Swati Verma, New Delhi V. ITO, Ward- 3(4), Noida

ITA 42/DEL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4829 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Reopening of assessment; Unexplained investment; Gift; Salary income; Question of law; Tangible material; Accommodation entries; Competent authority; Reason to believe; Reassessment proceedings
• Section: 143(3); 133(6); 147; 68; 69; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.42/DEL./2018 ASSESSMENT YEAR 2009-2010 SMT. SWATI VERMA, W/O. SH. NAGENDRA KISHORE VERMA, 173, 1 ST FLOOR, SUKHDEV VIHAR, NEW DELHI 110 025. PAN ACBPV4477H VS THE INCOME TAX OFFICER, WARD-3(4), NOIDA. (APP ELLANT ) (RESPONDENT) FOR ASSESSEE : SHRI SUNIL KUMAR, C.A. FOR REVENUE : SHRI S.L. ANURAGI, SR. D.R. DATE OF HEARING : 1 3 .0 7 .2018 DATE OF PRONOUNCEMENT : 01 .0 8 .2018 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-1, NOIDA, DATED 29.09.2 017, FOR THE A.Y. 2009-2010. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT AS PER AIR INFORMATION, THE ASSESSEE HAD PURCHASED AN IMMOVABL E PROPERTY FOR RS.1,00,96,750/- ON 30.12.2008 DURING THE 2 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. F.Y. 2008-09. TO VERIFY TRANSACTION, INFORMATION WA S CALLED UNDER SECTION 133(6) OF THE I.T. ACT, 1961 O N 19.10.2015 AND THE SAME WAS ISSUED TO THE ASSESSEE. THE ASSESSEE DID NOT MAKE COMPLIANCE REGARDING THE SOURCE OF INVESTMENT MADE IN PURCHASE OF IMMOVABLE PROPERTY. IN ABSENCE OF PAN, INFORMATION REGARDING FILING OF THE RETURN FOR THE A. Y.2009-2010 UNDER A PPEAL AND VERIFICATION OF SOURCE OF INVESTMENT MADE IN PURCHASE OF IMMOVABLE PROPERTY. SO, TREATING UNEXPLAINED INVESTMENT OF RS.1,00,96,750/- UNDER SECTION 69 OF THE I.T. ACT. 1961 AS ESCAPED ASSESSM ENT FOR A.Y.2009-2010 UNDER APPEAL, REOPENING PROCEEDIN G UNDER SECTION 147 OF THE I.T. ACT.1961 WERE INITIAT ED WITH THE APPROVAL OF THE COMPETENT AUTHORITY. NOTICE UND ER SECTION 148 OF THE I.T. ACT. 1961 WAS ISSUED TO THE ASSESSE E. IN COMPLIANCE TO THE NOTICE. THE ASSESSEE SUBMITTED TH AT RETURN ORIGINALLY FILED FOR A.Y. 2009-2010 ON 30.07.2009 M AY BE TREATED AS RETURN FILED IN COMPLIANCE TO THE NOTICE UNDER S ECTION 148 OF THE I.T. ACT, 1961. THE A.O. ISSUED STATUTORY NOTIC ES AND CALLED 3 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. FOR EXPLANATION OF ASSESSEE. THE ASSESSEE SUBMITTED BEFORE A.O. THAT THE FLAT SITUATED AT A-1/404, PURVANCHAL SILVE R CITY, SECTOR- 93, NOIDA WAS PURCHASED FOR RS.1,00,96,750/- BY THE ASSESSEE ALONG WITH HER HUSBAND AND SALE DEED WAS EXECUTED O N 30.12.2008. THE EXPENSES ON ACCOUNT OF PURCHASE OF STAMP DULY AND RELATED EXPENSES OF RS.4,99,200/- WAS INCU RRED. IT WAS ALSO SUBMITTED THAT ALL THE PAYMENTS FOR PURCHA SE OF FLAT WERE MADE BY THE HUSBAND OF THE ASSESSEE SHRI NAGENDER KISHORE VERMA IN A.Y. 2009-2010. HIS CASE IS ALSO REOPENED FOR VERIFICATION OF PAYMENTS AND ORDE R UNDER SECTION 147 R.W.S.143(3) DATED 12 LH MARCH 2015 WAS PASSED BY THE O/O. ASSESSING OFFICER. SINCE, ASSESSEE HAS NOT MADE ANY PAYMENT FOR PURCHASE OF F LAT, NO ADDITION CAN BE MADE IN HANDS OF ASSESSEE AND NO TICE FOR REOPENING OF THE ASSESSMENT MAY BE DROPPED. THE A.O. ACCEPTED THE EXPLANATION OF ASSESSEE AND DID N OT MAKE ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN PURCHASE OF THE AFORESAID FLAT. THE A .O. HOWEVER, MADE ADDITION OF RS.1,50.000/- ON ACCOUNT OF 4 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. DISALLOWANCE OF INTEREST ON BORROWED CAPITAL AND MA DE ADDITION OF RS.72,332/- ON ACCOUNT OF DISALLOWANCE OF CLAIM OF LTA. THE INCOME WAS ASSESSED AT RS.10,14,020/- AGAINST RETUR NED INCOME OF RS.7,91,690/-. THE ASSESSEE CHALLENGED TH E REOPENING OF THE ASSESSMENT AS WELL AS BOTH THE ADD ITIONS BEFORE LD. CIT(A). HOWEVER, THE APPEAL OF ASSESSEE HAS BEE N DISMISSED. 