M/s Kunal Calcium Limited, Yamunanagar V. DCIT, Yamunanagar

ITA 412/CHANDI/2016

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6431 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-11-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUR ALYA
• Keywords: Reopening of assessment; Principle of natural justice; Tangible material; Accommodation entries; Reason to believe; Documents seized; Reassessment proceedings; Set aside
• Section: 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , ! ' #$ % & ' ($ , ! BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.412/CHD/2016 / ASSESSMENT YEAR : 2009-10 KUNAL CALCIUM LIMITED, 18-F, DAV MARKET, YAMUNA NAGAR. THE D.C.I.T., CIRCLE YAMUNA NAGAR. ./PAN NO: AAACK4507G /ASSESSEE BY : SHRI ROHIT GOEL, CA / REVENUE BY : SHRI ANKUR ALYA, SR. DR ! /DATE OF HEARING : 14.11.2018 '#$% ! /DATE OF PRONOUNCEMENT: 11.02.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, GURGAON (IN SHORT CIT(A) DATED 19.2. 2016 PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 (HERE INAFTER REFERRED TO AS ACT). 2. BRIEF FACTS RELATING TO THE CASE ARE THAT THE ASSESSEE, FOR THE IMPUGNED YEAR, HAD FILED RETURN DECLARING INCOME OF RS.67,84,720/-. THE ASSESSING OFFICER,(IN SHORT REFERRED TO AS A.O), ON RECEIVI NG INFORMATION FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY OF RS.10 LACS DURING THE YEAR FROM ONE SHRI S.K. JAIN/SHRI VIRENDER JAIN THROUGH A ITA NO.412/CHD/2016 A.Y.2009-10 2 COMPANY CONTROLLED BY THEM, RECORDED REASONS AND ISSUED NOTICE U/S 148 OF THE ACT FOR REOPENING THE CASE OF THE ASSESSEE. THEREAFTER AFTER ISSUING A DETAILE D QUESTIONNAIRE TO THE ASSESSEE AND CONSIDERING THE REPLY FILED BY HIM, THE A.O. HELD THAT THE AMOUNT O F RS.10 LACS RECEIVED BY THE ASSESSEE FROM ONE M/S VI P LEASING & FINANCE PVT. LTD. WAS NOT A GENUINE TRANSACTION BUT AN ACCOMMODATION ENTRY AND ACCORDINGLY, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE ASSESSEE WENT IN APPEAL TO THE CIT(A) WHO UPHELD THE ORDER OF THE A.O.AGGRIEVED BY THE SA ME THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . 3. GROUND NOS.1 AND 2 RAISED BY THE ASSESSEE ARE LEGAL GROUNDS CHALLENGING THE VALIDITY OF THE ASSESSMENT FRAMED U/S 147 OF THE ACT AND READ AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF LEARNED AO IN REOPENING OF ASSESSMENT U/S 148. 2. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) H AS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF AO OF COMPLETING THE ASSESSMENT WITHOUT DISPOSING THE OBJECTIONS OF ASSESSEE AGAINST REOPENING OF ASSESSM ENT BEFORE COMPLETION OF ASSESSMENT. 4. VIS--VIS THE ABOVE GROUNDS RAISED BEFORE US, TH E LD. COUNSEL FOR ASSESSEE CONTENDED THAT THE REASONS RECORDED FOR REOPENING THE CASE WERE NOT SUFFICIENT TO FORM THE BELIEF OF ESCAPEMENT OF INCOME AND, THEREFORE, THE JURISDICTION ASSUMED BY THE A.O. U/S 147/148 OF THE ACT TO ASSESS THE INCOME OF THE ITA NO.412/CHD/2016 A.Y.2009-10 3 ASSESSEE WAS THUS INVALID AND THE ORDER, AS A CONSEQUENCE, PASSED BY THE A.O. OUGHT TO BE QUASHED . OUR ATTENTION WAS DRAWN TO THE REASONS RECORDED FOR REOPENING THE CASE REPRODUCED AT PAPER BOOK PAGE NOS.2 AND 3 AS UNDER: AS PER INFORMATION RECEIVED FROM THE O/O THE DY. DIRECTOR OF INCOME (INV.) UNIT-VI(2), NEW DELHI VIDE LE TTER NO. DDIT(INV.)