CABLE CORPORATION INDIA LTD, MUMBAI V. ACIT CIR 2(1), MUMBAI

ITA 4/MUM/2009

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0796 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-03-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 01-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Reopening of assessment; Tangible material; Wrong claim; Assessment record; Reason to believe
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI G S PANNU, AM & SHRI SAKTIJIT DEY, JM ITA NO. 04/MUM/2009 ASSESSMENT YEAR 1998-1999 ITA NO. 05/MUM/2009 ASSESSMENT YEAR 1999-2000 ITA NO. 843/MUM/2010 ASSESSMENT YEAR 2000-2001 ITA NO. 06/MUM/2009 ASSESSMENT YEAR 2001-2002 CABLE CORPORATION INDIA LTD., LAXMI BUILDING, 6, SHOORJI VALLABHDAS MARG, BALLARD ESTATE, MUMBAI 400 001. PAN AAACC2936J VS. ACIT CIR 2(1) / ITO 2(1)(4), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NITESH JOSHI, AR RESPONDENT BY : SHRI RAJAT MITTAL, DR DATE OF HEARING : 2 3 .0 3 .2017 DATE OF PRONOUNCEMENT : 09 .0 5 .2017 O R D E R PER SAKTIJIT DEY, JUDICIAL MEMBER: AFORESAID APPEALS OF THE ASSESSEE ARE DIRECTED AGA INST SEPARATE ORDERS OF LEARNED CIT(A)-II, MUMBAI FOR A.YS. 1998-99, 199 9-2000, 2000-01 AND 2001-02. AS THE APPEALS RELATE TO THE SAME ASSESSE E AND ARE MORE OR LESS INVOLVING COMMON ISSUES, FOR THE SAKE OF CONVENIENC E, THEY HAVE BEEN CLUBBED TOGETHER AND DISPOSED OF IN THIS CONSOLIDAT ED ORDER. 2. THE FIRST COMMON ISSUE RAISED IN GROUND NO.1 OF ALL THESE APPEALS RELATE TO VALIDITY OF PROCEEDINGS INITIATED U/S. 147 OF TH E ACT. BRIEFLY, THE FACTS WHICH CABLE CORPORATION INDIA LTD. 2 ARE MORE OR LESS COMMON IN ALL THESE APPEALS, AS CU LLED OUT FROM RECORD ARE THE ASSESSEE - A COMPANY, FILED ITS RETURNS VOLUNTA RILY IN REGULAR COURSE FOR ASSESSMENT YEARS UNDER DISPUTE AS UNDER: ASSESSMENT YEAR DATE OF FILING OF RETURN 1998-1999 26.11.1998 1999-2000 24.09.1999 2000-2001 29.11.2000 2001-2002 31.10.2001 AS FAR AS ASSESSMENT YEARS 1998-99 AND 2000-01 ARE CONCERNED, ASSESSMENTS WERE ORIGINALLY COMPLETED U/S. 143(3) O F THE ACT, VIDE ORDER DATED 23.03.2001 AND 13.12.2000 RESPECTIVELY. IN R ESPECT OF A.Y. 1999-2000 AND 2001-02 RETURNS WERE PROCESSED U/S. 143(1) OF T HE ACT. THE AO HAVING REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T ON ACCOUNT OF BOGUS CLAIM OF PAYMENT OF COMMISSION AND BROKERAGE TO M/S . NAROTAM AGENCIES, RE-OPENED ASSESSMENT U/S. 147 OF THE ACT FOR THE AF ORESAID ASSESSMENT YEARS BY ISSUING NOTICES U/S. 148 OF THE ACT ON 31.03.200 4 FOR A.Y. 1998-99 AND ON 26.03.2004 FOR A.YS. 1999-2000, 2000-2001 AND 2001- 02. ULTIMATELY, THE AO COMPLETED ASSESSMENTS U/S. 143(3) R.W.S. 147 OF THE ACT FOR THE AFORESAID ASSESSMENT YEAS ON 11.03.2005. WHILE DOING SO, THE AO ADDED BACK SERVICE/COMMISSION CHARGES PAID TO M/S. NAROTAM AGE NCIES BY TREATING IT AS BOGUS. BEING AGGRIEVED OF THE ASSESSMENT ORDERS SO