3. I HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL ON RECORD. 4. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS GROUND NO.2 OF APPEAL OF ASSESSEE, THE SAME IS DISM ISSED. 5. THE ASSESSEE IN THE PRESENT APPEAL HAS CHALLENG ED THE REOPENING OF THE ASSESSMENT UNDER SECTION 147/1 48 OF THE I.T. ACT AND ABOVE TWO ADDITIONS. THE ASSESSEE ALSO CHALLENGED THE ORDER OF THE A.O. AS THE SAME WAS PASSED WITHOU T JURISDICTION, THEREFORE, IT IS NULL AND VOID ABINITIO. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS AN INDIVIDUAL AND REGULARLY ASSESSED TO TAX AND FURNIS HED RETURN OF INCOME UNDER SECTION 139(1) FOR ASSESSMENT YEAR UNDER 5 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. APPEAL ON 30.07.2009 WHICH WAS ACCEPTED UNDER SECTI ON 143(1). THE A.O, HOWEVER, ON THE BASIS OF AIR INFORMATION I NITIATED THE RE-ASSESSMENT PROCEEDINGS WITHOUT ANY MATERIAL AND WITHOUT ANY INDEPENDENT FINDINGS. THE ASSESSEE HAS NOT MADE ANY INVESTMENT IN PURCHASE OF THE PROPERTY WHICH IS ACC EPTED BY THE A.O. THEREFORE, IT IS A CASE OF NON-APPLICATION OF MIND BY THE A.O. AND THE REASONS FOR REOPENING OF THE ASSESSMEN T DOES NOT EXIST. HE HAS RELIED UPON THE JUDGMENT OF THE HONB LE DELHI HIGH COURT IN THE CASE OF RANBAXY LABORATORIES LTD. , VS. CIT (2011) 336 ITR 136 (DEL.) AND RELIED UPON ORDER OF ITAT, DELHI SMC-2-BENCH, DELHI IN THE CASE OF SMT. RAJNI, VILL. KANHARWAS, DISTT. REWARI VS. ITO, WARD-2, REWARI IN ITA.NO.854 /DEL./2016 AND ITA.NO.855/ DEL./2016 DATED 06.01.2017. COPIES OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT AR E FILED AT PAGE-59 OF THE PAPER BOOK. HE HAS, THEREFORE, SUBMI TTED THAT A.O. WAS NOT JUSTIFIED IN REOPENING OF THE ASSESSME NT IN THE MATTER. 6 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. 6. ON THE OTHER HAND, LD. D.R. RELIED UPON THE ORD ERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT ASSESSE E PURCHASED THE PROPERTY. THE A.O. ISSUED NOTICES UNDER SECTION 133(6), FOR WHICH, NO COMPLIANCE WAS MADE. IN THE ABSENCE OF PA N AND OTHER INFORMATION, A.O. RIGHTLY CAME TO THE BELIEF THAT THE SAID INVESTMENT IN PURCHASE OF THE IMMOVABLE PROPERTY HA S ESCAPED ASSESSMENT. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT IS WELL SETTLED LAW THAT VALIDITY OF INITIATION OF RE-ASSES SMENT PROCEEDINGS IS TO BE DETERMINED ON THE BASIS OF THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE ASSES SEE HAS FILED COPY OF REASONS RECORDED UNDER SECTION 147 OF THE I .T. ACT AT PAGE-59 OF THE PAPER BOOK AND THE SAME IS REPRODUCE D AS UNDER: OFFICE OF THE INCOME TAX OFFICE, WARD-3(4), NOIDA. 1. NAME & ADDRESS OF THE ASSESSEE SMT. SWATI VERMA A-1/404, BLOCK-2, PURVANCHAL SILVER CITY, SECTOR-93, NOIDA 201 301. 2. STATUS INDL. 3. PAN NOT AVAILABLE 4. ASSESSMENT YEAR 2009-10 7 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. REASONS FOR INITIATING PROCEEDINGS U/S. 147 OF THE I.T. ACT, 1961 FOR A.Y. 2009-10. AIR INFORMATION IN CASE OF SMT. SWATI VERMA WHO PURCHASED AN IMMOVABLE PROPERTY FOR RS.1,00,96,750/ - ON 30.12.2008, HAS BEEN RECEIVED IN THIS OFFICE FOR VE RIFICATION OF NON PAN FINANCIAL TRANSACTION RELATED TO A.Y. 20 09-10. A LETTER DATED 19.10.2015 WAS ISSUED TO ASSESSEE FOR VERIFICATION AND SERVED UPON ASSESSEE BY THE SPEED POST. AS PER AIR INFORMATION ASSESSEE PURCHASED AN IMMOVA BLE PROPERTY FOR RS.1,00,96,750/- DURING THE YEAR. FURTHER, ASSESSEE HAS NOT GIVEN ANY REPLY WHICH ESTABLISHES THAT ASSESSEE IS WILLFULLY CONCEALED HE R INCOME BY WAY OF NOT DISCLOSING THE SOURCE OF INVESTMENT M ADE IN ACQUISITION