Sh. Nitin Goyal, Agra V. I.T.O.-4(3), Agra

ITA 428/AGR/2011

• Counselvise Citation: 42820314 RSA 2011
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 16-02-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 14-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Gift; Wrong claim; Difference of opinion; Accommodation entries; Reason to believe

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA(SMC) BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA NO. 428/AGRA/2011 ASST. YEAR : 2003-04 SHRI NITIN GOYAL VS. INCOME-TAX OFFICER, G-679, KAMLA NAGAR, AGRA. 4(3), AGRA. (PAN :ABYPG 5389 F) ITA NO. 433/AGRA/2011 ASST. YEAR : 2002-03 SMT. SONIYA AGARWAL, VS. INCOME-TAX OFFICER, E-21,, KAMLA NAGAR, AGRA. 4(4), AGRA. (PAN :AAXPG 0994 Q) (APPELLANTS) (RESPONDENTS) FOR ASSESSEES : SHRI ANURAG SINHA, ADVOCATE FOR REVENUE : SHRI A.K. SHARMA, JR. D.R. DATE OF HEARING : 27.02.2012 DATE OF PRONOUNCEMENT : 29.02.2012 ORDER THIS ORDER SHALL DISPOSE OF BOTH THE ABOVE APPEALS FILED BY DIFFERENT ASSESSEES ON SIMILAR ISSUES. 2. I HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDING OF AUTHORITIES BELOW AND CONSIDERED THE MAT ERIAL AVAILABLE ON RECORD. BOTH PARTIES MAINLY ARGUED THE APPEAL IN THE CASE OF NIT IN GOYAL AND STATED THAT THE ISSUE ITA NO. 428 & 433/AGRA/2011 2 IS SAME IN OTHER APPEAL AS WELL. FOR THE PURPOSE OF DISPOSAL OF BOTH THE APPEALS, I TAKE UP APPEAL IN THE CASE OF SHRI NITIN GOYAL FIRS T. ITA NO. 428/AGRA/2011 (A.T. 2003-04) SHRI NITIN GOY AL VS. ITO 3. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, AGRA DATED 23.08.2011 FOR THE ASSESSMENT YEAR 2003- 04. THE ASSESSEE RAISED THREE ISSUES IN THIS APPEAL, I.E., CHALLENGING THE REOPEN ING OF THE ASSESSMENT U/S. 148 OF THE INCOME-TAX ACT, ADDITION OF RS.50,000/- U/S. 68 OF THE INCOME-TAX ACT ON ACCOUNT OF GIFT RECEIVED FROM SMT. SARASWATI DEVI A ND ADDITION OF RS.2500/- ON ACCOUNT OF UNACCOUNTED COMMISSION PAID FOR TAKING A FORESAID GIFT. 4. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED ORIGINAL RETURN OF INCOME ON 21.08.2003 DECLARING TOTAL INCOME OF RS.8 1,750/-. THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S. 148 OF THE INC OME-TAX ACT BY RECORDING REASONS FOR THE SAME. THE ASSESSEE FILED REPLY BEFO RE THE ASSESSING OFFICER STATING THAT THE ORIGINAL RETURN ALREADY FILED MAY BE TREAT ED AS RETURN FILED IN COMPLIANCE TO THE NOTICE U/S. 148 OF THE INCOME-TAX ACT. THE ASSE SSEE OBJECTED TO THE REOPENING OF ASSESSMENT BEFORE THE ASSESSING OFFICER BUT THAT POINT WAS DECIDED AGAINST THE ASSESSEE. THE ASSESSING OFFICER MADE ADDITION OF RS .50,000/- ON ACCOUNT OF BOGUS GIFT RECEIVED FROM SMT. SARSWATI DEVI, NEW DELHI AN D ALSO MADE ADDITION OF RS.2500/- ON ACCOUNT OF UNACCOUNTED COMMISSION PAID FOR TAKING THE ABOVE GIFT ENTRY. THE REOPENING WAS CHALLENGED BEFORE THE LD. CIT(A) AND ASSESSEE REITERATED ITA NO. 428 & 433/AGRA/2011 3 THAT THE EARLIER REPLY/OBJECTION FILED BEFORE THE A SSESSING OFFICER, CHALLENGING REOPENING OF THE ASSESSMENT, MAY BE CONSIDERED. IT WAS BRIEFLY EXPLAINED THAT AT THE TIME OF RECORDING OF THE REASONS, THERE WERE NO INF ORMATION WITH THE ASSESSING OFFICER THAT THE GIFT SO RECEIVED BY THE ASSESSEE W AS BOGUS. IT WAS EXPLAINED THAT THE ASSESSING OFFICER RECORDED DIFFERENT REASONS FO R REOPENING OF THE ASSESSMENT ON ACCOUNT OF TAKING BOGUS ENTRY OF SALE PROCEEDS O F SHARES. THE LD. CIT(A), HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSES SEE AND CONFIRMED THE REOPENING OF THE ASSESSMENT IN THE MATTER. 