING FROM THE ACCOUNT OF THREE PERSONS. THE ASSESSING OFFICER ON THE BASIS OF THE REPORT GIVEN BY THE INVESTIGATION WING HAS COME TO THE CONCLUSION THAT THE ENTRIES WERE SQ UARELY HIT BY SECTION 68 OF THE ACT. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSING OFFICE R HAD NOT CONDUCTED INDEPENDENT ENQUIRIES AFTER RECEIPT OF INFORMATION. HOWEVER, HE HAS ANALYZED T HE REPORT RECEIVED FROM INVESTIGATION WING TO COME TO A CONCLUSION THAT TRANSACTIONS WERE NOT GEN UINE. THE REASONS RECORDED IN THE CASE OF THE PRESENT ASSESSEE ARE EXHAUSTIVE AS AGAINST THE SCAN TY REASONS RECORDED IN THE CASE OF SIGNATURE HOTELS P. LTD. (SUPRA). THIS IS NOT THE CASE IN THE PRESENT APPEAL. THEREFORE, IN OUR CONSIDERED OPINION, THE ASSESSING OFFICER HAD APPLIED HIS MIND WHILE RECORDING THE REASONS FOR RE-OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT. MOREO VER, THE INFORMATION IS SPECIFIC GIVING THE DETAILS OF THE BRANCH, THE NAME OF THE ACCOUNT HOLD ER AND THE DATE OF CHEQUE AND CHEQUE NUMBER. HONBLE SUPREME COURT IN THE CASE OF PHOOL CHAND BA JRANG LAL VS. ITO 203 ITR 456 (SC) HAS HELD AS UNDER :- SINCE THE BELIEF IS THAT OF THE INCOME-TAX OFFIC ER, THE SUFFICIENCY OF THE REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDG E, BUT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT THERE IN FACT EXISTED NO BELIEF OR T HAT THE BELIEF WAS NOT A BONAFIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON-SPECI FIC INFORMATION. TO THAT LIMITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUS ION ARRIVED AT BY THE INCOME-TAX OFFICER AND EXAMINE WHETHER THERE WAS ANY MATERIAL AVAILABLE ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE I NCOME-TAX OFFICER AND FURTHER WHETHER THAT MATERIAL HAD ANY RATIONAL CONNECTION W ITH OR A LIVE LINK FOR THE FORMATION OF THE REQUISITE BELIEF. IT WOULD BE IMM ATERIAL WHETHER THE INCOME-TAX 10 I. T. APPEAL NO. 3642 (DEL) OF 2011 . OFFICER, AT THE TIME OF MAKING THE ORIGINAL ASSESSM ENT, COULD OR COULD NOT HAVE FOUND BY FURTHER ENQUIRY OR INVESTIGATION, WHETHER THE TRANSACTION WAS GENUINE OR NOT IF, ON THE BASIS OF SUBSEQUENT INFORMATION, THE INCOME TAX OFFICER ARRIVES AT A CONCLUSION, AFTER SATISFYING THE TWIN CONDITIONS PR ESCRIBED IN SECTION 147(A) THAT THE ASSESSEE HAD NOT MADE A FULL AND TRUE DISCLOSUR E OF THE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT AND THEREFORE, INCOME C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT.( PAGE 477-E-H) 11. FROM THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF PHOOL CHAND BAJRANG LAL (SUPRA) IT IS CLEAR THAT SUFFICIENCY OF REASONS FOR FORMING THE BELIEF CANNOT BE JUDGED BY THE COURT. FROM THE REASONS RECORDED, THE LD. AR OF THE ASSESS EE HAS NOT POINTED OUT AS TO WHY THE BELIEF FORMED BY THE ASSESSING OFFICER WAS NOT BONAFIDE OR WAS BASED ON VAGUE, IRRELEVANT AND NON- SPECIFIC INFORMATION. AS MENTIONED ABOVE, A SPECIF IC INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER THROUGH THE OFFICE OF THE COMMISSIONER OF I NCOME-TAX THAT THE ASSESSEE HAD RECEIVED AMOUNT OF RS.1,60,000/- FROM THREE PERSONS THROUGH BANK ACCOUNTS. UNDER THE LAW, THERE IS NO REQUIREMENT THAT THE ASSESSING OFFICER SHOULD VERIF Y THE INFORMATION BEFORE FORMING THE BELIEF THAT INCOME HAD IN FACT ESCAPED ASSESSMENT AND ONLY THEN HE CAN RESORT TO PROCEEDINGS UNDER SECTION 148 OF THE ACT. WHAT IS TO BE SEEN IS WHET HER THERE IS NEXUS WITH THE INFORMATION AND FORMATION OF BELIEF BY THE ASSESSING OFFICER WHILE ISSUING NOTICE UNDER SECTION 148 OF THE ACT. IN THE CASE BEFORE US, THE ASSESSING OFFICER HAD RECOR DED DETAILED REASONS IN ORDER TO ARRIVE AT THE CONCLUSION THAT PROVISIONS OF SECTION 68 ARE APPLIC ABLE AND THUS RESULTED IN ESCAPEMENT OF INCOME. WE FIND THAT THAT THERE IS NEXUS BETWEEN TH E SPECIFIC INFORMATION AND REASONS RECORDED BY THE ASSESSING OFFICER. THEREFORE, IN OUR CONS IDERED OPINION, THE ASSESSING OFFICER IS JUSTIFIED IN REOPENING THE ASSESSMENT. THE LD. CIT (APPEALS) , THEREFORE, IN OUR CONSIDERED OPINION IS WRONG IN HOLDING THAT THERE IS NO NEXUS BETWEEN THE INFORMATION RECEIVED AND THE REASONS RECORDED BY THE ASSESSING OFFICER. WE, THEREFORE, UPHOLD THE REOPENING OF ASSESSMENT. 12. THE LD. CIT (APPEALS) HAS DECIDED THE APPEAL ON ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. SINCE THE ASSESSEE HAS CHA LLENGED THE ADDITIONS ON MERITS, WHICH HAVE 11 I. T. APPEAL NO. 3642 (DEL) OF 2011 . NOT BEEN DECIDED BY LD. CIT(A) IN VIEW OF THE FACT THAT HE HAD HELD THE ASSESSMENT VOID DUE LACK OF JURISDICTION. WE, THEREFORE, SET ASIDE THE MATT ER TO THE FILE OF CIT(A) WITH THE DIRECTION TO DECIDE THE APPEAL ON MERITS, AFTER AFFORDING THE AS SESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. WE ORDER ACCORDINGLY. 13. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED IN TERMS INDICATED AS ABOVE. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 31 ST OCTOBER, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJA N ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.