PASSED, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A), INTER ALIA, ON THE GROUND THAT REOPENING OF ASSESSMENT IS INVALID. THE CIT(A) HOWEVER, REJE CTED THE GROUND RAISED BY CABLE CORPORATION INDIA LTD. 3 THE ASSESSEE ON THE VALIDITY OF THE REASSESSMENT B Y HOLDING THAT THE AO HAS PROPERLY EXERCISED HIS POWER U/S. 147. THE CIT(A) ALSO UPHELD THE ADDITION OF COMMISSION/BROKERAGE PAYMENT TO M/S. NAROTAM AGE NCIES ON MERITS ALSO. 3. THE LEARNED AR DRAWING OUR ATTENTION TO THE REAS ONS TO BELIEVE RECORDED BY THE AO FOR REOPENING THE ASSESSMENT AS COMMUNICATED TO THE ASSESSEE, A COPY OF WHICH IS AT PAGE 53 OF THE PAPE R-BOOK, SUBMITTED THAT IN THE REASONS RECORDED THE AO HAS REFERRED TO INFORMA TION RECEIVED FROM ANOTHER OFFICER TO FORM HIS BELIEF THAT COMMISSION PAID TO THE PROPRIETOR OF M/S. NAROTAM AGENCIES IS BOGUS. HE SUBMITTED, AT T HE TIME OF RECORDING OF REASON FOR RE-OPENING ASSESSMENT, THE AO HAD NO TAN GIBLE MATERIAL BEFORE HIM TO FORM SUCH BELIEF. THE LEARNED AR SUBMITTED, INSPITE OF SPECIFIC REQUEST OF THE ASSESSEE, THE AO HAS NOT CONFRONTED THE MATE RIAL/INFORMATION ON THE BASIS OF WHICH HE FORMED THE BELIEF. THE LEARNED A R SUBMITTED, SINCE THERE IS NO TANGIBLE MATERIAL BEFORE THE AO AT THE TIME OF R ECORDING REASONS FOR RE- OPENING ASSESSMENT, THE BELIEF FORMED HAS NO NEXUS WITH THE MATERIAL ON RECORD, THEREFORE, THE ASSUMPTION OF JURISDICTION U /S. 147 IS INVALID. THE LEARNED AR SUBMITTED, EVEN, AS ON DATE THE DEPARTME NT HAS FAILED TO BRING ON RECORD ANY MATERIAL TO DEMONSTRATE THE NATURE OF IN FORMATION/MATERIAL AVAILABLE BEFORE THE AO TO FORM HIS BELIEF THAT INC OME HAS ESCAPED ASSESSMENT. THE LEARNED AR SUBMITTED, REASON TO BE LIEVE AS CONTEMPLATED U/S. 147 OF THE ACT IS THAT OF THE AO OF THE ASSESS EE AND NOT OF ANOTHER AO. CABLE CORPORATION INDIA LTD. 4 THE LEARNED AR SUBMITTED, IN THE PRESENT CASE THE R EASON FOR FORMATION OF BELIEF IN ABSENCE OF ANY TANGIBLE MATERIAL AND MERE LY ON SUSPICION. IN SUPPORT OF SAID CONTENTION THE LEARNED AR RELIED UP ON THE FOLLOWING DECISIONS: CHHUGAMAL RAJPAL VS. S P CHALIHA (1971) 79 ITR 603 (SC) SHEO NATH SINGH VS. APPELLATE ASSISTANT COMMISSIONE R OF INCOME TAX (1971) 82 ITR 147 (SC) 4. THE LEARNED DR JUSTIFYING THE REOPENING OF ASSES SMENT SUBMITTED THAT ON THE BASIS OF SPECIFIC INFORMATION RECEIVED FROM THE AO OF M/S. NAROTAM AGENCIES AT MADRAS, THE AO HAS REOPENED THE ASSESSM ENT. THE LEARNED DR SUBMITTED, WHEN THE AO HAS FORMED BELIEF THAT INCOM E HAD ESCAPED ASSESSMENT, THE SUFFICIENCY OF REASONS RECORDED CAN NOT BE CALLED INTO QUESTION. HE THEREFORE SUBMITTED THAT THE PROCEEDI NGS U/S. 147 OF THE ACT WERE VALIDLY INITIATED FOR ALL THE ASSESSMENT YEARS . 