OF AN IMMOVABLE PROPERTY. CONSIDERING THE ABOVE FACT, I HAVE REASON TO BELIEV E THAT ASSESSEE HAS NOTHING TO SAY AMOUNT OF RS.1,00,96,750/- IS ESCAPED FROM ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T. AC T, 1961. THEREFORE, PROCEEDINGS U/S 147 FOR THE ASSESSMENT Y EAR 8 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. UNDER CONSIDERATION IS TO BE INITIATED WITH THE APP ROVAL OF THE PR. COMMISSIONER OF INCOME TAX, NOIDA AS PER PR OVISIONS OF SECTION 151(2) OF THE INCOME TAX ACT, 1961. ACCO RDINGLY, PROPOSAL IS BEING SUBMITTED TO THE PR. COMMISSIONER OF INCOME TAX, NOIDA. YOURS FAITHFULLY, SD/-XXX (P.C. SHARMA) INCOME TAX OFFICER, WARD-3(4), NOIDA. 7.1. LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF ITAT, DELHI SMC-2-BENCH, DELHI IN THE CASE OF SMT. RAJNI, VILL. KANHARWAS, DIST. REWARI VS. ITO, WARD- 2, REWARI (SUPRA), IN WHICH, IN PARA-12, THE TRIBUNAL HELD AS UNDER : '12. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVE S, I HAVE GONE THROUGH THE RECORD CAREFULLY. SECTION 147 OF THE ACT CONTEMPLATES THAT ''IF THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTION 148 TO 153 , ASSESSEE OR RE-ASSESS SUCH 9 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. INCOME.......' A PERUSAL OF THIS SECTION WOULD SHOW THAT IN ORDER TO HARBOR A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, THE AO OUGHT TO HAVE FORMED AN OPINION ON THE BASIS OF THE MATERIAL POSSESSED BY HIM EXHIBITING T HE FACTS THAT INCOME HAS ESCAPED ASSESSMENT. A PERUSAL OF TH E REASONS EXTRACTED ABOVE WOULD INDICATE THAT THE LD. AO HAS BASICALLY NOT MADE REFERENCE TO ANY MATERIAL POSSES SED BY HIM EXCEPT THE AIR COMMUNICATED TO HIM. IT IS PERTI NENT TO OBSERVE THAT HE HAS NOT ANALYSED THE INFORMATION IN RIGHT PERSPECTIVE AND HE SOUGHT TO REOPEN BY CONCEIVING A FACT THAT THE ASSESSEE FAILED TO RESPOND TO THE QUERY RA ISED ABOUT THIS INVESTMENT. AS NOTICED IN THE SUBMISSION S OF LD. COUNSEL FOR THE ASSESSEE, I AM OF THE VIEW THAT THE RE WAS NO PROCEEDINGS PENDING BEFORE THE AO WHEN HE SOUGHT THE CLARIFICATION OF THE ASSESSEE VIDE ALLEGED QUERY NO TICE DATED 23RD JANUARY, 2012. THE ITAT AMRITSAR BENCH HAS DEA LT WITH THIS ISSUE ELABORATELY AND RECORDED A FINDING THAT UNDER THE INCOME TAX ACT, THERE IS NO SUCH PROCEDUR E TO CONDUCT AN ENQUIRY FOR COLLECTING THE INFORMATION W ITHOUT 10 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. PENDENCY OF ASSESSMENT PROCEEDINGS. IF THIS REASONI NG IS BEING EXCLUDED FROM THE COPY OF THE REASONS GIVEN B Y THE AO, THEN, NOTHING WILL REMAIN WITH THE AO EXCEPT TH E INFORMATION TRANSMITTED BY AIR WING. APART FROM THE ABOVE, IT IS TO BE SEEN THAT IN THE REASONS THE AO HAS NOW HERE ALLEGED ESCAPEMENT OF INCOME. THE THRUST OF THE REA SONING WOULD SHOW THAT HE WANT TO MAKE AN ENQUIRY ABOUT TH E INVESTMENT. NO DOUBT, FOR REOPENING OF AN ASSESSMEN T, HE HAS TO JUST FORM A PRIMA FACIE OPINION AND NOT TO A RRIVE AT A FIRM CONCLUSION, BUT, THE FORMATION OF A PRIMA FACI E OPINION SHOULD ALSO DEPICT ESCAPEMENT OF INCOME. IT IS ALSO PERTINENT TO OBSERVE THAT WHEN ALL THESE PLEAS WERE RAISED BE FORE THE FIRST APPELLATE AUTHORITY, THEN, THE LD. FIRST APPE LLATE AUTHORITY HAS NOT DEALT WITH A SINGLE PROPOSITION A ND RATHER DEALT WITH THE ISSUE IN AN ALTOGETHER DIFFERENT MAN NER WHETHER NOTICE U/S 148 WAS SERVED OR NOT, COPY OF REASONING WAS PROVIDED OR NOT, THE PROCEDURE CONTEM PLATED THROUGH THE DECISION OF THE HON'BLE SUPREME COURT I N THE CASE OF GKN DRIVESHAFT WAS FOLLOWED OR NOT. THE LD. CIT(A) 11 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. HAS NOT ADDRESSED THE CONTENTION OF THE ASSESSEE TH AT REOPENING OF ASSESSMENT IN ITSELF IS BAD BECAUSE TH ERE IS NO NEXUS BETWEEN REASONS VIS--VIS FORMATION OF BELIEF EXHIBITING THE ESCAPEMENT OF INCOME. TAKING INTO CONSIDERATION ALL THESE ASPECTS, I AM OF THE VIEW T HAT THE AO IS NOT JUSTIFIED IN REOPENING OF THE ASSESSMENT AFR ESH. I ALLOW THIS GROUND OF APPEAL AND QUASH THE ASSESSMEN T. AS FAR AS OTHER ISSUES ARE CONCERNED, SINCE REOPENING OF ASSESSMENT HAS BEEN HELD AS BAD AND NOT IN ACCORDAN CE WITH THE LAW, THEREFORE, I DEEM IT NOT NECESSARY TO DEAL WITH THE OTHER GROUNDS OF APPEAL AS THEY HAVE BECOME INFRUCTUOUS.' 