/U-VI(2)/LNFORMATION SHARING/2012- 13/223 D ATED 15.03.2013 (COPY ON RECORD) RECEIVED IN THIS OFFICE T HROUGH THE O/O JOINT COMMISSIONER OF INCOME TAX, YAMUNA NAGAR RANGE, YAMUNA NAGAR VIDE LETTER DATED 20.03.2013, M/S KUNAL CALCIUM LTD. (PAN: AABCK4507G) HAS RECEI VED AN ACCOMMODATION ENTRY OF RS.10,00,000/- DURING THE F .Y. 2008-09 RELEVANT TO A.Y. 2009-10 FROM SH. S.K. JAIN AN D HIS BROTHER. THE DETAIL OF INFORMATION RECEIVED IS AS UNDER :- 'A SEARCH/SURVEY ACTION U/S 132/133A OF THE INCOME TAX ACT, WAS CONDUCTED AT THE RESIDENTIAL AND BUSIN ESS PREMISES OF SH. SURENDRA KUMAR JAIN AND HIS BROTHER VIRENDRA JAIN. DURING THE COURSE OF POST SEARCH INVESTIGATION IT HAS BEEN EVIDENTLY ESTABLISHED TH AT SH. S.K. JAIN AND HIS BROTHER SH. VIRENDRA JAIN ARE IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES TO VARIO US BENEFICIARY COMPANIES/ENTITLES/PERSONS THROUGH CHEQU ES THROUGH A NUMBER OF PAPER & DUMMY COMPANIES IN LI EU OF CASE. THESE DUMMY COMPANIES ARE TOTALLY MANAGED AND CONTROLLED BY SH. SURENDRA KUMAR JAIN AND HIS BROTHE R SH. VIRENDRA JAIN. DURING THE COURSE OF SEARCH ACTION VAST NUMBER OF INCRIMINATING DOCUMENTS WERE FOUND AND SEIZED. THESE DOCUMENTS INCLUDE DATE WISE HAND WRITTEN CHEQUE BOOKS AND CASH BOOKS MAINTAINED BY SH. S.K. JAIN AND HIS BROTHER OVER A LONG PERIOD OF TIME (AROUND 6 YEARS). IN THESE CHEQUE BOOKS AND CASH BOOKS DETAIL OF CHEQUE PROVID ED TO THE BENEFICIARY COMPANIES/ENTRIES/PERSONS AND RECEIPT OF CASH BY SH. SURENDRA KUMAR JAIN FROM THESE BENEFICIARY COMPANIES/ENTRIES/PERSONS WERE RECORDED. FROM THE VERIFICATION OF THE DOCUMENTS SEIZED IT CLEA RLY APPEARS THAT THE FOLLOWING COMPANIES HAD OBTAINED ACCOMMODATION ENTRIES FROM VARIOUS PAPER COMPANIES OF S.KJAIN GROUP IN LIEU OF CASH DURING THE FINANCIAL YEAR 2005-06 TO 2010-1 5 FOR TOTAL AMOUNT MENTIONED AGAINST THEIR N AMES. THESE BOGUS SHARE CAPITAL/PREMIUM/LOAN HAS CLEARLY ESCAPED TAXATION IN THESE ASSESSMENT YEAR BEFORE TH ESE AMOUNTS ARE REQUIRED TO BE TAXED IN THE HANDS OF TH ESE COMPANIES BY INITIATING ACTION UNDER SECTION 148 OF THE INCOME-TAX ACT. 1961. ITA NO.412/CHD/2016 A.Y.2009-10 4 SR. NO. NAME OF COMPANY PAN F.Y. 2008-09 (AMOUNT RS.) 1 M/S KUNAL CALCIUM LTD. AABCK4507G 10,00,000/- AS THE JURISDICTION OVER THE ABOVE MENTIONED COMPANI ES LIE WITH CIT, PANCHKULA CHARGE. IT IS REQUESTED THAT THE REP ORT IN THE MATTER (ENCLOSED HEREWITH) MAY BE FORWARDED FOR NEC ESSARY ACTION INCLUDING IMMEDIATE INITIATION OF ACTION U/S148OFTHEI.T.ACT,1961FOR THE A.Y. 2005-06 IN THE C ASE OF ABOVE MENTIONED COMPANY.' THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT THE INCOME AMOUNTING TO RS.10,00,000/- HAS ESCAPED ASSESSMENT FOR A.Y. 2009-10 AND NOTICE U/S 148 IS REQUIRED TO BE ISSUED TO REASSESS THE INCOME FOR A.Y . 2009-10. 5. REFERRING TO THE SAME THE LD. COUNSEL FOR ASSESS EE STATED THAT EVIDENTLY, THE A.O.S BELIEF OF ESCAPEM ENT OF INCOME OF THE ASSESSEE RESTED ENTIRELY ON INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT AND THE A.O. HAD WITHOUT APPLYING HI S MIND TO THE INFORMATION SUPPLIED BY THE INVESTIGATI ON WING PROCEEDED TO ASSUME JURISDICTION TO FRAME ASSESSMENT ON THE ASSESSEE U/S 147 OF THE ACT. IT W AS CONTENDED, THEREFORE, THAT THE BELIEF OF ESCAPEMENT OF INCOME WAS NOT THAT OF THE A.O. BUT IN FACT, IT WAS A BORROWED BELIEF. THE LD. COUNSEL FOR ASSESSEE STATE D THAT IT IS SETTLED LAW THAT IT IS THE A.O. WHO SHOU LD BE OF THE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMEN T WHICH SHOULD BE BASED ON OBJECTIVE REASONS. OUR ATTENTION WAS DRAWN TO THE FOLLOWING CASE LAWS IN SUPPORT OF THE ABOVE CONTENTION: 1) SIGNATURE HOTELS PVT LTD. VS INCOME TAX OFFICER 338 ITR 51 (DELHI) 2) PCIT VS MEENAKSHI OVERSEAS 395 ITR 677(DELHI) ITA NO.412/CHD/2016 A.Y.2009-10 5 3) MRY AUTO COMPONENTS LTD. VS ITO WARD NO.6(1) 2017(9) TMI 966( DELHI BENCH) 4) CIT VS M/S SNG DEVELOPERS LIMITED 2017(7) TMI 575 (DELHI) 5. THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT IN THE REASONS RECORDED THE A.O. HAD ONLY REPRODUCED T HE INFORMATION RECEIVED FROM THE DDIT(INV) AND THEREAF TER RECORDED HIS BELIEF OF INCOME ESCAPING ASSESSMENT WITHOUT ANY APPLICATION OF HIS OWN MIND TO THE INFORMATION. 6. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(A) STATING THAT THE INFORMATION RECEIVED FROM THE DIT(INVESTIGATION) WAS SUFFICIENT MATERIAL ON THE BASIS OF WHICH HE COULD HAVE PRIMA FACIE REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT. THE LD. DR RELIED UPON THE FINDINGS OF THE LD.CIT(A) AT PARA 3.4 OF HIS ORDER AS UNDER: 3.4. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS. THE AO WHILE REOPENING THE CASE HAD RE CORDED DETAILED REASONS. PERUSAL OF THE REASONS SHOWS THAT AO HAD APPLIED HIS MIND TO THE INFORMATION RECEIVED FROM T HE O/O THE DIRECTOR OF INCOME TAX (INV.), NEW DELHI. IN THESE CIRCUMSTANCES THE CONTENTION OF THE APPELLANT THAT TH E NOTICE WAS SERVED WITHOUT APPLICATION OF MIND IS NOT CORREC T. THE ASSESSMENT PROCEEDINGS WERE REOPENED ON THE BASIS O F INFORMATION RECEIVED FROM DIT(INV.), NEW DELHI. FOR ACQUIRING JURISDICTION U/S 147 OF THE ACT THE A.O. IS REQUIRE D TO HAVE IN HIS POSSESSION CERTAIN MATERIAL OR INFORMATION ON T HE BASIS OF WHICH HE COULD PRIMA-FACIE HAVE REASON TO BELIEVE T HAT INCOME ESCAPED ASSESSMENT. COMMUNICATION RECEIVED BY AN ASSESSING OFFICER FOR DISCHARGE OF HIS OFFICIAL DUT IES IS VALID INFORMATION FOR ISSUE OF NOTICE U/S 148. RELIANCE IN T HIS REGARD IS PLACED ON THE CASE OF MONEY GROWTH INVESTMENT & CON SULTANTS (P) LTD. V. ITO (2012) 71 DTR 317 (DELHI)(HIGH COUR T) WHEREIN IT WAS HELD THAT MATERIAL AND INFORMATION PROVIDED BY INVESTIGATION WING TO THE AO, ON THE BASIS OF WHICH HE RECORDED REASONS AND REOPENED THE ASSESSMENT, THROW CONSIDERA BLE DOUBT ON THE VERACITY, CORRECTNESS, COMPLETENESS AN D TRUTH OF PARTICULARS FURNISHED BY THE ASSESSEE AT THE TIME OF THE ORIGINAL ITA NO.412/CHD/2016 A.Y.2009-10 6 ASSESSMENT AND THEREFORE NOTICE ISSUED BY AO UNDER SECTION 148 WAS VALID. RELIANCE IN THIS REGARD IS ALSO PLACE D ON THE FOLLOWING CASE LAWS:- I) SRINIVASA KHANDASARI UDYOG VS. ITO (ITAT, BANG) 56 ITD 146. II ITO VS. PURUSHOTAM DAS BANGUR & ANR. (SC) 224 ITR 362 III) ELPHINSTONE PICTURE PALACE VS. UNION OF IND IA & ANR (PAT) 74 ITR 115 IV) H.A. NANJI & CO.VS. ITO (CAI) 120 ITR 593 V) SOHAN SINGH VS. CIT (DEL) 158 ITR 174 VI) RATTAN GUPTA VS. CIT (P&H) 234 ITR 220 7. WE HAVE HEARD THE RIVAL CONTENTIONS CAREFULLY AN D PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THE PRESENT CASE AS IS CLEARLY EVIDENT FROM THE COPY OF REASONS RECORDED, PLACED BEFORE US, THE A.O. HAS MERELY REPRODUCED INFORMATION RECEIVED FROM THE DDIT(INVESTIGATION)THAT THE ASSESSEE HAD RECEIVED SOME ACCOMMODATION ENTRY OF RS. 10 LACS FROM A COMPANY CONTROLLED BY SHRI S.K. JAIN AND SHRI VIRENDER JAIN. THE INFORMATION AS REPRODUCED IN THE REASONS DOES NOT EVEN STATE FROM WHICH ENTITY THE S AID ENTRY WAS RECEIVED BY THE ASSESSEE, OR THE MODE IN WHICH IT WAS RECEIVED WHETHER AS LOAN OR SHARE CAPI TAL ,THE INFORMATION MENTIONING BOTH. EVEN THE MANNER I N WHICH IT WAS RECEIVED FINDS NO MENTION AND ONLY STA TES THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY OF RS.10 LACS DURING THE YEAR. THE INFORMATION IS MERE LY A CONCLUSION OF THE DDIT(INV) WITHOUT BRINGING OUT THE FACTS ON WHICH IT IS BASED. THERE COULD NOT HAVE POSSIBLY BEEN ANY FORMATION OF BELIEF OF ESCAPEMENT OF INCOME ON THE BASIS OF THIS INFORMATION RECEIVED BY THE A.O. FURTHER, THE A.O. IN THE REASONS HAS NOT ITA NO.412/CHD/2016 A.Y.2009-10 7 DISCLOSED AS TO HOW THIS INFORMATION, WHICH WAS CLEARLY VAGUE COULD BE CORRELATED TO ANY SUCH ENTRY IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THERE