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS AND PERUSED THE MATERIALS ON RECORD KEEPING IN VIEW THE DECISIONS R ELIED UPON. UNDISPUTEDLY, IN ALL THE ASSESSMENT YEARS UNDER APPEAL, THE AO HA S RE-OPENED THE ASSESSMENT BY ASSUMING JURISDICTION U/S. 147 OF THE ACT. THE REASONS RECORDED FOR REOPENING THE ASSESSMENT IN THE AFORES AID ASSESSMENT YEARS AS COMMUNICATED TO THE ASSESSEE READS AS UNDER: NOTICES U/S. 148 HAVE BEEN ISSUED AND SERVED ON YO U FOR AND FROM A.YS 1998-99 TO 2001-02. THE REASONS FOR REOPENING THE SAID ASSESSMENTS ARE AS UNDER:- CABLE CORPORATION INDIA LTD. 5 AS PER INFORMATION RECEIVED FROM THE ASSESSING OFF ICER, MADRAS IT IS FOUND THAT THE COMMISSION PAID BY YOU TO SHRI D.D.VYAS, PROP. OF SHRI NAROTAM AGENCIES, 12, ERRAB ALU CHETTY STREET, CHENAI-1, AS PER DETAILS GIVEN HEREUNDER, H AS BEEN FOUND TO BE BOGUS. THEREFORE, I HAVE REASON TO BEL IEVE THAT THE SAID COMMISSION CLAIMED AS EXPENSES HAS ESCAPED ASSESSMENT. AS COULD BE SEEN FROM A PLAIN READING OF THE REASON S RECORDED, ON THE BASIS OF INFORMATION RECEIVED FROM THE AO, MADRAS, TO THE EFFECT THAT COMMISSION PAID TO SHRI D D VYAS, PROPRIETOR OF M/S. NAROTAM A GENCIES OF CHENNAI IS FOUND TO BE BOGUS, THE AO HAD FORMED BELIEF THAT BY CLAIMING COMMISSION PAYMENT AS DEDUCTION INCOME HAS ESCAPED ASSESSMENT. HOWEVER, IN THE REASONS RECORDED THE AO HAS NOT MENTIONED IN DETAIL WHAT IS THE NATURE OF INFORMATION/MATERIAL AVAILABLE BEFORE HIM FOR FORMA TION OF BELIEF THAT THERE IS ESCAPEMENT OF INCOME. THEREFORE, IN COURSE OF APPE LLATE PROCEEDINGS BEFORE THIS FORUM THE LEARNED DR WAS DIRECTED TO CALL FOR THE ASSESSMENT RECORDS PERTAINING TO THE AFORESAID ASSESSMENT YEARS AND BR ING TO THE NOTICE OF THE BENCH THE MATERIAL/INFORMATION AVAILABLE BEFORE THE AO AT THE TIME OF RECORDING OF REASONS. TO THE AFORESAID SPECIFIC QU ERY RAISED BY THE BENCH, THE BEST THE DEPARTMENT COULD COME UP WITH IS A LET TER DATED 10.12.2010 WRITTEN BY THE ITO BUSINESS WARD IX(3), CHENNAI TO DY CIT 2(1), AAYKAR BHAVAN, MUMBAI. THE CONTENT OF THE SAID LETTER, A C OPY OF WHICH IS AT PAGE 3 OF THE DEPARTMENTS PAPER BOOK READS AS UNDER: CABLE CORPORATION INDIA LTD. 6 SIR, SUB: INFORMATION CALLED FOR IN THE CASE OF SRI D D VYAS, PROP. SHREE NAROTHAM AGENCIES, NO.13, ERRABALU STREET, CHENNAI-1 ASSESSMENT YEARS 1998-99 TO 2001-02 REG. REF : DY. COMMISSIONERS LETTER IN NO DCIT /INFORMATION/10-11 DT. 11.11.2010. PLEASE REFER TO YOUR LETTER CITED. THREE STATEMENTS WERE RECORDED FROM SRI D D VYAS I. E. ON 23.12.2003; 29.12.2003 & 05.01.2004. COPY OF THE A BOVE THREE STATEMENTS RECORDED FROM DD VYAS, PROP. M/S. NAROTT AM AGENCIES, ARE ENCLOSED HEREWITH, AS REQUIRED BY YOU. NO OTHER MATERIAL RELATING TO M/S. CABLE CORPORATIO N OF INDIA LTD., MUMBAI, SEEMS TO HAVE BEEN OBTAINED EITHER AT THE T IME OF SURVEY OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LEARNED DR ADMITTED BEFORE US THAT EXCEPT THE L ETTER DATED 10.12.2010 THERE IS NO OTHER MATERIAL AVAILABLE ON RECORD WHIC H CAN BE SAID TO BE INFORMATION/MATERIAL AVAILABLE WITH THE AO AT