7.2. THE HONBLE DELHI HIGH COURT IN THE CASE OF P R. CIT VS. G & G PHARMA INDIA LTD., (2016) 384 ITR 147 (DE L.) HAS HELD AS UNDER : THE BASIC REQUIREMENT OF LAW FOR REOPENING AN ASSES SMENT IS APPLICATION OF MIND BY THE ASSESSING OFFICER, TO THE MATERIALS PRODUCED PRIOR TO REOPENING THE ASSESSMEN T, TO 12 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. CONCLUDE THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONA L REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYZING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT MAKE AN INHERENTLY DEFECTIVE REASSESSMENT ORDER VAL ID. THE ASSESSEE FILED RETURNS FOR THE ASSESSMENT YEAR 2003-04 WHICH WAS PROCESSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. BASED ON INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION ABOUT FOUR ENTRIES , STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE , I.E., FEBRUARY 10, 2003, FROM FOUR ENTITIES WHICH WERE TE RMED AS ACCOMMODATION ENTRIES, THE ASSESSING OFFICER ISSUED NOTICE TO THE ASSESSEE FOR REASSESSMENT FOR THE ASSESSMENT YEAR 2003-04 ON MARCH 19,2010 STATING THAT IT WAS EVIDEN T THAT THE ASSESSEE- COMPANY HAD INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATI ON ENTRIES. THE ASSESSEE'S APPEAL WAS DISMISSED BY THE COMMISSIONER (APPEALS). THE TRIBUNAL CONCLUDED, FRO M THE 13 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. REASONS RECORDED, THAT THE ASSESSING OFFICER ISSUED NOTICE ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING BUT WITHOUT COMING TO AN INDEPEN DENT CONCLUSION FOR REASON TO BELIEVE THAT INCOME HAD ES CAPED ASSESSMENT AND ALLOWED THE APPEAL OF THE ASSESSEE. ON APPEAL : HELD, DISMISSING THE APPEAL, THAT ONCE THE DATE ON WHICH THE SO-CALLED ACCOMMODATION ENTRIES WERE PROV IDED WAS KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE .ASSESSING OFFICER, IF HE HAD IN FACT UNDERTAKEN TH E EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VE RY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESS ES, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN , WHICH WAS FILED ON NOVEMBER 14, 2004 AND WAS PROCES SED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WA S NOT POSSIBLE FOR HIM TO HAVE SIMPLY CONCLUDED THAT IT W AS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED IT S OWN 14 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATI ON ENTRIES. THE BASIC JURISDICTIONAL REQUIREMENT WAS APPLICATION OF MIND BY THE ASSESSING OFFICER TO THE MATERIAL PRODUCED BEFORE ISSUING THE NOTICE FOR REASSESSMENT . WITHOUT ANALYZING AND FORMING A PRIMA FACIE OPINION ON THE BASIS OF MATERIAL PRODUCED, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO CONCLUDE THAT HE HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE ORDER OF TH E TRIBUNAL WAS PROPER. NO QUESTION OF LAW AROSE. 