IS NO MENTION OF THE FACT IN THE REASONS THAT THE A.O. HA D VERIFIED THIS VAGUE INFORMATION RECEIVED FROM THE DDIT(INVESTIGATION), WITH THE INFORMATION OF THE ASSESSEE AVAILABLE ON RECORD WITH HIM AND FOUND TO BE TRUE. THE A.O. CLEARLY HAS NOT APPLIED HIS MIND TO THE INFORMATION AT ALL. THE BELIEF IS NOT HIS BELIEF BU T THE BELIEF OF THE DDIT(INV). WE THEREFORE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT THE BELIEF IN THE PRESENT CASE OF ESCAPEMENT OF INCOME OF THE ASSESSEE WAS NOT THAT OF THE A.O. BUT WAS A BORROWED BELIEF WITH NO APPLICATION OF MIND BY THE A.O. ON THE INFORMATION RECEIVED BY HIM FROM THE DIT(INVESTIGATION). AS RIGHTLY POINTED OUT BY THE L D. COUNSEL FOR ASSESSEE, COURTS IN VARIOUS DECISIONS H AVE INTERPRETED THE PROVISIONS OF SECTION 148 AND HAVE HELD THAT FOR A VALID REOPENING AN ESSENTIAL PREREQUISITE IS THE REASONABLE BELIEF OF THE ASSES SING OFFICER THAT INCOME HAS ESCAPED ASSESSMENT. IT HAS BEEN CATEGORICALLY HELD BY COURTS IN VARIOUS DECISI ONS THAT THE BELIEF SHOULD BE THAT OF THE ASSESSING OFF ICER AND SHOULD NOT BE A BORROWED BELIEF AND THE EXISTEN CE OF THIS FACT CAN BE EXAMINED FROM THE REASONS RECOR DED BY THE ASSESSING OFFICER FOR REOPENING OF THE CASE. ITA NO.412/CHD/2016 A.Y.2009-10 8 8. IN THE CASE OF MEENAKSHI OVERSEAS(SUPRA) THE HONBLE DELHI HIGH COURT, QUASHED REASSESSMENT PROCEEDINGS INITIATED ON THE BASIS OF VAGUE INFORMATION TO WHICH NO MIND HAD BEEN APPLIED BY TH E AO WHO HAD MERELY BORROWED THE BELIEF OF THE INVESTIGATION WING OF THE DEPARTMENT. THE HONBLE HELD AS UNDER: A PERUSAL OF THE REASONS AS RECORDED BY THE AO REVE ALS THAT THERE ARE THREE PARTS TO IT. IN THE FIRST PART, THE AO HAS REPRODUCED THE PRECISE INFORMATION HE HAS RECEIVED F ROM THE INVESTIGATION WING OF THE REVENUE. THIS INFORMATION IS IN THE FORM OF DETAILS OF THE AMOUNT OF CREDIT RECEIVED, THE PAYER, THE PAYEE, THEIR RESPECTIVE BANKS, AND THE CHEQUE NUMBER. THIS INFORMATION BY ITSELF CANNOT BE SAID TO BE TANGIBLE MATER IAL. 20. COMING TO THE SECOND PART, THIS TELLS US WHAT THE AO DID WITH THE INFORMATION SO RECEIVED. HE SAYS: THE INFO RMATION SO RECEIVED HAS BEEN GONE THROUGH. ONE WOULD HAVE EXPEC TED HIM TO POINT OUT WHAT HE FOUND WHEN HE WENT THROUGH THE INFORMATION. IN OTHER WORDS, WHAT IN SUCH INFORMATION LED HIM TO FORM THE BELIEF THAT INCOME ESCAPED ASSESSMENT. B UT THIS IS ABSENT. HE STRAIGHTAWAY RECORDS THE CONCLUSION THAT ' THE ABOVESAID INSTRUMENTS ARE IN THE NATURE OF ACCOMMOD ATION ENTRY WHICH THE ASSESSEE HAD TAKEN AFTER PAYING UNACCO UNTED CASH TO THE ACCOMMODATION ENTRY GIVEN ( SIC GIVER)'. THE AO ADDS THAT THE SAID ACCOMMODATION WAS 'A KNOWN ENTRY OPERATOR' THE SOURCE BEING 'THE REPORT OF THE INVES TIGATION WING'. 21. THE THIRD AND LAST PART CONTAINS THE CONCLUSION D RAWN BY THE AO THAT IN VIEW OF THESE FACTS, THE ALLEGED TRANS ACTION IS NOT THE BONAFIDE ONE. THEREFORE, I HAVE REASON TO BE BELIEVE THAT AN INCOME OF RS. 5,00,000 HAS ESCAPED ASSESSMENT IN THE AY 2004-05 DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY F OR ITS ASSESSMENT... 22. AS RIGHTLY POINTED OUT BY THE ITAT, THE 'REASONS TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIONS, ONE AFT ER THE OTHER. THE EXPRESSION 'ACCOMMODATION ENTRY' IS USED TO DESCRIBE THE INFORMATION SET OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUSION. THE STATEMENT THAT THE SAID ENTRY WAS GIVEN TO THE ASSESSEE ON HIS PAYING 'UNAC COUNTED CASH' IS ANOTHER CONCLUSION THE BASIS FOR WHICH IS N OT DISCLOSED. WHO IS THE ACCOMMODATION ENTRY GIVER IS NO T MENTIONED. HOW HE CAN BE SAID TO BE 'A KNOWN ENTRY OPERATOR' IS EVEN MORE MYSTERIOUS. CLEARLY THE SOURCE FOR