5. THE LD. COUNSEL FOR THE ASSESSEE FILED COPY OF R EASONS RECORDED FOR REOPENING OF THE ASSESSMENT IN THIS CASE AT PAGE 14 OF THE PA PER BOOK, THROUGH WHICH THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING OF THE ASSESSMENT ON 24.03.2008. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT NO VALID INITIATION OF PROCEEDINGS HAS BEEN MADE IN THIS CASE BECAUSE THERE WAS NO REA SON TO FORM THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS SUBMITTED THAT THE ASSESSING OFFICER ASSUMED JURISDICTION U/S. 148 MER ELY ON RECEIPT OF SOME INFORMATION FROM THE INVESTIGATION WING AND WITHOUT APPLYING MIND TO THE FACTS OF THE CASE, RECORDED THE REASONS FOR REOPENING OF ASS ESSMENT IN MOST MECHANICAL MANNER. THUS, THE ASSESSING OFFICER WAS NOT JUSTIFI ED IN ASSUMING JURISDICTION U/S. 148 WITHOUT THERE BEING ANY MATERIAL, MUCH LESS, CO RROBORATIVE AND RELIABLE MATERIAL TO SUBSTANTIATE THE RECORDED REASONS. HE H AS, THEREFORE, SUBMITTED THAT THE ITA NO. 428 & 433/AGRA/2011 4 NOTICE U/S. 148 IS ILLEGAL AND WITHOUT JURISDICTION . HE HAS SUBMITTED THAT ITAT, AGRA BENCH IN SIMILAR CASE OF KISHAN CHAND VS. ITO IN ITA NO. 73/AGRA/2006 DATED 26 TH SEPTEMBER, 2008, QUASHED THE REASSESSMENT PROCEEDI NGS. 6. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE ASSESSING OFFICER AND ALSO RELIED UPON THE ORDER OF ITAT (SMC) BENCH IN THE CASE OF SMT. KAMALJEET KALRA VS. ITO IN ITA NOS. 294 & 295/AGR./2011. 7. I HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL ON RECORD. THE AO RECORDED FOLLOWING REASONS FOR REOPENING OF ASSESSM ENT (PB-14) : INFORMATION HAS BEEN RECEIVED FROM THE ADDL. DIT(I NV), AGRA THAT ONE M/S. SARASWATI DEVI GOYAL, NEW DELHI (A/C. NO.16051) HAS PROVIDED BOGUS ENTRIES OF SALE PROCEED OF SHARES TO THE ASSESSEE THROUGH JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI. ENQUIRIES HAVE BEEN CONDUCTED BY THE ADDL. DIT(INV. ), AGRA AND IT HAS BEEN FOUND THAT NO GENUINE TRANSACTION IN SALE/ PURCHASE OF SHARES HAS TAKEN PLACE THROUGH THIS BANK ACCOUNT. THE BENE FICIARIES HAVE BEEN TAKEN ENTRIES BY PAYING IN CASH AN AMOUNT EQUI VALENT TO THE DRAFT/CHEQUE AMOUNT AND CERTAIN PREMIUM ON THAT. TH E BROKER ON RECEIPT OF CASH FROM THE BENEFICIARIES DEPOSITED TH E SAME IN THE BANK ACCOUNT AND THEN ISSUED DRAFT/CHEQUUE TO THE BENEFI CIARIES. THE ADDL. DIT(INV.), AGRA HAS PROVIDED A LIST OF SUCH BENEFIC IARIES. IN THE SAME LIST, NAME OF THE ASSESSEE SH. NITIN GOYAL, G-679, KAMLA NAGAR, AGRA WHO FALLS UNDER THE JURISDICTION OF THE UNDERSIGNED APPEARS AT SL. NO. 61. THE ASSESSEE HAS TAKEN BOGUS ENTRY ON 14.10.200 2 AND RECEIVED AMOUNT OF RS.50,125/- THROUGH INSTRUMENT/DD NO.1498 14 OF JAI LAXMI CORPORATION BANK, FATEHPURI, NEW DELHI ISSUED BY M/S. SARASWATI DEVI GOYAL, NEW DELHI AND DEPOSITED THE S AME TO THE ACCOUNT NO.837, ALLAHABAD BANK, NEW AGRA. ITA NO. 428 & 433/AGRA/2011 5 SIMILAR SUCH CASES OF BOGUS CLAIM OF CAPITAL GAIN ARRANGED THROUGH VARIOUS BROKERS HAVE ALREADY BEEN ASSESSED UNDER SECTION 148/143(3) IN RANGE-4, AGRA CHARGE. THE CIT(A)-II, AGRAS ORDER IN THE CASE OF SH. ASHOK KUMAR LAWANIA, AY 2001-2002, M/S. BAIJNATH AGARWAL, AY 2001-02 AND BRIJ MOHAN AGARWAL, AY 2001 -02 TO NAME A FEW ASSESSEES, THE MODUS OPERANDI OF SUCH TRANSAC TIONS WHEREIN WITH THE CONVENIENCE OF SHARE BROKERS ASSESSEES UN ACCOUNTED MONEY IS ROUTED AS SALE PROCEEDS OF SHARE. IN VIEW OF THE INFORMATION RECEIVED FROM THE INVES TIGATION WING, AGRA AND THE ADVERSE MATERIAL IN POSSESSION O F THE DEPARTMENT AS MENTIONED ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS.50,125/- SHOWN AS BOGUS SALE PROCEEDS OF SHAR ES HAS ESCAPED ASSESSMENT IN THE CASE OF SH. NITIN GOYAL, G-679, K AMLA NAGAR, AGRA FOR THE AY 2003-04. 