7.3. THE HONBLE DELHI HIGH COURT IN THE CASE OF P RINCIPAL COMMISSIONER OF INCOME TAX VS. MEENAKSHI OVERSEAS P VT. LTD., (2017) 395 ITR 677 (DEL.) HAS HELD AS UNDER : FOR THE ASSESSES REAR 2004-05, THE ASSESSEE WAS ASSESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT , 1961 IN NOVEMBER, 2004. BASED ON THE INFORMATION RECEIVE D FROM THE DIRECTOR (INVESTIGATION) THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES, NOTICE UNDER SECTION 148 WAS ISSUED IN MARCH, 2011 AFTER TAKING APPROVAL FROM TH E 15 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. APPROPRIATE AUTHORITY UNDER SECTION 151(1). THE ASS ESSING OFFICER RECORDED THAT HE HAD REASONS TO BELIEVE THA T INCOME HAD ESCAPED ASSESSMENT. HE RECORDED REASONS THAT ACCORDING TO THE REPORT OF THE INVESTIGATION WING, DURING THE ASSESSMENT YEAR 2004-05, THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRIES FROM AN ENTRY OPERATOR PAYING UNACCOUNTED CASH WHICH HAD ESCAPED ASSESSMENT DUE T O THE FAILURE OF THE ASSESSEE TO DISCLOSE TRULY AND F ULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THE AMOU NT CONCERNED. THE ASSESSEE REQUESTED THAT THE ORIGINAL RETURN FILED UNDER SECTION 139 BE TREATED AS RETURN FILED IN COMPLIANCE WITH THE NOTICE UNDER SECTION 148. THE ASSESSING OFFICER TREATED THE CREDIT RECEIVED FROM THE HOLDER OF THE ENTRY GIVING ACCOUNT AS UNEXPLAINED INCOME A ND OTHER CREDIT ENTRIES, THAT PURPORTEDLY REMAINED 'UNVERIFI ED, UNSUBSTANTIATED AND UNEXPLAINED, WHICH HE FOUND IN THE STATEMENT OF THE ASSESSEE'S BANK ACCOUNT AS UNEXPLA INED CREDITS UNDER SECTION 68 AND ADDED THE SUMS AS INCO ME FROM UNDISCLOSED SOURCES TO THE ASSESSEES INCOME. HE 16 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. PASSED AN ORDER UNDER SECTION 143(3) READ WITH SECT ION 147. THE COMMISSIONER (APPEALS) DISMISSED THE ASSES SEES APPEAL. THE APPELLATE TRIBUNAL HELD THAT, (A) THE A SSESSING OFFICER HAD ISSUED A NOTICE UNDER SECTION 148 SOLEL Y ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR {INVESTIGATION), (B) HE HAD CONCLUDED THAT THE TABU LATED INSTRUMENT IN INVESTIGATION REPORT WAS IN THE NATUR E OF ACCOMMODATION ENTRY, WITHOUT FURTHER VERIFICATION, EXAMINATION OR ANY OTHER EXERCISE, AND, (C) HE HAD NOT MENTIONED THE NATURE OF TRANSACTION WHICH WAS EFFECTED FOR THE PURPORTED ACCOMMODATION ENTRY AND HAD NOT EVEN MENTIONED THE DATE OF RECORDING THE REASONS. IT FURTHER HELD THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND AT THE TIME OF INITIATING THE PROCEEDINGS FOR REASSESSMENT UNDER SECTION 147 AND ACCORDINGLY ALLOWED THE APPEAL OF THE ASSESSEE. ON APPEAL: 17 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. HELD, DISMISSING THE APPEAL THAT WHILE THE REPORT O F THE INVESTIGATION WING MIGHT HAVE CONSTITUTED MATERIAL ON THE BASIS OF WHICH THE ASSESSING OFFICER FORMED THE REA SONS TO BELIEVE, THE PROCESS OF ARRIVING AT SUCH SATISFACTI ON COULD NOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION . IN THE ASSESSEE'S CASE, THE CRUCIAL LINK BETWEEN THE INFOR MATION MADE AVAILABLE TO THE ASSESSING OFFICER AND THE FOR MATION OF BELIEF WAS ABSENT. THE REASONS TO BELIEVE RECO RDED WERE NOT REASONS BUT ONLY CONCLUSIONS AND A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT RECEIVED FRO M THE DIRECTOR (INVESTIGATION). IT WAS A BORROWED SATISF ACTION. THE EXPRESSION ACCOMMODATION ENTRY' WAS USED TO DESCRIBE THE INFORMATION SET OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUSION. THE BASIS FOR THE STATEMENT THAT THE ENTRY WAS GIVEN TO THE ASSESSEE ON HIS PAYING UNACCOUNTED CASH ' WAS NOT DISCLOSED. WHO W AS THE ACCOMMODATION ENTRY GIVER AND HOW HE COULD BE S AID TO BE A 'KNOWN ENTRY OPERATOR' WERE NOT MENTIONED. THE SOURCE FOR ALL THE CONCLUSIONS WAS THE INVESTIGATION REPOR T. THE 18 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. TANGIBLE MATERIAL WHICH FORMED THE BASIS FOR THE BE LIEF THAT INCOME HAD ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING OF THE REASONS. THE REASONS FAILED TO DEMON STRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORM ATION OF THE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSES SMENT. THE ASSESSING OFFICER HAD NOT INDEPENDENTLY CONSIDE RED THE TANGIBLE MATERIAL WHICH FORMED THE BASIS FOR TH E REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. NO E RROR HAD BEEN COMMITTED BY THE APPELLATE TRIBUNAL IN CON CLUDING THAT THE INITIATION OF THE REASSESSMENT PROCEEDINGS UNDER SECTION 147/148 TO REOPEN THE ASSESSMENTS FOR THE A SSESS- MENT YEAR 2004-05, WAS NOT LEGAL. 