THE T IME OF RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 147 OF THE ACT. EVEN, ON THOROUGH EXAMINATION OF THE ASSESSMENT RECORD OF THE AFORESA ID ASSESSMENT YEARS UNDER APPEAL, WE HAVE NOT FOUND ANY OTHER INFORMATI ON/MATERIAL PURPORTEDLY RECEIVED FROM THE AO, MADRAS ON THE BASIS OF WHICH THE AO RE-OPENED THE ASSESSMENT. THUS, AS COULD BE SEEN, THE ONLY MATER IAL AVAILABLE IN THE ASSESSMENT RECORD WHICH CAN BE TREATED AS INFORMATI ON RELATING TO THE NATURE OF THE COMMISSION/BROKERAGE PAYMENT MADE BY THE ASS ESSEE TO M/S. CABLE CORPORATION INDIA LTD. 7 NAROTAM AGENCIES IS THE LETTER DATED 10.12.2010. T HUS, OBVIOUSLY THE AFORESAID LETTER DATED 10.12.2010 COULD NEVER BE AV AILABLE BEFORE THE AO AT THE TIME OF RECORDING OF REASONS IN MARCH 2004. TH EREFORE, IT BECOMES CLEAR, AT THE TIME OF RECORDING REASONS, THE AO HAD NO TAN GIBLE MATERIAL BEFORE HIM TO FORM HIS BELIEF THAT INCOME HAS ESCAPED ASSESSME NT. IN OTHER WORDS, THE FORMATION OF BELIEF BY THE AO IS NOT ON THE BASIS O F CONCRETE MATERIAL/INFORMATION AVAILABLE ON RECORD BUT ON MER E HEARSAY AND SUSPICION. IT IS WELL SETTLED PRINCIPLE OF LAW THAT EXPRESSION REASONS TO BELIEVE AS USED IN SECTION 147 POSTULATES THAT THE BELIEF MUST BE O F A HONEST AND REASONABLE PERSON BASED ON REASONABLE GROUNDS. THE AO IS REQU IRED TO ACT NOT ON MERE SUSPICION BUT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE. IT HAS BEEN HELD THAT THE EXPRESSION REASON TO BELIEVE IS STRONGER THAN THE WORDS IS SATISFIED. THE BELIEF ENTERTAINED BY THE AO SHOULD NOT BE ARBITRAR Y OR IRRATIONAL AND IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL . THOUGH, THE COURT CANNOT INVESTIGATE INTO ADEQUACY OR SUFFICIENCY OF REASONS FOR FORMATION OF BELIEF BUT THE COURT CERTAINLY CAN EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE BEARING ON THE MATTERS WITH REGARD TO WHIC H THE AO IS REQUIRED TO ENTERTAIN BELIEF BEFORE HE CAN ISSUE NOTICE U/S. 14 8. IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, THE INEVITABLE CONCLUSION IS, THE AO COULD NOT HAVE REASON TO BELI EVE THAT ANY PART OF INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE REASONS ARE THE LIVE LINK BETWEEN THE MATERIAL PLACED ON RECORD AND THE CONCLUSION REACHED BY THE CABLE CORPORATION INDIA LTD. 8 AUTHORITY IN RESPECT OF AN ISSUE. IN ABSENCE OF TA NGIBLE MATERIAL BEFORE THE AO DEMONSTRATING ESCAPEMENT OF INCOME, BELIEF CANNO T BE FORMED IN VACUUM. THE HONBLE SUPREME COURT IN THE CASE OF C HHUGAMAL RAJPAL VS. S P CHALIHA (SUPRA), WHILE DEALING WITH A CASE OF REASS ESSMENT U/S. 147 OF THE ACT ON MORE OR LESS IDENTICAL FACTS AND SITUATION HELD AS UNDER: IN THE REPORT THE INCOME-TAX OFFICER DOES NOT SET OUT ANY REASON FOR COMING TO THE CONCLUSION THAT THIS IS A FIT CAS E TO ISSUE NOTICE UNDER SECTION 148. THE MATERIAL THAT HE HAD BEFORE HIM FOR ISSUING NOTICE UNDER SECTION 148 IS NOT