8. THE ASSESSEE RAISED OBJECTIONS BEFORE THE ASSESS ING OFFICER FOR REOPENING OF THE ASSESSMENT. REPLY OF ASSESSEE IS FILED AT PAGE 16 OF THE PAPER BOOK, IN WHICH THE ASSESSEE MORE OR LESS RAISED THE SAME OBJECTION , AS HAS BEEN ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE. THE ASSESSEE EXPLAINED IN THE REPLY BEFORE THE ASSESSING OFFICER THAT THERE WAS NO MATERIAL TO FORM THE BELI EF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND THAT THE INITIATION OF THE PROCEEDINGS U/S. 147 IS NOT BASED ON AN INDEPENDENT APPLICATION OF MIND, BUT BY MECHANICALLY FOLLOWING THE INFORMATION RECEIVED FROM ADDL. DIT(INV.), AGRA. TH E ASSESSEE ALSO EXPLAINED THAT THERE WAS NO INFORMATION WITH THE ASSESSING OFFICER THAT THE GIFT RECEIVED BY THE ASSESSEE WAS BOGUS. RATHER, THE ASSESSING OFFICER R ECORDED THE REASONS FOR REOPENING OF ASSESSMENT ON ACCOUNT OF TAKING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. THE REASONS REPRODUCED ABOVE CLEARLY SUPPOR T THE CASE OF THE ASSESSEE TO ITA NO. 428 & 433/AGRA/2011 6 PROVE THAT THE ASSESSING OFFICER WAS HAVING NO REAS ON TO BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE ASSES SING OFFICER FOLLOWED THE REPORT OF ADDL. DIT(INV.), AGRA FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT, IN WHICH IT WAS PROVIDED THAT THE ASSESSEE IS ONE OF T HE BENEFICIARIES WHO RECEIVED BOGUS ENTRIES OF SALE PROCEEDS OF SHARES. NOTHING I S MENTIONED IF THE ASSESSEE RECEIVED ANY BOGUS GIFT FROM SMT. SARASWATI DEVI, F OR WHICH THE ASSESSING OFFICER ULTIMATELY MADE ADDITION IN THE ASSESSMENT ORDER. T HUS, THE REASONS ON WHICH THE NOTICE FOR RE-ASSESSMENT WAS ISSUED, WERE NOT EXIST ING. THE ASSESSING OFFICER RELIED ON THE INFORMATION WHICH WAS NON-EXISTING. I T IS, THEREFORE, CLEAR THAT THE REASONS HAVE BEEN RECORDED BY THE ASSESSING OFFICER FOR REOPENING OF THE ASSESSMENT, WHICH NEVER EXISTED. THE ASSESSING OFFI CER HAS NOT VERIFIED THE INFORMATION BEFORE RECORDING REASONS FOR RE-ASSESSM ENT IN THE MATTER. SINCE NOTHING WAS FOUND AGAINST THE ASSESSEE ON ACCOUNT OF TAKING BOGUS ENTRIES OF SALE PROCEEDS OF SHARES, THEREFORE, REASONS RECORDED QUA ASSESSEE , WERE INCORRECT REASONS HAVING NO NEXUS WITH THE CASE OF THE ASSESSEE. THUS, NO SU CH INCOME HAS ESCAPED ASSESSMENT AS MENTIONED IN THE INFORMATION AND REAS ONS RECORDED FOR REOPENING OF THE ASSESSMENT. THE REASONS RECORDED BY THE ASSESSI NG OFFICER FOR REOPENING OF THE ASSESSMENT WERE MERE PRETENCE, AN EXCUSE TO ENQUIRE INTO TAKING OF BOGUS ENTRY OF SALE PROCEEDS OF SHARES WITHOUT ANY MATERIAL OR EVI DENCE IN POSSESSION OF THE ASSESSING OFFICER. THE ASSESSING OFFICER, THEREFORE , DID NOT HAVE REASONS TO BELIEF THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT. THE ITA NO. 428 & 433/AGRA/2011 7 ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION RECEIVED BY HIM, BUT MERELY ACCEPTED THE TRUTH OF VAGUE INFORMA TION IN A MECHANICAL MANNER. THE ASSESSING OFFICER HAS NOT EVEN RECORDED HIS SAT ISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING NOTICE U/S. 148 OF THE INCOME-TAX ACT. I AM FORTIFIED IN MY VIEW BY THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ATUL JAIN, 299 ITR 383(DELHI), IN WHICH IT WAS HELD AS UNDER : THERE MUST BE REASON TO BELIEVE WARRANTING THE I SSUANCE OF A NOTICE OF REASSESSMENT BY THE ASSESSING OFFICER. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING THE PROCEEDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE Q UASHED. MERE SATISFACTION OF THE ASSESSING OFFICER FOR THE ISSUA NCE OF A NOTICE NOT ENOUGH, THERE MUST BE REASONS ON RECORD WHICH LED H IM TO BELIEVE THAT A NOTICE SHOULD BE ISSUED. AFTER A FOUNDATION BASED ON INFORMATION IS SET UP, THERE MUST STILL BE SOME REASONS WHICH WARR ANT THE HOLDING OF A BELIEF SO AS TO NECESSITATE THE ISSUANCE OF A NOT ICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961. THE ASSESSEES PURCHASED SHARES AND SUBSEQUENTLY SO LD THESE SHARES AT A MUCH HIGHER VALUE. FOR THE ASSESSMENT Y EAR 1997-98, THE ASSESSEES DISCLOSED LONG-TERM CAPITAL GAINS ARISIN G FROM THE TRANSACTION. ON THE BASIS OF THE INFORMATION RECEIV ED BY THE DEPUTY DIRECTOR (INVESTIGATION), THE ASSESSING OFFICER ISS UED NOTICE UNDER SECTION 148. THE FILES WERE THEN PUT UP BEFORE THE COMMISSIONER AND IN RESPONSE TO THE QUESTION WHETHER THE COMMISSIONE R WAS SATISFIED THAT INCOME HAD ESCAPED ASSESSMENT, HE WROTE YES. THEREAFTER, THE ASSESSING OFFICER RE-ASSESSED THE INCOME AND CHARGE D INTEREST AND LEVIED PENALTY. THE COMMISSIONER (APPEALS) ALLOWED RELIEF PARTLY BUT THE TRIBUNAL CONCLUDED THE ISSUE IN FAVOUR OF THE A SSESSES. ON APPEAL : HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORM ATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAI NS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THA T AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPI TAL GAINS WHICH IN ITA NO. 428 & 433/AGRA/2011 8 THIS CASE WERE SHARES. THEE WAS NO INFORMATION WHIC H SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF TH E VAGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING O FFICER HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNES S OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE UNDER SECTION 148. WHAT HAD BEEN RECORDED BY THE ASSESSING OFFICER AS HIS REASONS T O BELIEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMM ISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORD ING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE ASSESSING OFFICER HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE. 9. HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ATLAS CYCLE INDUSTRIES, 180 ITR 319 (P&H) HAS HELD AS UNDER : HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELING THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASS ESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND, THEREFORE, THE INCOME-TAX OFFICER DID NOT GET JURISDICTION TO MAKE A REASSESS MENT. 10. IN THE CASE OF ACIT VS. O.P. CHAWLA, 306 ITR (A T) 328, THE THIRD MEMBER, ITAT DELHI BENCH, ON DIFFERENCE OF OPINION, HELD THAT THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT WERE A MERE PRETENCE, AN E XCUSE TO ENQUIRE INTO THE GIFTS RECEIVED BY THE ASSESSEE WITHOUT ANY MATERIAL OR EVIDENCE COMING INTO HIS POSSESSION AFTER HE PROCES SED THE RETURN UNDER