ALL THESE CONCLUSIONS, ONE AFTER THE OTHER, IS THE INVESTI GATION ITA NO.412/CHD/2016 A.Y.2009-10 9 REPORT OF THE DIT. NOTHING FROM THAT REPORT IS SET O UT TO ENABLE THE READER TO APPRECIATE HOW THE CONCLUSIONS FLOW THEREFRO M. 23. THUS, THE CRUCIAL LINK BETWEEN THE INFORMATION MAD E AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS A BSENT. THE REASONS MUST BE SELF EVIDENT, THEY MUST SPEAK FOR TH EMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE BASIS FOR THE BE LIEF THAT INCOME HAS ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING OF THE REASONS. THE ENTIRE MATERIAL NEED NOT B E SET OUT. HOWEVER, SOMETHING THEREIN WHICH IS CRITICAL TO TH E FORMATION OF THE BELIEF MUST BE REFERRED TO. OTHERWIS E THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 IS A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINL Y CANNOT BE INVOKED CASUALLY OR MECHANICALLY. THE HEART OF THE PRO VISION IS THE FORMATION OF BELIEF BY THE AO THAT INCOME HAS ESC APED ASSESSMENT. THE REASONS SO RECORDED HAVE TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FRO M READING THE REASONS. IT CANNOT BE SUPPLIED SUBSEQUENT LY EITHER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPE NING ARE CONSIDERED OR EVEN DURING THE ASSESSMENT PROCEEDING S THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 9. IN VIEW OF THE ABOVE WE HOLD THAT THERE WAS NO BELIEF AT ALL OF THE A.O OF ESCAPEMENT OF INCOME AN D JURISDICTION, THEREFORE, ASSUMED TO FRAME ASSESSMEN T U/S 147 WAS INVALID. WE MAY ADD THAT THOUGH IT IS N OT DENIED THAT COMMUNICATION RECEIVED BY AN ASSESSING OFFICER FOR DISCHARGE OF HIS OFFICIAL DUTIES IS VAL ID INFORMATION FOR ISSUE OF NOTICE U/S 148 OF THE ACT, AS STATED BY THE LD.CIT(A), BUT AT THE SAME TIME IT IS ONLY INFORMATION BRINGING OUT THE FACT OF INCOME ESCAPI NG ASSESSMENT, WHICH CAN BE TREATED AS INFORMATION SUFFICIENT FOR REOPENING AND NOT ANY VAGUE INFORMAT ION GIVING NOT EVEN THE BASIC DETAILS OF THE TRANSACTIO N AS IN THE PRESENT CASE. THEREFORE WE DO NOT AGREE WITH THE LD.CIT(A) THAT THE REOPENING BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WING IN THE PRESENT CASE WAS A VALID REOPENING. THE CASE LAWS REFERRED TO ITA NO.412/CHD/2016 A.Y.2009-10 10 BY THE LD.CIT(A) ALSO ARE OF NO ASSISTANCE SINCE IN THOSE CASES THERE WAS SPECIFIC INFORMATION RECEIVED BY THE A.O TO WHICH THE A.O WAS ALSO FOUND TO HAVE APPLIED HIS MIND WHILE ASSUMING JURISDICTION TO FRA ME ASSESSMENT U/S 147 OF THE ACT. 10. WE THEREFORE HOLD THAT THE JURISDICTION ASSUMED IN THE PRESENT CASE BY THE A.O TO REOPEN THE CASE O F THE ASSESSEE U/S 147 OF THE ACT ,WAS NOT AS PER LAW . THE ORDER PASSED, THEREFORE, IN THE PRESENT CASE IS SET ASIDE. GROUND NOS.1 IS THEREFORE ALLOWED. 11. SINCE WE HAVE HELD THE JURISDICTION ASSUMED U/S 147 OF THE ACT TO BE INVALID FOR THE ABOVE REASON , THE GROUND NO.2 RAISED BY THE ASSESSEE CHALLENGING THE FRAMING OF ASSESSMENT WITHOUT DISPOSING OFF THE OBJECTIONS RAISED BY THE ASSESSEE BECOMES ACADEMIC IN NATURE AND IS THEREFORE NOT BEING DEALT WITH BY US. 12. GROUND OF APPEAL NOS.3, 4 AND 5 RAISED BY THE ASSESSEE ARE RELATING TO THE MERITS OF THE CASE AND CHALLENGE THE ACTION OF THE CIT(A) IN CONFIRMING TH E ADDITION OF RS.10 LACS RECEIVED BY THE ASSESSEE FRO M ONE M/S VIP LEASING & FINANCE PVT. LTD., AS UNDISCLOSED INCOME OF THE ASSESSEE. THE SAID GROUND S ARE AS UNDER: 3. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTI ON OF AO OF NOT PROVIDING THE DOCUMENTS RELIED AND CROSS EXAMINATION OF WITNESS WHOSE STATEMENT WAS RELIED WHILE COMPLETING THE ASSESSMENT PROCEEDINGS. ITA NO.412/CHD/2016 A.Y.2009-10 11 4. THAT AUTHORITIES BELOW HAVE ERRED IN VIOLATING TH E PRINCIPLES OF NATURAL JUSTICE SINCE THIRD PARTY EVID ENCE IS RELIED BY AO AGAINST ASSESSEE WITHOUT ADEQUATE OPPORTUNITY. 5. THAT LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITIO N OF RS.10,00,000/- U/S 68 ON ACCOUNT OF CREDIT RECEIVED UNDER SHARE CAPITAL AND SHARE PREMIUM ACCOUNT. 13. THE LD. COUNSEL FOR ASSESSEE DREW OUR ATTENTION TO THE FINDINGS OF THE LD.CIT(A) IN CONFIRMING THE ADDITION AT PARAS 4.3 TO 4.5 OF THE ORDER AS UNDER: 4.3. I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMI SSIONS. IT IS EVIDENT FROM THE FACTS RECORDED IN THE ASSESS MENT ORDER THAT A SEARCH WAS CONDUCTED AT THE PREMISES OF SH.S .K. JAIN AND SH. VIRENDER JAIN BY THE INVESTIGATION WING DEL HI. DURING THE COURSE OF SEARCH IT WAS FOUND THAT SH. S.K. JAI N AND SH. VIRENDER JAIN WERE ENGAGED IN THE BUSINESS OF PROVI DING ACCOMMODATION ENTRIES. THIS BUSINESS WAS CARRIED OUT THROUGH NUMBER OF COMPANIES WHICH WERE MANAGED AND CONTROLLED BY SH. S.K. JAIN AND SH. VIRENDER JAIN, ALTHO UGH ON PAPER THESE COMPANIES HAD OTHER DIRECTORS. THE DOCUM ENTS REGARDING THESE COMPANIES WERE FOUND DURING THE COU RSE OF SEARCH. SPECIFIC DOCUMENTS PERTAINING TO M/S VIP LE ASING AND FINANCE PVT. LTD. WERE ALSO FOUND DURING THE SEARCH SHO WING THE LINKAGE OF THIS CONCERN WITH SH. S.K. JAIN AND SH. VIREND ER JAIN. FURTHER, AS POINTED OUT BY THE AO IN THE ASSESSM ENT ORDER, SH. S.K. JAIN AND SH. VIRENDER JAIN ADMITTED IN THEIR STATEMENTS THAT M/S VIP LEASING AND FINANCE P VT. LTD. WAS ONE OF THE COMPANIES USED FOR PROVIDING ACCOMMO DATION ENTRIES. IN RELATION TO THE ABOVE, THE AO HAS ALSO RE FERRED TO A SPECIFIC DOCUMENT I.E. PAGE 40 OF THE ANNEXURE A-27 IN WHICH FOLLOWING FACTS HAD BEEN RECORDED:- I. NAME OF THE APPELLANT. II NAME OF THE BANK THROUGH WHICH DRAFT WAS GIVEN. III. DEMAND DRAFT NUMBER. IV. DATE OF ISSUANCE OF DEMAND DRAFT. V. AMOUNT OF DEMAND DRAFT. 4.4. ALL THESE FACTS AND EVIDENCES REFERRED TO BY THE AO, A COPY OF WHICH WAS DULY PROVIDED TO THE APPELLANT CLEAR LY ESTABLISHES BEYOND ANY DOUBT THAT THE DEMAND DRAFT OF RS. 10,00,000/- RECEIVED BY THE APPELLANT COMPANY ON ACC OUNT OF SHARE CAPITAL AND SHARE PREMIUM FROM M/S VIP LEASIN G AND FINANCE PVT. LTD. WAS NOT A GENUINE TRANSACTION BUT ONLY AN ACCOMMODATION ENTRY. 4.5. THE APPELLANT'S CONTENTION THAT NO OPPORTUNITY OF CRO SS EXAMINATION OF SH. S.K. JAIN AND SH. VIRENDER JAIN WAS PROVIDED TO THE APPELLANT AND THEREFORE THE ADDITIO N MADE IS ITA NO.412/CHD/2016 A.Y.2009-10 12 NOT JUSTIFIED IS ALSO NOT LEGALLY TENABLE. AS SEEN FROM THE FACTS RECORDED IN THE ASSESSMENT ORDER THE EVIDENCE S FOUND DURING THE COURSE OF SEARCH INCLUDING THE COPY OF 14. THEREAFTER THE LD. COUNSEL FOR ASSESSEE POINTED OUT THAT THE LD.CIT(A) HAS CONFIRMED THE ADDITION SOLELY ON THE BASIS OF INFORMATION RECEIVED FROM TH E PREMISES OF ONE SHRI S.K. JAIN AND SHRI VIRENDER JA IN DURING SEARCH CONDUCTED ON THEM AND ON THE STATEMENTS OF THOSE PERSONS RECORDED DURING THE SEARCH. THE LD. COUNSEL FOR ASSESSEE POINTED OUT TH AT IT HAD REQUESTED FOR AN OPPORTUNITY BE AFFORDED TO CROSS EXAMINE SH.S.K JAIN AND HIS ASSOCIATES ON WHOSE STATEMENTS THE REVENUE HAD RELIED UPON AND HAD ALSO REQUESTED FOR COPIES OF THE ASSESSMENT ORD ERS IN THEIR CASES VIDE LETTER FILED TO THE AO RAISING OBJECTIONS TO THE REOPENING, COPY OF WHICH WAS PLAC ED BEFORE US AT P.B 4-5,BUT HAD BEEN DENIED THE SAME AGAINST THE PRINCIPLES OF NATURAL JUSTICE. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, CONTENDED THAT THE ADDITION CONFIRMED, BEING IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, OUGHT TO BE DELETED. RELIANCE WAS PLACED ON THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIE S VS. COMMISSIONER OF CENTRAL EXCISE, KOLKATA-II(SC) IN CIVIL APPEAL NO.4228 OF 2006 DT.2 ND SEPTEMBER 2015. THE LD. COUNSEL FOR ASSESSEE FURTHER POINTED OUT TH AT THE INFORMATION IN THE POSSESSION OF THE DEPARTMENT COULD NOT HAVE FORMED THE BASIS OF HOLDING THE AMOU NT RECEIVED FROM M/S VIP LEASING & FINANCE PVT. LTD. A S ITA NO.412/CHD/2016 A.Y.2009-10 13 AN ACCOMMODATION ENTRY FOR THE REASON ALSO THAT THI S COMPANY WAS NOT LISTED IN THE PERSONS AGAINST WHOM A PRIMA FACIE CASE WAS MADE OUT BY THE SFIO IN PROCEEDINGS CONDUCTED CONSEQUENT TO SEARCH CONDUCTED ON SHRI S.K. JAIN AND OTHERS AND THEIR STATEMENTS RECORDED THEREIN. A COPY OF THE ORDER OF ACMMC(SPECIAL ACTS) CENTRAL DISTRICT, DELHI DATED 9.6.2017 LISTING-ACCUSED PERSONS TO BE SUMMONED FOR OFFENCES IN THE CASE OF SFIO VS. SURENDER KUMAR JAI N & OTHERS IN CC NO.5434/2016 WAS PLACED BEFORE US AND IT WAS POINTED OUT THEREFROM THAT THE NAME OF M /S VIP LEASING & FINANCE PVT. LTD. DID NOT FIGURE IN T HE SAME OUT OF THE 31 PERSONS/ENTITIES LISTED THEREIN. THE LD. COUNSEL FOR ASSESSEE, THEREFORE, STATED THAT FO R THE ABOVE REASONS ALSO, IT COULD NOT BE SAID THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S VIP LEASIN G & FINANCE PVT. LTD. WAS IN RELATION TO THE BOGUS COMPANIES FLOATED BY SHRI S.K. JAIN & OTHERS FOR PROVIDING ACCOMMODATION ENTRIES TO PERSONS AND SINC E THIS WAS THE SOLE BASIS FOR CONFIRMING THE ADDITION , THE SAME NO LONGER REMAINING THE SAME OUGHT TO BE DELETED. 15. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE CIT(A). 16. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES. WE FIND MERIT IN THE CONTENTION O F THE LD. COUNSEL FOR ASSESSEE. AS IS EVIDENT FROM TH E ITA NO.412/CHD/2016 A.Y.2009-10 14 FINDINGS OF THE LD.CIT(A) THE ENTIRE BASIS OF CONFI RMING THE ADDITION WAS THE INFORMATION RECEIVED FROM DIT(INVESTIGATION) THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRY FROM BOGUS COMPANIES FLOATED BY SHRI S.K. JAIN & OTHERS, WHICH INFORMATION WAS COLLECTED DURING THE COURSE OF SEARCH CONDUCTED ON THEM AND SUBMISSIONS MADE BY THEM IN THE PROCEEDINGS. AS POINTED OUT BY THE LD. COUNSEL FOR ASSESSEE THAT THE FACT OF THE MATTER IS THAT THE IMPUGNED SUM OF RS.10 LACS WAS RECEIVED FROM M/S VI P LEASING & FINANCE PVT. LTD. THIS COMPANY, AS POINTE D OUT BY THE LD. COUNSEL FOR ASSESSEE, DOES NOT FIND MENTION IN THE LIST OF THE COMPANIES AND PERSONS AGAINST WHOM A PRIMA FACIE CASE WAS MADE OUT BY THE SFIO AFTER COMPLETING INVESTIGATION ON SHRI S.K. JA IN & OTHERS. THE LD.DR WAS UNABLE TO CONTROVERT THIS F ACT POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE. THEREFORE, THE VERY BASIS FOR TREATING THE IMPUGNED TRANSACTION AS ACCOMMODATION ENTRY IN THE CASE OF T HE ASSESSEE DOES NOT SURVIVE . MOREOVER WE AGREE WITH THE LD. COUNSEL FOR ASSESSEE THAT THE ADDITION WAS MADE AND CONFIRMED WITHOUT AFFORDING ADEQUATE OPPORTUNIT Y TO THE ASSESSEE TO DEFEND HIMSELF AND REBUT THE ADVERSE INFORMATION COLLECTED AGAINST HIM, BY AFFORDING DUE OPPORTUNITY OF CROSS EXAMINING THE SEARCHED PERSONS AS REQUESTED BY THE ASSESSEE. IT I S WELL ACCEPTED PRINCIPLE OF NATURAL JUSTICE THAT NOB ODY SHOULD BE CONDEMNED UNHEARD AS PER THE MAXIM AUDI ITA NO.412/CHD/2016 A.Y.2009-10 15 ALTERAM PARTEM. THE REVENUE CANNOT JUSTIFY ITS ACT ION BY SAYING THAT THE INFORMATION IN THEIR POSSESSION WAS SUFFICIENT TO NAIL THE ASSESSEE AND THERE WAS NO NE ED TO PROVIDE ANY OPPORTUNITY FOR CROSS EXAMINATION OR TO DEFEND ITSELF. IT GOES AGAINST THE VERY SPIRIT/ GRAIN OF N ATURAL JUSTICE, AS HELD BY THE HON'BLE APEX COURT IN THE C ASE OF ANDAMAN TIMBER (SUPRA). ANY ASSESSMENT MADE WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE CANNOT B E UPHELD. RELEVANT FINDINGS OF THE HON'BLE APEX COURT IN THE SAID CASE ARE AS UNDER: ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROSS-EX AMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH TH E STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERIOUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLATION OF PRIN CIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS A DVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EVEN WHEN THE ASSESSEE DISPU TED THE CORRECTNESS OF THE STATEMENTS AND WANTED TO CRO SS- EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THI S OPPORTUNITY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORDER PASSED BY THE ADJUDICATING AUT HORITY HE HAS SPECIFICALLY MENTIONED THAT SUCH AN OPPORTUNIT Y WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY W AS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WITH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONC ERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENA BLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS-EXAMINATION OF T HE SAID DEALERS COULD NOT HAVE BROUGHT OUT ANY MATERIAL WHICH W OULD NOT BE IN POSSESSION OF THE APPELLANT THEMSELVES TO E XPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WAS NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLANT WANTED TO CROSS-EXAMINE THOSE DEALERS AND WH AT EXTRACTION THE APPELLANT WANTED FROM THEM. 7. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DISCREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNITY OF CROSS-EXAMINATION. T HAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIED UPON TH E PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PR ICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WER E, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE W HICH IS MENTIONED IN THE PRICE LIST ITSELF COULD BE THE SUBJEC T MATTER OF ITA NO.412/CHD/2016 A.Y.2009-10 16 CROSS-EXAMINATION. THEREFORE, IT WAS NOT FOR THE ADJUD ICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJE CT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARK S AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EAR LIER OCCASION WHEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH TH E DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS R EASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. 8. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF T HE TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WITH THE DEPARTMENT ON THE BASIS OF WHICH IT C OULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAI D TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHOW CAU SE NOTICE. 17. IN VIEW OF THE ABOVE, CONSIDERING THE ENTIRE FA CTS AND CIRCUMSTANCES OF THE CASE WE HOLD THAT THE ADDITION MADE OF RS.10 LACS, BEING THE AMOUNT RECEIVED FROM M/S VIP LEASING & FINANCE PVT. LTD. HOLDING THE SAME TO BE AN ACCOMMODATION ENTRY, IS WITHOUT ANY COGENT BASIS AND HAS BEEN MADE IN GROSS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE SAM E IS, THEREFORE, DIRECTED TO BE DELETED. GROUND NOS.3, 4 AND 5 RAISED BY THE ASSESSEE ARE ACCORDINGLY DISPOSED O FF. 18. IN EFFECT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- % & ' ($ (SANJAY GARG) (ANNAPURNA GUPTA) ! /JUDICIAL MEMBER )* ! /ACCOUNTANT MEMBER , % /DATED: 11 TH FEBRUARY, 2019 * $ * ITA NO.412/CHD/2016 A.Y.2009-10 17 #&' ()*) / COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT 2. ',+ / THE RESPONDENT 3. - / CIT 4. - ( )/ THE CIT(A) 5. )./' 0 , !0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35 / GUARD FILE #& / BY ORDER, / ASSISTANT REGISTRAR