MENTIONED IN THE RE PORT. IN HIS REPORT HE VAGUELY REFERS TO CERTAIN COMMUNICATIONS RECEIVED BY HIM FROM THE COMMISSIONER OF INCOME-TAX, BIHAR AND ORIS SA. HE DOES NOT MENTION THE FACTS CONTAINED IN THOSE COMMUNICAT IONS. ALL THAT HE SAYS IS THAT FROM THOSE COMMUNICATIONS IT APPEAR S THAT THESE PERSONS (ALLEGED CREDITORS) ARE NAME-LENDERS AND TH E TRANSACTIONS ARE BOGUS. HE HAS NOT EVEN COME TO A PRIMA FACIE C ONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED ARE NOT GENUI NE TRANSACTIONS. HE APPEARS TO HAVE HAD ONLY A VAGUE FEELING THAT TH EY MAY BE BOGUS TRANSACTIONS. SUCH A CONCLUSION DOES NOT FUL FIL THE REQUIREMENTS OF SECTION 151(2). WHAT THAT PROVISIO N REQUIRES IS THAT HE MUST GIVE REASONS FOR ISSUING A NOTICE UNDE R SECTION 148. IN OTHER WORDS HE MUST HAVE SOME PRIMA FACIE GROUND S BEFORE HIM FOR TAKING ACTION UNDER SECTION 148. FURTHER HIS R EPORT MENTIONS: 'HENCE PROPER INVESTIGATION REGARDING THESE LOANS I S NECESSARY'. IN OTHER WORDS HIS CONCLUSION IS THAT THERE IS A CASE FOR INVESTIGATING AS TO THE TRUTH OF THE ALLEGED TRANSACTIONS. THAT I S NOT THE SAME THING AS SAYING THAT THERE ARE REASONS TO ISSUE NOT ICE UNDER SECTION 148. BEFORE ISSUING A NOTICE UNDER SECTION 148, THE INCOME-TAX OFFICER 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 SECTION 139 FOR ANY ASSESSMENT YEAR TO THE IN COME-TAX OFFICER 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 N OTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTI ONED ABOVE ON THE PART OF THE ASSESSEE, THE INCOME-TAX OFFICER HA S IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T FOR ANY CABLE CORPORATION INDIA LTD. 9 ASSESSMENT YEAR. UNLESS THE REQUIREMENTS OF CLAUSE (A) OR CLAUSE (B) OF SECTION 147 ARE SATISFIED, THE INCOME-TAX OF FICER HAS NO JURISDICTION TO ISSUE A NOTICE UNDER SECTION 148. F RONT REPORT SUBMITTED BY THE INCOME-TAX OFFICER TO THE COMMISSI ONER, IT IS CLEAR THAT HE COULD NOT HAVE HAD REASONS TO BELIEVE THAT BY REASON OF THE ASSESSEE'S OMISSION TO DISCLOSE FULLY AND TR ULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE ACCOUNTI NG YEAR IN QUESTION, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT FOR THAT YEAR, NOR COULD IT BE SAID THAT HE, AS A CONSE QUENCE OF INFORMATION ILL POSSESSION, HAD REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT Y EAR. WE ARE NOT SATISFIED THAT THE INCOME-TAX OFFICER HAD ANY MATER IAL BEFORE HIM WHICH COULD SATISFY THE - REQUIREMENTS OF EITHER CL AUSE (A) OR CLAUSE (B) OF SECTION 147. THEREFORE, HE COULD NOT HAVE ISSUED A NOTICE UNDER SECTION 148. FURTHER, THE REP ORT SUBMITTED BY HIM UNDER SECTION 151(2) DOES NOT MENT ION ANY REASON FOR COMING TO THE CONCLUSION THAT IT IS A FI T CASE FOR THE ISSUE OF A NOTICE UNDER SECTION 148. WE ARE ALSO OF THE OPINION THAT THE COMMISSIONER HAS MECHANICALLY ACCORDED PER MISSION. HE DID NOT HIMSELF RECORD THAT HE WAS