SECTION 143(1)(A). THE ASSESSING OFFICER DID NOT HAVE REASON TO BELIEVE THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE COMMISSIONER (APPEALS) WAS JUSTIFIE D IN HOLDING THAT THE REOPENING OF THE ASSESSMENT WAS NOT VALID AND T HEREFORE, THE REASSESSMENT MADE WAS VOID AB INITIO. ITA NO. 428 & 433/AGRA/2011 9 11. THE DIVISION BENCH OF ITAT, AGRA BENCH IN THE C ASE OF KISHAN CHAND VS. ITO (SUPRA) IN PARA 15 TO 17, HELD AS UNDER : 15. WE HAVE CAREFULLY EXAMINED THE RECORDS, INCLUD ING THE REASONS RECORDED FOR TAKING ACTION UNDER SECTION 148 OF THE ACT. WE HAVE FOUND THAT APART FROM RELYING ON THE REPORT OF ADIT, THE LD AO HAS DONE NO OTHER EXERCISE TO VERIFY THE FACTUAL FA CTS OF THIS CASE BY WAY OF COLLECTING SUBJECTIVE MATERIALS ON THE BASIS OF WHICH HE COULD FROM HIS OPINION. ANY INVESTIGATION DONE OR EVIDENC ES COLLECTED AFTER THE ISSUANCE OF NOTICE UNDER SECTION 148 ARE NOT RE LEVANT FOR FORMING OF HIS OPINION, FOR WRITING HIS REASONS OR FOR RE-O PENING OF ASSESSMENT ORDER. THE OBSERVATION MADE BY LD CIT(A) THAT THE L D. AO CAN ACT ON THE INFORMATION OF ADIT, FOR WHICH HE HAS REFERRED TO CERTAIN DECISION ALSO IS NOT AT ALL CORRECT. NO COURT OF LAW HAS TAK EN SUCH A LEGAL VIEW. WE ARE AWARE THAT THE AO IS NOT REQUIRED TO PROVE T HE ALLEGATION OF ESCAPEMENT OF INCOME AT THAT STAGE IT IS ENOUGH IF HE FORMS HIS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT EVEN ON HIS SUBJ ECTIVE SATISFACTION BUT SUCH A BELIEF HAS TO BE FORMED ON THE BASIS OF OBJECTIVE MATERIALS. THE INFORMATION OF ADIT IS NOT THAT OBJECTIVE MATERIAL. THEREFORE, WE ARE NOT IN AGREEMENT WITH LD.CIT(A) IN THAT REGARD. THE REASONS FOR OUR ABOVE CONCLUSION ARE BE ING NARRATED IN THE FOLLOWING PARAGRAPHS. 16. THE ASSESSEE ORIGINALLY FILED HIS RETURN OF INC OME ON 23.07.2001 DECLARING TOTAL INCOME OF RS. 1,10,840/- AS HAS BEE N DISCUSSED ABOVE. SUBSEQUENTLY ON THE INFORMATION RECEIVED FORM ADI ( INV.), DELHI, THAT THIS ASSESSEE HAS RECEIVED D.D. NO. 268194 FOR RS. 2,50,000/- ON 08.02.2001 MADE FROM VIJAYA BANK, BHAKAJI KAMA PALA CE, NEW DELHI, BY WAY OF LONG TERM CAPITAL GAIN/PROFIT IN S HARE DEALING/GIFTS/CONTRIBUTION TO SHARE CAPITAL FROM M/ S YADAV & CO./ RAAKESH NAGAR & CO./ SHRI S.S. MEHTA, NEW DELHI AND ON INVESTIGATION DONE BY THE INVESTIGATION WING IT WAS NOTICED THAT THIS WAS A PLOY TO GIVE AND TAKE ACCOMMODATION ENTRIES T O BENEFICIARIES WHO HAD THEMSELVES PAID CASH AMOUNT ALONGWITH SETTL ED AMOUNT OF COMMISSION, FOR GETTING D.. OF THE AMOUNT. ON THE BASIS OF THE ABOVE REASONS THE ASSESSMENT IN QUESTION WAS REOPENED. IT IS A AN UNDENIABLE FACT THAT THE LEARNED AO HAS FRAMED HIS OPINION FOR TAKING ACTION UNDER SECTION 148 OF THE ACT, ON THE BASIS O F INFORMATION RECEIVED FROM THE INVESTIGATION WING OF DDIT, DELHI . THE ASSESSEE HAS ENCLOSED CAPITAL ACCOUNT WITH ORIGINAL RETURN F ILED BY HIM. EXCEPT ITA NO. 428 & 433/AGRA/2011 10 FOR THE AMOUNT OF D.D. AND BANK ALL THE FACTS MENTI ONED IN THE REASONS ARE FOUND TO BE NOT CORRECT. THIS FACT IS ALSO EVID ENT FROM THE FIRST PAGE OF ASSESSMENT ORDER ITSELF. IT IS OBVIOUS THAT THE LEARNED AO HAS ACTED IN A MECHANICAL MANNER AND HAS NOT APPLIED HI S MIND AT ALL TO THE INFORMATION RECEIVED FROM THE DDIT, INVESTIGATI ON WING. THE ASSESSEE HAS DECLARED RECEIPT OF TWO GIFTS, TOTALIN G TO RS. 4,50,000/- IN HIS CAPITAL ACCOUNT AND THE LEARNED AO HAS ALSO MAD E ADDITION OF THE SAME AMOUNT, BUT IN REASONS, HE HAS MENTIONED ONLY THE ESCAPEMENT OF RS. 2,50,000/- ON ACCOUNT OF CAPITAL GAIN. HE HA S STATED THAT THE ASSESSEE HAS TAKEN BOGUS ENTRIES RESULTING INTO CAP ITAL GAIN, FROM STOCK BROKER YADAV & CO. RAKESH NAGAR & CO. AND SHR I S.S. MEHTA OF NEW DELHI. BUT IT WAS FOUND THAT THE ASSESSEE HA D NO CONCERN WITH THE ABOVE PERSONS/ENTITIES AND THAT HE NEITHER PURC HASED NOR SOLD ANY SHARE OF THESE COMPANIES DURING THE YEAR. ONLY BECA USE THE NUMBER OF D.D. AND THE NAME OF THE BANK TALLIED, CANNOT RE SULT INTO BELIEF BUT ONLY TO SUSPICION DDIT REPORT MAY BE USED AS A BAS IS FOR MAKING THE PRELIMINARY ENQUIRIES. THE LD AO HAS TO APPLY HIS O WN MIND FOR FORMING THE BELIEF OF ESCAPEMENT OF INCOME, WITHOUT WHICH THE LD. AO CANNOT ACQUIRE A VALID JURISDICTION. THE FACTS OF T HE GIVEN CASE CLEARLY ESTABLISH THE AO HAS NOT AT ALL APPLIED HIS MIND AND HAS ONLY BASED HIS OPINION ON THE BORROWED INFORMATION. THERE IS N O DOUBT THAT A BORROWED INFORMATION CAN BE UTILISED AS A BASIS FOR REOPENING BUT THAT TOO ONLY WHEN THE FACTS MENTIONED THEREIN ARE SPECI FIC AND RELEVANT. IN THIS CASE NEITHER THE INFORMATION IS SPECIFIC NOR R ELEVANT TO THE FACTS OF ASSESSEES CASE. THE ASSESSEE NEVER DEALT IN SHARES AND HAD ONLY RECEIVED TOW GIFTS WHICH WERE DULY DISCLOSED IN THE RETURN OF INCOME FILED WITHIN DUE TIME. THE ASSESSEE HAS NEVER DEALT IN SHARES AS HAS BEEN MENTIONED IN THE REASONS OR FOR THAT MATTER IN THE INFORMATION OF DDIT, DELHI, THIS CLEARLY ESTABLISHED THE NON-APPLI CATION MIND BY THE LEARNED AO HAD HE APPLIED HIS MIND HE WOULD HAVE VE RIFIED THE DOCUMENT ATTACHED WITH THE RETURN OF INCOME AND COU LD EASILY COME TO THE CORRECT REASONING IF HE WANTED TO. THEREFORE, A NY ASSUMPTION OF JURISDICTION ON THE BASIS OF INVALID REASON RENDERS THE ENTIRE PROCEEDINGS UNDERTAKEN THEREAFTER AS INVALID AND VI TIATE THE ENTIRE PROCESS OF REASSESSMENT. THE OBJECTION S RAISED BY THE ASSESSEE ABOUT REOPENING OF THE ASSESSMENT WERE NOT DISPOSED OF PR IOR TO TAKING RECOURSE TO REASSESSMENT. THE AO IS REQUIRED TO DIS POSE OF SUCH OBJECTION BEFORE PROCEEDINGS FURTHER. THE LEGISLATO RS IN THEIR WISDOM HAVE ENACTED THE PROVISION IN THE REGARD SO THAT IF IS FOUND IN THE VERY BEGINNING THAT THE REASONS ARE NOT CORRECT, TIME AN D MONEY OF THE ITA NO. 428 & 433/AGRA/2011 11 PARTIES MAY NOT BE WASTED IN SUBSEQUENT FUTILE EXER CISE WHEN AT THE END THE SAME CONCLUSION WAS TO BE REACHED. 17. WHILE DECIDING THE CASE OF DASS FRIENDS BUILDER S PVT. LIMITED REPORTED IN (2006) 280 ITR 77 (ALL) AHS CATEGORICAL LY HELD THAT UNDER SECTION 147 OF THE ACT, THE WORDS ARE HAS REASONS T O BELIEVE AND NOT REASONS TO SUSPECT. THE BELIEF ENTERTAINED BY THE AO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE AND BASED ON REASONS WHICH ARE RELEVANT. IT MUST BE IN GOOD FAITH AND NO T A MERE PRETENCE, SHOULD HAVE A RATIONAL CONNECTION AND RELEVANT BEAR ING ON THE FORMATION OF THE BELIEF, AND SHOULD NOT BE EXTRANEO US OR IRRELEVANT. THE MATERIAL SHOULD BE RELATION TO THE PARTICULAR Y EAR FOR WHICH THE ASSESSMENT IS SOUGHT TO BE REOPENED. IT IS NOT ANY AND EVERY MATERIAL, HOWEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FOR-FETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF R ELATING TO ESCAPEMENT OF INCOME. IN THIS CASE EXACTLY SAME SIT UATION HAS HAPPENED. THE REASONS RECORDED BY THE A.O. ARE SIMP LY REPRODUCTION OF THE REPORT RECEIVED BY HIM FROM DDIT, DELHI. THE REFORE HE HAS NOT APPLIED HIS MIND TO THE FACTS AND THE AVERMENT CONT AINED IN THAT REPORT. FOR FORMING HIS BELIEF THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT HE IS BOUND TO APPLY HIS MIND AN D HAS TO REDUCE HIS THIS BELIEF IN WRITING ALONGWITH THE REASONS FO R DOING SO. WE DO NOT DISPUTE THAT AN INFORMATION OF THE DDIT CAN BE USED FOR MAKING REASSESSMENT ONLY WHEN THE REPORT IS COMPLETE. SPEC IFIC AND RELEVANT TO THE CASE OF THE ASSESSEE TO THAT PARTICULAR A.Y. AND THE BASE READING OF WHICH, TO THE NORMAL PRUDENT MIND, GIVES AN INFE RENCE OF THE FACT THAT INCOME HAS ESCAPED ASSESSMENT. IN THAT CASE TH AT REPORT ITSELF CAN BE USED FOR FORMING HIS OPINION AS IS REQUIRED UNDE R SECTION 147 READ WITH SECTION 148 OF THE ACT. BUT WHEN THE INFORMATI ON IS NOT SPECIFIC, CONCRETE AND RELEVANT AND IS ONLY VAGUE AND REMOTE THAT CANNOT BE, PER SE, MADE A BASIS FOR FORMING HIS OPINION BY LEA RNED A.O. IN SUCH CASES HE HAS TO FURTHER EXAMINE THE FACTS AND FIGUR ES SO FOUND RECORDED IN SUCH REPORT OF DDIT AND ONLY THEREAFTER , BY APPLYING HIS MIND, HE HAS TO MAKE OUT HIS OPINION WHICH HAS TO B E TRANSLATED INTO THE REASONS IN WRITING. IN THIS CASE EXCEPT A SUM S AY RS. 2.5 LAKHS STATED TO BE AS CAPITAL GAINS RECEIVED THROUGH A PA RTICULAR NUMBER OF D.D. DRAWN ON A PARTICULAR BANK IS FOUND TO BE CORR ECT BUT THE ENTIRE OTHER INFORMATIONS ARE FOUND TO BE INCORRECT. THE A SSESSEE HAS NOT AT ALL DEALT WITH PERSONS NAMED IN THAT REPORT. THE AS SESSEE HAS NOT RECEIVED ANY CAPITAL GAIN ON THE TRANSACTIONS OF SH ARES DURING THE RELEVANT YEAR. THE ASSESSEE HAD ALREADY DISCLOSED T WO GIFTS OF RS. 2.50 ITA NO. 428 & 433/AGRA/2011 12 LAKHS AND RS. 2.00 LAKHS IN HIS ORIGINAL RETURN AND HAS SUBMITTED THE ENTIRE REQUISITE INFORMATIONS REGARDING THE GIFTS. THERE ARE PLETHORA OF DECISIONS IN THIS DIRECTION WHICH CLEARLY EXHORT TH AT ONLY ON BASIS OF VAGUE INFORMATION OF THE DEPARTMENT WHICH IS NOT SP ECIFIC AND RELEVANT, ACTION UNDER SECTION 147 READ WITH SECTIO N 148 CANNOT BE TAKEN. THE EXISTENCE OF ESCAPED ASSESSMENT WITH REG ARD TO A PARTICULAR INCOME IS A PRECONDITION FOR TAKING SUCH AN ACTION. IF THE REASONS ARE NOT FOUND TO BE CORRECT, IT HAS TO BE P RESUMED THAT THE VERY REASON RECORDED BY THE LEARNED A.O. FOR MAKING REASSESSMENT WAS NON-EXISTENT AND THUS IT WAS INVALID. THERE IS A SUBTLE AND TENUOUS DIFFERENCE BETWEEN THE VALIDITY AND INVALIDITY OF R EASONS IN A GIVEN SET OF FACTS. IF A REASONS IS FOUND TO BE CORRECT AND V ALID ANT TO EXIST ON THE DATE OF RECORDING OF REASONS ON THE BASIS OF IN COMPLETE OR INCORRECT FACTS AND SUBSEQUENTLY AFTER EXAMINING TH E ENTIRE RECORDS IT IS FOUND THAT THE FACTS CONCEIVED BY THE LEARNED A. O AT THAT TIME WERE NOT CORRECT, IN THAT EVENTUALITY, THE REASONS RECOR DED BECOME RETROSPECTIVELY INVALID. MEANING THEREBY SUBSEQUENT FINDING OF FACT STILL INVALIDATE VALID REASONS WHICH WERE SUPPORTED TO BE SO AT THE TIME OF RECORDING OF REASONS. MANY A TIMES THIS LEGAL PO SITION IS CONFUSED WITH THE CASES WHERE THE REASONS ARE VALID AS PER T HE RECORDS BUT DURING RE-ASSESSMENT PROCEEDINGS THE ASSESSEE SUCCE EDS IN EXPLAINING AND THAT IS WHY ADDITION QUA THAT GROUND IN REASONS IS NOT MADE, STILL THE AO CANNOT BE SAID TO HAVE NOT VALID REASONS. T HE EXISTENCE OF FACTS HELPS THE AO TO FORM HIS SUBSTANTIVE SATISFAC TION BASED ON MATERIAL FACTS AVAILABLE BEFORE HIM AS EXPLAINED BU T THOSE FACTS ARE NEVER FOUND TO BE NON-EXISTENT. NATURALLY IN THAT S ITUATION IT CANNOT BE SAID THAT THE REASONS WAS NOT VALID AND MOREOVER SU BSEQUENT EXPLAINED POSITION OF THOSE FACTS WOULD NOT RENDER THE REASON AS INVALID. THEREFORE, IN EACH AND EVER CASE A FINE DI STINCTION HAS TO BE DRAWN BETWEEN THESE TWO SETS OF SATISFACTION. IN TH E GIVEN CASE THE LEARNED AO HAS NO VALID REASONS FOR RESORTING TO SE CTION 147/148 OF THE ACT AND THEREFORE, IT CAN BE SAFELY SAID THAT H E HAD ONLY VAGUE AND IRRELEVANT REASONS FOR MAKING ROVING AND FISHING EN QUIRIES IN ORDER O FIND CERTAIN FACTS BASED AS A SEQUEL OF PUBLICITY G IVEN IN PRINT AND ELECTRONIC MEDIA REGARDING A SCAM OF GIVING ACCOMMO DATION ENTRIES. HENCE A VAGUE INFORMATION RECEIVE BY THE O EVEN FRO M THE INVESTIGATION WING OF THE DEPARTMENT COULD NOT JUST IFY THE REASONS. IN THE RESULT WE HOLD THAT THE ASSUMPTION OF JURISDICT ION FOR RE- ASSESSMENT ON THE BASIS OF VAGUE AND INVALID REASON S HAS TO BE QUASHED BEING NULL AND VOID. THE NOTICE UNDER SECTI ON 148 IS ITA NO. 428 & 433/AGRA/2011 13 THEREFORE, QUASHED AND AS A RESULT THE CONSEQUENTIA L RE-ASSESSMENT ORDER IS ALSO QUASHED. 12. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF ABOVE DECISIONS, IT IS CLEAR THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN REO PENING OF THE ASSESSMENT IN THE MATTER. I, THEREFORE, HOLD THAT ASSUMPTION OF JURIS DICTION FOR RE-ASSESSMENT ON THE BASIS OF VAGUE, INCORRECT AND NON-EXISTING REASONS QUA THE ASSESSEE, HAVE TO BE QUASHED. IN VIEW OF THE PECULIAR FACTS OF THE CASE, THE ORDER IN THE CASE OF SMT. KAMALJEET KALRA (SUPRA) OF ITAT (SMC) BENCH, AGRA C ANNOT BE GIVEN PREFERENCE IN THE MATTER. I, ACCORDINGLY, QUASH THE INITIATION AND RESULTANT PROCEEDINGS U/S. 148 OF THE INCOME-TAX ACT IN THE MATTER AGAINST THE ASS ESSEE. IN VIEW OF THE ABOVE FINDING, THERE IS NO NEED TO DECIDE THE ISSUE OF GE NUINENESS OF GIFT, AS THE SAME HAS BECOME ACADEMIC IN NATURE. RESULTANTLY, ALL ADDITIO NS MADE IN THE RE-ASSESSMENT PROCEEDINGS WOULD STAND DELETED. AS A RESULT, THE A PPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 433/AGRA/2011 (A.Y. 2002-03) SMT. SONIYA AG ARWALL VS. ITO 13. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, AGRA DATED 30.08.2011 FOR THE ASSESSMENT YEAR 2002- 03. IN THIS APPEAL, THE ASSESSEE RAISED THREE ISSUES, I.E., CHALLENGING THE REOPENING OF THE ASSESSMENT U/S. 148 OF THE IT ACT, ADDITION ON ACCOUNT OF UNEXPLAIN ED GIFT OF RS.2,00,000/- RECEIVED FROM MS. KANUPRIYA MITTAL AND ADDITION OF RS.4,000/- ON ACCOUNT OF COMMISSION PAID FOR RECEIVING ACCOMMODATION ENTRY O F THE GIFT. IT IS STATED THAT THE ITA NO. 428 & 433/AGRA/2011 14 ISSUE IS SAME AS CONSIDERED IN APPEAL IN THE CASE O F SHRI NITIN GOYAL ABOVE. BY FOLLOWING THE REASONS FOR DECISION IN THE CASE OF N ITIN GOYAL (SUPRA), I QUASH THE REOPENING OF ASSESSMENT U/S. 147 OF THE ACT AND DEL ETE THE RESULTANT ADDITIONS MADE IN THE RE-ASSESSMENT PROCEEDINGS. AS A RESULT, APPE AL OF THE ASSESSEE IS ALLOWED. 14. NO OTHER POINT IS ARGUED OR PRESSED BY BOTH THE PARTIES. 15. IN THE RESULT, BOTH THE APPEALS OF DIFFERENT AS SESSEES ARE ALLOWED. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DATED: 29 TH FEBRUARY, 2012 *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE ASSISTANT REGISTRAR TRUE COPY