7.4. THE HONBLE DELHI HIGH COURT IN THE CASE OF P R. CIT VS. RMG POLYVINYL (I) LTD., (2017) 396 ITR 5 (DELHI ) HAS HELD AS UNDER : THE ASSESSEE FILED ITS RETURN FOR THE ASSESSMENT Y EAR 2008-09 AND ASSESSMENT WAS MADE UNDER SECTION 143(1 ) OF THE INCOME-TAX ACT, 1961. THE ASSESSING OFFICER ISSUED A 19 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. NOTICE FOR REASSESSMENT BASED ON INFORMATION RECEIV ED FROM THE INVESTIGATION WING THAT THE ASSESSEE WAS THE BENEFICIARY OF CERTAIN ACCOMMODATION ENTRIES, WHICH WERE GIVEN IN THE GARB OF SHARE APPLICATION MONEY OR EXP ENSES OR GIFTS OR PURCHASE OF SHARES DURING THE PERIOD RELEV ANT TO THE ASSESSMENT YEAR 2004-05. HE RECORDED THAT THE ASSES SEE HAD NOT FILED A RETURN FOR THE ASSESSMENT YEAR 2004 -05, AS THERE WAS NO RETURN AVAILABLE IN THE DATABASE OF TH E DEPARTMENT, AND THAT CONSEQUENTLY HE HAD NOT OFFERE D ANY INCOME FOR TAXATION. ON APPEAL: HELD, DISMISSING THE APPEAL; THAT NO LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT, COULD BE DISCER NED. THE INFORMATION RECEIVED FROM THE INVESTIGATION WIN G WAS NOT TANGIBLE MATERIAL PER SE WITHOUT A FURTHER ENQU IRY HAVING BEEN UNDERTAKEN BY THE ASSESSING OFFICER, WH O HAD DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEEDING ON THE ERRONEOUS PREMISE THAT THE ASSES SEE HAD NOT FILED A RETURN 20 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. FOR THE ASSESSMENT YEAR, 2004-05, WHEN IN FACT IT H AD. IN HIS ASSESSMENT ORDER, THE ASSESSING OFFICER HAD, IN STEAD OF ADDING A SUM OF RS.78 LAKHS, EVEN GOING BY THE REAS ONS FOR REOPENING OF THE ASSESSMENT, ADDED A SUM OF RS.1.13 CRORES AND THE BASIS FOR SUCH ADDITION HAD NOT BEEN EXPLAINED. NO ERROR WAS COMMITTED BY THE APPELLATE TRIBUNAL IN HOLDING THAT REOPENING OF THE ASSESSMEN T UNDER SECTION 147 WAS BAD IN LAW. NO QUESTION OF LAW AROS E. 7.5. THE HONBLE DELHI HIGH COURT IN THE CASE OF R ANBAXY LABORATORIES LTD., VS. CIT (2011) 336 ITR 136 (DEL. ) HAS HELD AS UNDER : THE ASSESSEE-COMPANY WAS ENGAGED IN THE BUSINESS O F MANUFACTURE AND TRADING OF PHARMACEUTICALS PRODUCTS . THE ASSESSING OFFICER ACCEPTED THE RETURNED INCOME OF T HE ASSESSEE BUT INITIATED REASSESSMENT PROCEEDINGS UND ER SECTION 147 OF THE INCOME-TAX ACT, 1961, IN RESPECT OF CLUB FEES, GIFTS AND PRESENTS AND PROVISION FOR LEAVE ENCASHMENT. WHILE COMPLETING THE REASSESSMENT HOWEV ER, 21 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. HE DID NOT MAKE ADDITIONS ON ACCOUNT OF THESE ITEMS BUT INSTEAD REDUCED THE DEDUCTIONS UNDER SECTIONS 80HH AND 80-1. THE COMMISSIONER (APPEALS) HELD THAT IN THE O RIGINAL ASSESSMENT THE POWERS OF THE ASSESSING OFFICER WERE LIMITED TO THE EXTENT OF PRIMA FACIE ADJUSTMENT ONL Y. ON THE MERITS OF THE ADDITIONS, THE COMMISSIONER (APPEALS) FOLLOWED HIS ORDER OF ASSESSMENT YEAR 1996-97. ON A PPEAL THE TRIBUNAL HELD THAT THE ASSUMPTION OF JURISDICTI ON BY INITIATING REASSESSMENT PROCEEDINGS WAS VALID AND REASSESSMENT COULD NOT BE ANNULLED. IT WAS A SEPARA TE ISSUE THAT AFTER VALIDLY ASSUMING JURISDICTION THE POINTS ON WHICH REASSESSMENT WAS PROPOSED WERE NOT ADDED/DISALLOWED. AT THE SAME TIME UNDER SECTION 14 7 THE ASSESSING OFFICER COULD ALSO ASSESS SUCH INCOME WHI CH HAD ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 147 . ON APPEAL : 22 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. HELD, THAT SECTION 148 WAS SUPPLEMENTARY AND COMPLEMENTARY TO SECTION 147. SUB-SECTION (2) OF SE CTION 148 MANDATES REASONS FOR ISSUANCE OF NOTICE BY THE ASSESSING OFFICER AND SUB-SECTION (1) MANDATES SERV ICE OF NOTICE TO THE ASSESSEE BEFORE THE ASSESSING OFFICER PROCEEDS TO ASSESS, REASSESS OR RECOMPUTE ESCAPED INCOME. SE CTION 147 MANDATES RECORDING OF REASONS TO BELIEVE BY THE ASSESSING OFFICER THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. ALL THESE CONDITIONS WERE REQUI RED TO BE FULFILLED TO ASSESS OR REASSESS THE ESCAPED INCO ME CHARGEABLE TO TAX. UNDER EXPLANATION 3 IF DURING TH E COURSE OF THE PROCEEDINGS THE ASSESSING OFFICER COMES TO T HE CONCLUSION THAT SOME ITEMS HAVE ESCAPED ASSESSMENT, THEN NOTWITHSTANDING THAT THOSE ITEMS WERE NOT INCLUDED IN THE REASONS TO BELIEVE AS RECORDED FOR INITIATION OF TH E PROCEEDINGS AND THE NOTICE, HE WOULD BE COMPETENT T O MAKE ASSESSMENT OF THOSE ITEMS. FOR EVERY NEW ISSUE COMI NG BEFORE THE ASSESSING OFFICER DURING THE COURSE OF PROCEEDINGS OF ASSESSMENT OR REASSESSMENT OF ESCAPE D 23 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. INCOME, AND WHICH HE INTENDS TO TAKE INTO ACCOUNT, HE WOULD BE REQUIRED TO ISSUE A FRESH NOTICE UNDER SEC TION 148. THE ASSESSING OFFICER WAS SATISFIED WITH THE JUSTIF ICATIONS GIVEN BY THE ASSESSEE REGARDING THE ITEMS OF CLUB F EES, GIFTS AND PRESENTS AND PROVISION FOR LEAVE ENCASHMENT, BU T DURING THE ASSESSMENT PROCEEDINGS, HE FOUND THE DED UCTION UNDER SECTIONS 80HH AND 80-1 AS CLAIMED BY THE ASSE SSEE TO BE NOT ADMISSIBLE. HE CONSEQUENTLY PROCEEDED TO MAKE DEDUCTIONS UNDER SECTIONS 80HH AND 80-1 AND ACCORDI NGLY REDUCED THE CLAIM ON THESE ACCOUNTS. THE VERY BASIS OF INITIATION OF PROCEEDINGS FOR WHICH REASONS TO BELI EVE WERE RECORDED WAS INCOME ESCAPING ASSESSMENT IN RESPECT OF ITEMS OF CLUB FEES, GIFTS AND PRESENTS, ETC., BUT W HILE THESE ITEMS WERE NOT DISTURBED, THE ASSESSING OFFICER PRO CEEDED TO REDUCE THE CLAIM OF DEDUCTION UNDER SECTIONS 80H H AND 80-1 WHICH WAS NOT PERMISSIBLE. THE TRIBUNAL WAS RI GHT IN HOLDING THAT THE ASSESSING OFFICER HAD THE JURISDIC TION TO REASSESS ISSUES OTHER THAN THE ISSUES IN RESPECT OF WHICH PROCEEDINGS WERE INITIATED BUT HE WAS NOT JUSTIFIED WHEN 24 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. THE REASONS FOR THE INITIATION OF THOSE PROCEEDINGS CEASED TO SURVIVE. 7.6. THE REASONS RECORDED FOR REOPENING OF THE ASSESSMENT SHOWS THAT A.O. RECEIVED THE INFORMATION THAT ASSESSEE PURCHASED IMMOVABLE PROPERTY FOR WHICH VER IFICATION IS REQUIRED FOR NON-PAN FINANCIAL TRANSACTION RELAT ED TO A.Y. 2009-2010. THE A.O. IN ORDER TO VERIFY THE TRANSACT ION, ISSUED NOTICE TO THE ASSESSEE. HOWEVER, IN THE ABSENCE OF ANY REPLY FROM THE SIDE OF THE ASSESSEE, A.O. NOTED THAT SAME ESTABLISHED THAT ASSESSEE HAS WILLFULLY CONCEALED HER INCOME BY WAY OF NOT DISCLOSING THE SOURCE OF THE INVESTMENT. THE A.O. I N THE REASONS DID NOT RECORD IF HE HAS REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WHICH IS MANDATORY CO NDITION FOR REOPENING OF THE ASSESSMENT. THE A.O. ALSO NOTE D IN THE RE- ASSESSMENT ORDER THAT ASSESSEE, IN REPLY TO THE NOT ICE UNDER SECTION 148, SUBMITTED THAT RETURN ORIGINALLY FILED FOR ASSESSMENT YEAR UNDER APPEAL ON 30.07.2009 MAY BE T REATED AS RETURN FILED IN COMPLIANCE TO THE NOTICE UNDER SECT ION 148 OF THE 25 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. I.T. ACT. COPY OF THE RETURN ORIGINALLY FILED BY AS SESSEE ALONG WITH OTHER ANNEXURES ARE FILED IN THE PAPER BOOK, W HICH SHOWS THAT ASSESSEE HAS FILED ORIGINAL RETURN OF INCOME W ITHIN TIME MENTIONING HER PAN, SUPPORTED BY COMPUTATION OF INC OME, IN WHICH THE MAJOR SOURCE OF INCOME OF THE ASSESSEE IS INCOME FROM SALARY, ON WHICH, TAX AT SOURCE HAVE BEEN DEDUCTED AND SUPPORTED BY FORM-16. THEREFORE, A.O. HAS WRONGLY M ENTIONED IN THE REASONS FOR REOPENING OF THE ASSESSMENT THAT THE TRANSACTION OF PURCHASE OF PROPERTY REQUIRES VERIFI CATION BECAUSE OF NON-PAN FINANCIAL TRANSACTION RELATE TO ASSESSMENT YEAR UNDER APPEAL. THE A.O. INSTEAD OF VERIFYING TH E FACTS FROM THE INCOME TAX DEPARTMENT, RECORDED INCORRECT AND N ON- EXISTING REASONS IN THE REASONS FOR REOPENING OF TH E ASSESSMENT. FURTHER, WHEN ORIGINAL RETURN OF INCOME WAS FILED O N TIME AND ACCORDING TO THE ASSESSEE IT WAS PROCESSED UNDER SE CTION 143(1), THERE WERE NO PROVISION UNDER THE ACT TO CONDUCT AN Y ENQUIRY FROM THE ASSESSEE WITHOUT PENDENCY OF THE ASSESSMEN T PROCEEDINGS. THEREFORE, ASSESSEE IS NOT UNDER ANY O BLIGATION TO FILE ANY REPLY BEFORE A.O. WHEN NO ASSESSMENT PROCE EDINGS WERE 26 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. PENDING. THEREFORE, IT WAS DUTY OF THE A.O. TO VERI FY THE FACTS PROPERTY AND THEN APPLY HIS MIND TO THE INFORMATION AND MATERIAL ON RECORD, THEREAFTER, MAY RECORD REASONS FOR REOPENING OF THE ASSESSMENT BASED ON RELEVANT AND COGENT MATE RIAL ON RECORD. THE A.O. AT THE ASSESSMENT STAGE ACCEPTED T HE EXPLANATION OF ASSESSEE THAT NO INVESTMENT HAVE BEE N MADE BY ASSESSEE IN PURCHASE OF THE PROPERTY. THEREFORE, TH E A.O. DID NOT APPLY HIS MIND TO THE INFORMATION RECEIVED FOR PURC HASE OF IMMOVABLE PROPERTY. THE BASIC REQUIREMENT WAS APPLI CATION OF MIND BY THE A.O. TO THE MATERIAL PRODUCED BEFORE HI M BEFORE ISSUING NOTICE OF RE-ASSESSMENT. WITHOUT ANALYZING AND FORMING A PRIMA FACIE OPINION ON THE BASIS OF MATERIAL PROD UCED, IT WAS NOT POSSIBLE FOR THE A.O. TO CONCLUDE THAT HE HAD H AS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. THE A.O. DID NOTHING IN THE MATTER AND WITHOUT VERI FICATION OF INFORMATION OR EXAMINATION OR CONDUCTING ANY EXERCI SE, ACCEPTED THE SAME WITHOUT APPLYING HIS MIND TO THE INFORMATION. THE A.O. IN THE REASONS FOR REOPENING OF THE ASSESSMENT, REOPENED ASSESSMENT MERELY BECAUSE ASSE SSEE HAS 27 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. NOTHING TO SAY IN THE MATTER WHICH IS IRRELEVANT TO THE REOPENING OF THE ASSESSMENT. SINCE THE A.O. DID NOT APPLY HIS MIND TO THE INFORMATION AND THAT A.O. DID NOT RECORD IN THE REA SONS THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THEREFORE, A.O. RECORDED INCORRECT AND NON-EXISTING REASONS FOR REOPENING OF THE ASSESSMENT IN THE MATT ER. THUS, THE A.O. WITHOUT ANY JUSTIFICATION HAS ASSUMED THE JURISDICTION UNDER SECTION 147/148 OF THE I.T. ACT WHICH IS BAD IN LAW AND IS LIABLE TO BE SET ASIDE. IN VIEW OF THE FACTS OF THE CASE AND DISCUSSION ABOVE IN THE LIGHT OF JUDGMENTS RELIED U PON ABOVE, I AM OF THE VIEW THAT THE A.O. HAS NO JUSTIFICATION T O ASSUME JURISDICTION UNDER SECTION 147 OF THE I.T. ACT AS P ER LAW. ACCORDINGLY, I SET ASIDE THE ORDERS OF THE AUTHORIT IES BELOW AND QUASH THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE I.T. ACT. RESULTANTLY, ENTIRE ADDITIONS ARE DELETED . IN VIEW OF THE ABOVE FINDING ON LEGAL ISSUE, THERE IS NO NEED TO D ECIDE THE REMAINING GROUNDS ON MERIT BECAUSE THE SAME ARE LEF T WITH ACADEMIC DISCUSSION ONLY. 28 ITA.NO.42/DEL./2018 SMT. SWATI VERMA, NEW DELHI. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI, DATED 01 ST AUGUST, 2018 VBP/- COPY TO 1. THE APP ELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASSISTANT REGISTRAR : ITAT DELHI BENCHES : DELHI.