SATISFIED THAT T HIS WAS A FIT CASE FOR THE ISSUE OF A NOTICE UNDER SECTION 148. T O QUESTION NO. 8 IN THE REPORT WHICH READS 'WHETHER THE COMMISSION ER IS SATISFIED THAT IT IS A FIT CASE FOR THE ISSUE OF NO TICE UNDER SECTION 148', HE JUST NOTED THE WORD 'YES' AND AFFIXED HIS SIGNATURE THEREUNDER. WE ARE OF THE OPINION THAT IF ONLY HE H AD READ THE REPORT CAREFULLY, HE COULD NEVER HAVE COME TO THE C ONCLUSION ON THE MATERIAL BEFORE HIM THAT THIS IS A FIT CASE TO ISSUE NOTICE UNDER SECTION 148. THE IMPORTANT SAFEGUARDS PROVIDED IN S ECTIONS 147 AND 151 WERE LIGHTLY TREATED BY THE INCOME-TAX OFFICER AS WELL AS BY THE COMMISSIONER. BOTH OF THEM APPEAR TO HAVE TAKEN THE DUTY IMPOSED ON THEM UNDER THESE PROVISIONS AS OF LITTLE IMPORTANCE. THEY HAVE SUBSTITUTED THE FORM FOR THE SUBSTANCE. IN THE RESULT THIS APPEAL IS ALLOWED, THE ORDER OF THE HIGH COURT IS SET ASIDE AND THE IMPUGNED NOTICE QUASHED. THE RESP ONDENT NO. 2 SHALL PAY THE COSTS OF THE APPELLANT BOTH IN THIS C OURT AND IN THE HIGH COURT. FOLLOWING THE AFORESAID DECISION, THE HONBLE APEX COURT IN THE CASE OF SHEO NATH SINGH VS. APPELLATE ASSISTANT COMMISSIONER OF INCOME TAX (SUPRA) HELD AS UNDER: CABLE CORPORATION INDIA LTD. 10 IT IS ABUNDANTLY CLEAR THAT THE TWO REASONS WHICH H AVE BEEN GIVEN FOR THE BELIEF WHICH WAS FORMED BY THE INCOME -TAX OFFICER HOPELESSLY FAIL TO SATISFY THE REQUIREMENTS OF THE STATUTE. IN A RECENT CASE, CHHUGAMAL RAJPAL V S.P.CHALIHA [1971]79 ITR 6 03 (SC), WHICH CAME UP BEFORE THIS COURT, A SIMILAR SITUATIO N HAD ARISEN AND UNDER THE DIRECTIONS OF THE COURT, THE DEPARTMENT P RODUCED THE RECORDS TO SHOW THAT THE INCOME-TAX OFFICER HAD COM PLIED WITH THE CONDITIONS LAID DOWN IN THE STATUTE FOR ISSUING A N OTICE RELATING TO ESCAPEMENT OF INCOME. THERE ALSO, THE REPORT SUBMIT TED BY THE OFFICER TO THE COMMISSIONER AND THE LATTER'S ORDERS THEREON WERE PRODUCED. IN HIS REPORT, THE INCOME-TAX OFFICER REF ERRED TO SOME COMMUNICATIONS RECEIVED BY HIM FROM THE COMMISSIONE R OF INCOME-TAX, BIHAR AND ORISSA, FROM WHICH IT APPEARED THAT CERTA IN CREDITORS OF THE ASSESSEE WERE MERE NAME-LENDERS AND THE LOAN TRANSA CTIONS WERE BOGUS AND, THEREFORE, PROPER INVESTIGATION REGARDING THE LOANS WAS NECESSARY. IT WAS OBSERVED THAT THE INCOME-TAX OFFICER HAD NOT SE T OUT ANY REASON FOR COMING TO THE CONCLUSION THAT IT WAS A FIT CASE FOR ISSUING A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961. THE MATERIAL THAT HE HAD BEFORE HIM FOR ISSUI NG NOTICE HAD NOT BEEN MENTIONED. THE FACTS CONTAINED IN THE COMM UNICATIONS WHICH HAD BEEN RECEIVED WERE ONLY REFERRED TO VAGUE LY AND ALL THAT HAD BEEN SAID WAS THAT FROM THOSE COMMUNICATIONS, I T APPEARED THAT THE ALLEGED CREDITORS WERE NAME-LENDERS AND TH E TRANSACTIONS WERE BOGUS. IT WAS HELD THAT FROM THE REPORT SUBMITTED BY THE INCOME-TAX OFFICER TO THE COMMISSI ONER IT WAS CLEAR THAT HE COULD NOT HAVE HAD REASONS TO BELIEVE THAT ON ACCOUNT OF THE ASSESSEE'S OMISSION TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS, INCOME CHARGEABLE TO TAX HAD ESCAPE D ASSESSMENT. IN OUR JUDGMENT, THE LAW LAID DOWN BY THIS COURT IN THE ABOVE CASE IS FULLY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. THERE CAN BE NO MANNER OF DOUBT THAT THE WORDS 'REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THAT THE INCOME-TAX OFF ICER MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BUT NOT ON MER E SUSPICION, GOSSIP OR RUMOUR. THE INCOME-TAX OFFICER WOULD BE A CTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF T HAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT M ATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS ASPECT THOUGH THE DECLARATION O R SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. CABLE CORPORATION INDIA LTD. 11 THERE IS NO MATERIAL OR FACT WHICH HAS BEEN STATED IN THE REASONS FOR STARTING PROCEEDINGS IN THE PRESENT CAS E ON WHICH ANY BELIEF COULD BE FOUNDED OF THE NATURE CONTEMPLA TED BY SECTION 34(IA). THE SO-CALLED REASONS ARE STATED TO BE BELIEFS THUS LEADING TO AN OBVIOUS SELF-CONTRADICTION. WE A RE SATISFIED THAT THE REQUIREMENTS OF SECTION 34(IA) WERE NOT SA TISFIED AND, THEREFORE, THE NOTICES WHICH HAD BEEN ISSUED W ERE WHOLLY ILLEGAL AND INVALID. IN THE RESULT, THE APPEAL IS ALLOWED AND THE JUDGMENT OF THE HIGH COURT IS SET ASIDE. THE WRIT P ETITION SUCCEEDS TO THE EXTENT THAT THE IMPUGNED NOTICES SH ALL STAND QUASHED. THE ASSESSEE SHALL BE ENTITLED TO HIS COST S. APPLYING THE PRINCIPLE LAID DOWN IN THE AFORESAID J UDICIAL PRECEDENTS TO THE FACTS OF THE PRESENT CASE THE ONLY CONCLUSION ONE C AN ARRIVE AT IS, AT THE TIME OF RECORDING OF REASONS THE AO, SINCE, HAD NO TANGI BLE MATERIAL BEFORE HIM TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, T HE REOPENING OF ASSESSMENT ON MERE SUSPICION, RUMOR AND GOSSIP IS I NVALID. THE AO IN CASE OF A PARTICULAR ASSESSEE WHILE INITIATING ACTION U/ S. 147 MUST FORM HIS OWN BELIEF ON THE BASIS OF MATERIALS/INFORMATION IN HIS POSSESSION AND NOT AT THE BEHEST OF ANOTHER OFFICER. IN THE FACTS OF THE PRE SENT CASE, WE ARE CONVINCED THAT AT THE TIME OF RECORDING OF REASONS THERE WAS NO MATERIAL BEFORE THE AO TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT . THOUGH, THE AO HAS REFERRED TO THE INFORMATION RECEIVED FROM THE AO AT MADRAS, HOWEVER, THERE IS NOTHING AVAILABLE IN THE ASSESSMENT RECORD TO THROW LIGHT ON THE EXACT NATURE OF INFORMATION RECEIVED FROM THE AO, MADRAS AND THE MODE OF COMMUNICATION OF SUCH REASONS. THEREFORE, ON OVERALL CONSIDERATI ON OF FACTS AND MATERIAL ON RECORD, WE ARE OF THE CONSIDERED OPINION THAT THE F ORMATION OF BELIEF BY THE CABLE CORPORATION INDIA LTD. 12 AO RELATING TO ESCAPEMENT OF INCOME BEING NOT ON TH E BASIS OF ANY TANGIBLE MATERIAL AVAILABLE BEFORE HIM AT THE TIME OF RECORD ING OF REASONS, THE INITIATION OF PROCEEDINGS U/S. 147 IS INVALID AND W ITHOUT JURISDICTION, HENCE, DESERVES TO BE ANNULLED. CONSEQUENTIALLY THE ASSES SMENT ORDERS PASSED IN PURSUANCE THEREOF BEING INVALID ARE ALSO QUASHED / ANNULLED. GROUND NO.1 IN ALL THESE APPEALS ARE ALLOWED. 6. AS WE HAVE HELD THE ASSESSMENT ORDER TO BE INVAL ID AND QUASHED THE ASSESSMENT ORDERS, GROUND NO.2 RAISED BY THE ASSESS EE CHALLENGING THE ADDITION ON MERIT HAVE BECOME INCONSEQUENTIAL AND I NFRUCTUOUS REQUIRING NO ADJUDICATION. 7. GROUND NO.3, WHICH IS COMMON IN ALL THESE APPEAL S, RELATES TO REFUND OF EXCESS APPEAL FEES PAID BY THE ASSESSEE AT THE TIME OF FILING OF APPEAL BEFORE THE CIT(A). 8. AS IT EMERGES FROM THE FACTS ON RECORD, AT THE T IME OF FILING APPEALS AGAINST THE RE-ASSESSMENT ORDERS BEFORE THE CIT(A), THE ASSESSEE INSTEAD OF DEPOSITING THE ACTUAL APPEAL FESS OF ` .1000 PAID AN AMOUNT OF ` .10,000/- BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE RAISED A SPECIFIC GROUND CLAIMING REFUND OF THE EXCESS APPEAL FEES PAID BY T REATING IT AS TAX PAID FOR THE YEARS UNDER APPEAL. THE LEARNED CIT(A) HOWEVER , REJECTED THE CLAIM OF THE ASSESSEE BY OBSERVING THAT SECTION 246A DOES NO T CONTAIN ANY PROVISION FOR REFUND OF EXCESS APPEAL FEES. HE ALSO OBSERVED , U/S. 251(1) THE CIT(A) CABLE CORPORATION INDIA LTD. 13 HAS NO POWER TO GRANT REFUND OF EXCESS APPEAL FEES. ACCORDINGLY, HE REJECTED THE GROUND RAISED BY THE ASSESSEE. 9. THE LEARNED AR REITERATING THE STAND TAKEN BEFOR E THE CIT(A) SUBMITTED THAT APPEAL FEES PAID IN EXCESS BY IGNORANCE SHOULD BE REFUNDED TO THE ASSESSEE . IN THIS CONTEXT, HE RELIED UPON THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RANCHODLAL MANEKLAL VS. M ANEKLAL PRANJIVAN DAS AIR 1953 (BOM) 436. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD. AS PER SECTION 246A OF THE ACT , ANY APPEAL FILED BY THE ASSESSEE SHOULD BE ACCOMPANIED BY APPEAL FEES OF ` .1000/-. UNDISPUTEDLY, THE ASSESSEE HAS PAID APPEAL FEES OF ` .10,000/- WHILE FILING THE APPEALS BEFORE THE CIT(A) CHALLENGING THE ASSESSMENT ORDERS . THE CIT(A) HAS NOT DISPUTED THE AFORESAID FACTUAL POSITION. THEREFORE , WHEN THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE HAS PAID APPEAL FEES IN EXCESS OF WHAT IT WAS REQUIRED TO PAY UNDER THE STATUTORY PROVISIONS, SUC H EXCESS APPEAL FEES HAS TO BE REFUNDED TO THE ASSESSEE. WE DIRECT THE AO T O VERIFY THIS ASPECT AND REFUND THE EXCESS APPEAL FEES PAID BY THE ASSESSEE FOLLOWING DUE PROCESS OF LAW. GROUND NO.3 IN ALL THE APPEALS ARE ALLOWED. CABLE CORPORATION INDIA LTD. 14 11. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF MAY, 2017. SD/- SD/- (G S PANNU) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI; DATED : 9 TH MAY, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, C BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI