M/s. Metro Decorative Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 450/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3916 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 28-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR NEEL
• Assessee Lawyers: AMIT GOEL
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries; Reason to believe; Borrowed satisfaction
• Section: 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E NEW DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER & SHRI K.N. CHARRY, JUDICIAL MEMBER ITA NO.-450/DEL/2014 ( ASSESSMENT YEAR: 2004-05) METRO DECORATIVE PVT. LTD. E-430, GREATER KAILASH-II NEW DELHI. AADCM5343A VS ITO WARD 6(4) NEW DELHI ASSESSEE BY SH. AMIT GOEL, CA REVENUE BY SH. PRADEEP KUMAR NEEL, SR. DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER AGGRIEVED BY THE ORDER DATED 29.11.2013 IN APPEAL N O. 155/11-12 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IX, NEW DELHI (HEREINAFTER FOR SHORT CALL ED AS THE LD. CIT(A)). ASSESSEE PREFERRED THIS APPEAL ON THE FOL LOWING GROUNDS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN ISSUING NOTICE U/S 148 O F THE INCOME TAX ACT, 1961. THE NOTICE U/S 148 ISSUED IN THIS CASE IS ILLEGAL, VOID AND WITHOUT JURISDICTION AND ACCOR DINGLY THE DATE OF HEARING 07.09.2017 DATE OF PRONOUNCEMENT 24.10.2017 2 ITA NO.450/DEL/2014 ASSESSMENT ORDER PASSED ON THE FOUNDATION OF SUCH N OTICE IS LIABLE TO BE QUASHED. THE LD. COMMISSIONER OF INCO ME TAX (APPEAL) SHOULD HAVE HELD THE REASSESSMENT PROCEEDI NGS AS ILLEGAL, VOID AND WITHOUT JURISDICTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIR MING THE ADDITION MADE BY THE ASSESSING OFFICER OF SHARE APP LICATION MONEY/SHARE CAPITAL OF RS. 20,00,000/- AS ALLEGED UNEXPLAINED INCOME U/S 68 OF THE INCOME TAX ACT, 19 61. THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTA INABLE AND COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE DE LETED THE SAME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIR MING THE ADDITION OF RS. 40,000/- MADE BY THE ASSESSING OFFI CER AS ALLEGED COMMISSION PAID. THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND COMMISSION ER OF INCOME TAX (APPEAL) SHOULD HAVE DELETED THE SAME. 4. THE ALLEGED REASONS GIVEN BY ASSESSING OFFICER AND CIT (A) FOR MAKING/CONFIRMING THE ADDITIONS OF RS. 20,00,000/- AND RS. 40,000/- ARE ERRONEOUS, BOTH ON FACTS AND IN LAW AN D, THEREFORE, THE ADDITIONS OF RS. 20,00,000/- AND RS. 40,000/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY CIT (A) ARE LIABLE TO BE DELETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE ONE OR MORE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEAR ING OF APPEAL. THE AFORESAID GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE OF EACH OTHER. 2. BRIEFLY STATED FACTS ARE THAT THE RETURN OF INCO ME DATED 30.10.2004 SUBMITTED BY THE ASSESSEE DECLARING A TO TAL INCOME OF RS. 1,72,908/- WAS PROCESSED U/S 143(1) OF THE INCO ME TAX ACT, 1961 (HEREINAFTER FOR SHORT CALLED AS THE ACT) AN D SUBSEQUENTLY AN INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G, NEW DELHI THAT CERTAIN PERSONS INCLUDING THE ASSESSEE HAVE RE SORTED TO MONEY LAUNDERING BY GIVING AN UNACCOUNTED CASH TO E NTRY 3 ITA NO.450/DEL/2014 OPERATORS AND IN TURN TAKING CHEQUES AND DDS UNDER THE GARB OF SHARE APPLICATION MONEY OR SALE PROCEEDS OF NON-EXI STENT GOODS THEREBY PLOUGHING BACK THEIR UNDECLARED CASH INTO I TS BOOKS OF ACCOUNTS. BASING ON SUCH INFORMATION THE AO RECORD ED THE FOLLOWING REASONS FOR REOPENING THE ASSESSMENT: THE INVESTIGATION WING OF THE INCOME TAX DEPARTMEN T HAD UNEARTHED A HUGE MONEY LAUNDERING MECHANISM WHEREIN IT WAS ESTABLISH THAT BOGUS ACCOMMODATION ENTRIES WERE PRO VIDED/TAKEN. THESE ACCOMMODATION ENTRIES RECEIVED IN LIEU OF PAY MENT OF CASH OF EQUIVALENT AMOUNT PLUS COMMISSION THEREON TO THE EN TRY OPERATORS. FOR OBVIOUS REASONS, THESE CASH TRANSACTIONS ARE NO T ROUTED THROUGH THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN THIS CASE , INFORMATION HAS BEEN RECEIVED FROM ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4, NEW DELHI FORWARDED BY INCOME TAX OFFICER WARD 14(4), NEW DELHI VIDE LETTER F.NO. ITO W 14(4)/2010-11/765 DATED 22.03.2011 THAT DURING THE RELEVANT ASSESSMENT YEAR , THE ASSESSEE HAD RECEIVED THE FOLLOWING CHEQUE AMOUNT(S) IN NATU RE OF ACCOMMODATION ENTRY FROM THE COMPANIES OPERATED BY TARUN GOYAL (AN ENTRY OPERATOR) FOR THE AY 2004-05. VALUE OF ENTRY TAKEN INSTRUMENT NO. BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVEN BANK A/C NO. ENTRY GIVEN ACCOUNT 5,00,000 MAHANIVESH INDIA LTD. 5,00,000 GOOFCOO FINANCE LTD. 5,00,000 DU SECURITIES (P) LTD. 5,00,000 ADONIS FINANCIAL SERVICES (P) LTD. THEREFORE, I HAVE REASON TO BELIEVE THAT AN INCOME OF RS. 20,00,000/- PLUS COMMISSION @ 2%, THEREON AMOUNTING TO RS. 40,0 00/- TOTALING TO RS. 20,40,000/- HAS ESCAPED ASSESSMENT DURING THE A SSESSMENT 4 ITA NO.450/DEL/2014 YEAR. ON THE BASIS OF THIS INFORMATION, I HAVE REA SON TO BELIEVE THAT THE INCOMES DESCRIBED ABOVE HAVE ESCAPED ASSESSMENT AND THE CASE IS FIT FOR ISSUING. NOTICE U/S 148 OF INCOME TAX A CT, 1961. ASSESSMENT WAS COMPLETED BY MAKING ADDITION OF RS. 20,40,000/- BEING THE UNEXPLAINED CREDITS IN THE BOOKS OF THE A SSESSEE AND COMMISSION AT 2% THEREON. IN APPEAL ASSESSEE CHALL ENGED THE REOPENING OF THE ASSESSMENT AND ALSO THE ADDITIONS. LD. COMMISSIONER OF INCOME TAX HELD THAT THE AO FOLLOWE D THE PROCEDURE BY ISSUING A NOTICE U/S 148 OF THE ACT, A S SUCH, THERE IS NOTHING TO VITIATE THE REOPENING OF THE PROCEEDINGS . IN SO FAR AS THE ADDITIONS ARE CONCERNED, LD. CIT (A) HELD THAT IN R EALITY ALL THE CREDITORS ARE ONLY PAPER COMPANIES AND THE CREDITWO RTHINESS AND GENUINENESS OF THE TRANSACTIONS ARE NOT PROVED AS A LL THE THREE ATTRIBUTES REQUIRED TO BE PROVED BY THE ASSESSEE AS PER THE DECISION IN CIT VS. LOVELY EXPORTS P. LTD. (2008) 2 16 ITR 195 (SC), CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 98. HOL DING SO LD. CIT (A) CONFIRMED THE ADDITIONS MADE BY THE AO. HENCE, THE ASSESSEE IS IN APPEAL NOW BEFORE US. 3. IT IS THE ARGUMENT OF THE LD. AR THAT THE REASON S RECORDED BY THE AO IN THIS CASE CANNOT BE SAID TO BE REASONS TO BELIEVE THAT ANY INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT, FOR THEY DO NOT 5 ITA NO.450/DEL/2014 INDICATE THE APPLICATION OF MIND BY THE AO. ACCORD ING TO HIM THE VALIDITY OR OTHERWISE OF THE PROCEEDINGS INITIATED U/S 147 HAS TO BE ADJUDGED ON THE BASIS OF THE REASONS RECORDED, AS S UCH, IF APPLICATION OF MIND IS NOT MANIFESTED FROM THE REAS ONS SO RECORDED, SUCH PROCEEDINGS ARE INVALID AND VITIATED . HE FURTHER ARGUED THAT WHERE THE SANCTION/APPROVAL WAS ACCORDE D BY THE AUTHORITY FOR ISSUING NOTICE U/S 149 OF THE ACT IN A MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND, ASSUMPTION OF JURISDICTION TO REOPEN THE ASSESSMENT IS INVALID. FOR THIS PURPOSE, HE PLACED RELIANCE ON THE DECISIONS REPORTED IN PR. CIT VS. G&G PHARMA INDIA LTD. (DELHI HIGH COURT) (ITA NO. 545/D /2015), PR. CIT VS. N.C. CABLES LTD. (DELHI HIGH COURT) (ITA NO . 335/2015), PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (DELHI HIGH CO URT) (2017)(S) TMI 1428, CIT VS. S.GOYANKA LIME & CHEMICALS LTD. ( MP HIGH COURT) 2015 (5) TMI 217 AND CIT VS. S.GOYANKA LIME AND CHEMICALS LTD. (SUPREME COURT) 64 TAXMANN.COM 313 ( 2015). 4. ON MERITS HE SUBMITTED THAT THE DETAILS LIKE PAN CARD, ITR ACKNOWLEDGEMENTS, AUDITED STATEMENTS RELATING TO GE EFCEE FINANCE LIMITED, MAHANIVESH (INDIA) LTD., ADONIS FINANCIAL SERVICES PVT. 6 ITA NO.450/DEL/2014 LTD. AND ADONIS SECURITIES PRIVATE LTD. ALL THE COM PANIES FROM WHOM THE SHARE APPLICATION WAS RECEIVED ARE FILED E STABLISHING NOT ONLY THE IDENTITY BUT ALSO THEIR CAPACITY TO INVEST THE AMOUNT AND THE GENUINENESS OF THE TRANSACTION. HE SUBMITTED T HAT THE SHARE APPLICATION FORM ALONG WITH BOARD RESOLUTION WAS AL SO MADE AVAILABLE BEFORE THE AUTHORITIES, AS SUCH, IT IS NO T OPEN FOR THEM TO SAY THAT ALL THE FOUR COMPANIES ARE PAPER COMPANIES AND THE TRANSACTION WAS NOT A GENUINE ONE. FURTHER IN RESP ECT OF THE AY 2005-06 SIMILAR REOPENING OF THE MATTER TOOK PLACE ON THE INFORMATION FURNISHED BY THE DIT (INV.) AND IT WAS DELETED BY THE LD. CIT (A) IN APPEAL BY ORDER DATED 29.04.2013 AND A COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO. 513/DEL/2015 UPHE LD THE FINDINGS OF THE LD. CIT (A) DELETING THE ADDITION M ADE U/S 68 OF THE ACT ON ACCOUNT OF SHARE APPLICATION MONEY AND THE C OMMISSION THEREON. 5. PER CONTRA, LD. DR HEAVILY RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW AND HE SUBMITTED THAT THE WHOLE A FFAIR OF THE ASSESSEE RECEIVING THE SHARE APPLICATION MONEY OF R S. 20 LACS IS A DESIGN TO CREATE AN APPARATUS TO INTRODUCE UNACCOUN TED MONEY OF 7 ITA NO.450/DEL/2014 THE ASSESSEE. WHETHER THE CREDITORS OR THE ENTRY P ROVIDERS SHOULD BE TAXED SEPARATELY LEAVING THE ENTRY TAKER, I.E. A SSESSEE IS FREE FROM LIABILITY OR NOT IS A DIFFERENT ISSUE ALTOGETH ER. BUT THE CIRCUMSTANCIAL EVIDENCES AND THE DESIGN OF THE ENTR Y OPERATOR GIVES THE BENEFIT TO THE ASSESSEE MORE THAN ANYONE ELSE. THE ASSESSEE HAS INTRODUCED UNACCOUNTED MONEY PAYING SOME COMMIS SION TO THE ENTRY OPERATOR UNDER THE GRAB OF SHARE APPLICAT ION MONEY TAKING ADVANTAGE OF SOME JUDICIAL DECISIONS. IN TH E ERA OF HIGH LEVEL OF PROFESSIONALISM WITH DEGREDATION OF ETHICS , CIRCUMSTANCIAL EVIDENCES HAVE FOUND DUE IMPORTANCE EVEN IN CRIMINA L PROCEEDINGS AND HENCE IN THE INCOME TAX PROCEEDINGS, AT THE APP ELLATE STAGE IT IS DIFFICULT TO DO AWAY WITH IT. ALL THE DOCUMENTS FILED BY THE ASSESSEE ONLY POINTS TOWARDS IDENTITY OF THE CREDIT ORS. HE, THEREFORE, PRAYED TO DISMISS THE APPEAL. 6. WE HAVE CAREFULLY GONE THROUGH THE RECORD, THE D OCUMENTS AND DECISIONS RELIED UPON BY EITHER SIDE. IN SO FA R AS THE CHALLENGE OF THE ASSESSEE AS TO THE LEGALITY AND VALIDITY OF THE REOPENING IS CONCERNED, ASSESSEE IS PLACING RELIANCE ON THE DECI SIONS REPORTED IN G&G PHARMA INDIA LTD. (DEL. HIGH COURT) (SUPRA), N.C. CABLES 8 ITA NO.450/DEL/2014 LTD. (SUPRA) AND MEENAKSHI OVERSEAS PVT. LTD. (SUPR A). HE ALSO PLACED RELIANCE ON THE DECISIONS REPORTED IN SIGNAT URE HOTELS PVT. LTD. VS. ITO 338 ITR 51 (DEL), SARTHAK SECURITIES C O. PVT. LTD. VS. ITO (2010) 195 TAXMAN 262 (DEL), CIT VS. KAMDHENU S TEELS & ALLOYS LTD. (2012) 119 TAXMANN.COM 26 (DEL.). AS C OULD BE SEEN FROM THESE DECISIONS, IT IS CONSISTENTLY HELD THAT THE REOPENING BASED ON THE INFORMATION FURNISHED BY THE DIRECTORA TE OF INVESTIGATION AND THE AO WITHOUT MAKING ANY FURTHER INVESTIGATION ON HIS OWN, RECORDING THE REASONS TO BELIEVE THAT I NCOME ESCAPED ASSESSMENT ARE BAD. IN FACT IN PR. CIT VS. M/S N.C . CABLES LTD. (SUPRA) ABOVE VIDE PARAGRAPH NO. 10 THE HONBLE HIG H COURT EXTRACTED THE REASONS WHICH ARE AS FOLLOWS: 10. AS FAR AS THE FIRST ISSUE WITH RESPECT TO THE APPROVAL GRANTED TO REOPEN THE ASSESSMENT UNDER SECTION 147 / 148 OF THE ACT IS CONCERNED, THE RELEVANT NOTING IS AS FOLLOWS:- 'REASONS FOR ISSUING NOTICE U/S 148 OF THE ACT IN T HE CASE OF M/S N. C. CABLES LIMITED, FOR THE A. Y. 2001-02-REG . INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATIO N WING OF THE INCOME TAX DEPARTMENT THAT THE ABOVE NAMED ASSE SSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ESTABLISHED ENTRY OPERATORS IDENTIFIED BY THE WING DURING THE PERIOD LAUNDERING FOR THE BENEFICIARIES AND ON THE BASIS OF INVESTIGATION CARRIED OUT AND EVIDENCES COLLECTED, A REPORT HAS BEEN FORWARDED. I HAVE PERUSED THE INFORMATION CONT AINED IN THE REPORT AND THE EVIDENCES GATHERED. THE REPORT P ROVIDES DETAILS OF THE MODUS OPARANDI OF THE 'MONEY LAUNDER ING SCAM' AND EXPLAIN HOW THE UNACCOUNTED MONEY OF THE BENEFI CIARIES ARE PLOUGHED BACK IN ITS BOOKS OF ACCOUNT IN THE FO RM OF BOGUS 9 ITA NO.450/DEL/2014 SHARE CAPITAL/CAPITAL GAINS ETC. AFTER ROUTING THE SAME THROUGH THE BANK ACCOUNT (S) OF THE ENTRY OPERATORS. ENTRY OPERATORS WEREIDENTIFIED AFTER THOROUGH INVESTIGATION ON THE BASIS OF DEFINITIVE ANALYSIS OF THEIR IDENTITY, CREDITWORTHI NESS AND THE SOURCE OF THE MONEY ULTIMATELY RECEIVED BY THE BENE FICIARIES. THESE ENTRY OPERATORS ARE FOUND TO BE MOSTLY ABSCON DING AFTER THE UNEARTHINQ OF THE 'MONEY LAUNDERING SCAM' LEAVI NG THE SAID MONEY AT THE DISPOSAL OF THE BENEFICIARIES WITHOUT ANY ASSOCIATED COST OR LIABILITY. IN THE INSTANT CASE, THE ASSESSEE IS FOUND TO BE THE BENEFICIARY OF ACCOMMODATION ENTRY FROM SUCH ENTRY OPERATORS AS PER THE FOLLOWING SPECIFIC DETAI LS OF TRANSACTION:- ENTRY OPERATOR BENEFICIARYS BANK AMOUNT RS. INSTRUMENT NO. BY WHICH ENTRY TAKEN AND DATE ENTRY GIVING BANK ACCOUNT NO. FROM WHICH ENTRY WAS GIVEN MAHESH GARG - 800480 30.11.2000 SBP-DG 4507 PERFORMANCE TRADING & INV. - 700420 13.11.2000 SBP-DG 4281 CHINTPURNI CREDITS - 900540 22.11.2000 SBP-DG 50058 SUBHASH CHANDER SINGHAL - 500300 23.11.2000 SBP-DG 4544 KULDEEP TEXTILES P. LTD. - 500500 21546 24.03.2001 INNOVATIVE WAZIPUR 239 SWETA STONE P. LTD. - 500500 23510 24.03.2001 -DO- 1200259- CA DIVISION TRADING P. LTD. - 500500 33612 24.3.2001 -DO- 225 DURING THE COURSE OF THE PROCEEDINGS U/S 148 FOR TH E SAME ASSESSMENT YEAR, WHICH WAS DROPPED ON THE TECHNICAL GROUND THAT PROPER SANCTION WAS NOT OBTAINED, IT WAS NOTICED TH AT THERE ARE OTHER RECEIPTS ALSO FROM THE IDENTIFIED ENTRY OPERATORS. INFORMATION ABOUT THOSE ENTRIES WAS NOT AVAILABLE IN THE DATA RECEIVE D FROM THE INVESTIGATION WING. NEVERTHELESS THEY ALSO FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT. THE ASSESSEE HAS RECEIVED UNEXPLAINED SUMS FROM THE ENTRY OPERATORS AS PER THE ABOVE DETAILS AS PER INF ORMATION AVAILABLE WITH THE UNDERSIGNED. AS EXPLAINED ABOVE THE IDENTI TY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS WI TH THE PERSONS FOUND TO BE ENTRY OPERATORS CANNOT BE ESTABLISHED. I THEREFORE HAVE REASONS TO BELIEVE THAT ON ACCOUNT OF FAILURE ON TH E PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL F ACTS NECESSARY FOR 10 ITA NO.450/DEL/2014 ASSESSMENT FOR ABOVE AY THE INCOME CHARGEABLE TO TA X TO THE EXTENT OF ACCOMMODATION ENTRY MENTIONED ABOVE, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF S.147 OF THE ACT. SINCE FOUR YEARS HAS BEEN EXPIRED FROM THE END OF T HE RELEVANT YEAR, AND ASSESSMENT U/S 143(3) OF THE ACT WAS MADE IN TH E CASE OF THE ASSESSEE FOR THE SAID A ~ THE REASONS RECORDED ABOV E FOR THE PURPOSE OF REOPENING OF ASSESSMENT IS PUT UP FOR KIND SATIS FACTION OF THE CIT, DELHI T1, NEW DELHI IN TERMS OF THE PROVISO TO SECTION 151 OF THE ACT. SD/- (ITO) WARD 13(1). THE ACIT, RANGE 13, NEW DELHI FOR KIND APPROVAL OF CIT-V, NEW DELHI CIT-V, DELHI: 'APPROVED' SD/-' 7. IN THE CASE ON HAND ALSO THE CONTENTION OF THE R EVENUE IS THAT THE ASSESSEE ISSUED CASH AND RECEIVED CHEQUES FROM ONE SH. TARUN GOYAL, AN ENTRY OPERATOR. IT IS ONLY ON THE BASIS OF INFORMATION FURNISHED BY THE DIRECTORATE OF INVESTI GATION UNIT AO FOUND THE SATISFACTION THAT THE INCOME OF RS. 20,40 ,000/- HAD ESCAPED THE ASSESSMENT DUE TO THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO PROVE NOT ONLY THE IDENTITY OF SHAR E APPLICANTS BUT ALSO THE CAPACITY OF SUCH APPLICANTS AND THE GENUIN ENESS OF THE TRANSACTION. THE HONBLE JURISDICTIONAL HIGH COURT IN SARTHAK SECURITIES PVT. LTD. VS. ITO (2010) 195 TAXMAN 262 (DEL), SIGNATURE HOTELS PVT. LTD. VS. ITO 338 ITR 51 (DEL) , CIT VS. SFIL STOCK BROKING LTD. (2010) 325 ITR 285 (DEL), PR. CI T VS. G&G 11 ITA NO.450/DEL/2014 PHARMA INDIA LTD. (ITA NO. 545/D/2015) (DELHI HIGH COURT), ITO VS. N.C. CABLES LTD. (DELHI ITAT) JUDGMENT DATED 22.10.2014 AND PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (2017) (S) TMI 1428 HELD THAT THE REOPENING OF THE ASSESSMENT WITHOUT T HE AO INDEPENDENTLY UNDERTAKING THE EXERCISE OF EXAMINATI ON OF FACTS IS BAD UNDER LAW. 8. THE JURISDICTION DELHI HIGH COURT IN THE CASE OF PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (2017)(S) TMI 1428 HAS HELD THAT REOPENING U/S 147/148 WAS NOT JUSTIFIED WHERE REASO NS WERE RECORDED MERELY ON THE BASIS OF INFORMATION RECEIVE D FROM INVESTIGATION USING AND WITHOUT INDEPENDENT APPLICA TION OF MIND BY THE AO. THE HONBLE COURT HELD THAT IT WAS INDE ED A BORROWED SATISFACTION AND REOPENING WAS NOT JUSTIFIED. 9. NOW COMING TO THE SECOND LIMB OF CHALLENGE MADE BY THE ASSESSEE TO THE EFFECT THAT THE REASSESSMENT PROCEE DINGS INITIATED ARE BAD IN AS MUCH AS THE APPROVAL/SANCTION BY ADDL . CIT IS WITHOUT RECORDING SATISFACTION AND THE SAME IS NOT IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 151 OF THE ACT, LD . AR BROUGHT IT TO OUR NOTICE THAT VIDE SL. NO. 11 THE ADDL. CIT, R ANGE 6, NEW DELHI 12 ITA NO.450/DEL/2014 RECORDED THAT YES, I AM SATISFIED. ON THIS ASPEC T LD. AR PLACED RELIANCE ON THE DECISIONS REPORTED IN CHHUGAMAL RAJ PAL VS. S.P. CHALIHA (1971) 79 ITR 602 (SC), CENTRAL INDIA ELECT RIC SUPPLY CO. LTD. VS. ITO (2011) 10 TAXMANN.COM 169 (DELHI), ITO VS. N.C. CABLES LTD. (DELHI ITAT) JUDGMENT DATED 22.10.201 4, ITO VS. M.B. JEWELLERS (P) LTD. (DELHI ITAT) JUDGMENT DATED 14.11.2014, AMAR LAL BAJAJ VS. ACIT (2013) 37 TAXMANN.COM 7 (MU M) (TRIB), CIT VS. M/S S. GOYANKA LIME AND CHEMICALS LTD. 2015 (5) TMI 217 AND PR. COMMISSIONER OF INCOME TAX VS. N.C. CAB LES LTD. (ITA NO. 335/2015), FOR THE PRINCIPLE THAT WHERE THE AUT HORITY TO GRANT/SANCTION MERELY RECORDED YES, I AM SATISFIED , SUCH AN APPROVAL/SANCTION IS NOT SUSTAINABLE. 10. WE HAVE GONE THROUGH THE DECISIONS RELIED UPON BY THE LD. AR. IN THE DECISION REPORTED IN CIT VS. M/S S. GOY ANKA LIME AND CHEMICALS LTD. (SUPRA) IT IS HELD BY THE HONBLE MA DHYA PRADESH HIGH COURT AS FOLLOWS: 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND W E FIND THAT WHILE ACCORDING SANCTION, THE JOINT COMMISSIONER, INCOME TAX HAS ONLY RECORDED SO YES, I AM SATISFIED. IN THE CASE OF ARJUN SINGH (SUPRA), THE SAME QUESTION HAS BEEN CONSIDERED BY A COORDINA TE BENCH OF THIS COURT AND THE FOLLOWING PRINCIPLES ARE LAID DO WN 13 ITA NO.450/DEL/2014 THE COMMISSIONER ACTED, OF COURSE, MECHANICALLY IN ORDER TO DISCHARGE HIS STATUTORY OBLIGATION PROPERL Y IN THE MATTER OF RECORDING SANCTION AS HE MERELY WROTE ON THE FORMAT YES, I AM SATISFIED WHICH INDICATES AS IF HE WAS TO SIGN ONLY ON THE DOTTED LINE. EVEN OTHERWISE ALSO, THE EXERC ISE IS SHOWN TO HAVE BEEN PERFORMED IN LESS THAN 24 HOURS OF TIME WHICH ALSO GOES TO INDICATE THAT THE COMMISSIONER D ID NOT APPLY HIS MIND AT ALL WHILE GRANTING SANCTION. THE SATISFACTION HAS TO BE WITH OBJECTIVITY ON OBJECTIV E MATERIAL. 11. THIS DECISION OF THE MADHYA PRADESH HIGH COURT WAS CHALLENGED BY THE REVENUE BEFORE THE HONBLE SUPREM E COURT BY WAY OF THE SPECIAL LEAVE PETITION AND THE HONBLE S UPREME COURT WAS PLEASED TO DISMISS THE SPECIAL LEAVE PETITION V IDE ORDER REPORTED IN (2015) 64 TAXMANN.COM 313 (SC). 12. IN THE CIRCUMSTANCES SURROUNDING THIS CASE, IN VIEW OF THE DECISIONS REFERRED TO ABOVE, WE ARE OF THE CONSIDER ED OPINION THAT THE DECISIONS REPORTED IN SARTHAK SECURITIES PVT. L TD. (SUPRA), SIGNATURE HOTELS (SUPRA), KAMDHENU STEELS & ALLOYS LTD. (2012) 19 TAXMAN.COM 26 (DEL) & G&G PHARMA INDIA LTD. (SUPRA) ARE DIRECTLY APPLICABLE TO THE FACTS OF THE CASE TO HOL D THAT THE REASONS RECORDED BY THE AO IN THIS MATTER SOLELY BASING ON THE INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION WITH OUT ANY INDEPENDENT EXERCISE OF MENTAL PROCESS CANNOT BE CO NSTRUED AS REASONS TO BELIEVE AND THE CONSEQUENT PROCEEDINGS O F REOPENING 14 ITA NO.450/DEL/2014 ARE BAD UNDER LAW. FURTHER, THE APPROVAL/SANCTION OF THE ADDL. CIT, RANGE 6, NEW DELHI IS ALSO NOT IN ACCORDANCE W ITH THE REQUIREMENTS OF SECTION 151 OF THE ACT, AS IS HELD IN M/S S. GOYANKA LIME AND CHEMICALS LTD. (SUPRA) AND THIS AL SO VITIATES THE PROCEEDINGS. FOR THESE REASONS, WE HOLD THAT T HE REOPENING PROCEEDINGS ARE BAD UNDER LAW AND ARE LIABLE TO BE QUASHED. SINCE, WE ARE QUASHED THE PROCEEDINGS ON THE QUESTI ONS OF LAW, WE DO NOT DEEM IT NECESSARY TO ADJUDICATE THE MERITS O F ADDITIONS MADE IN THIS MATTER. FOR THESE REASONS, WE HOLD TH AT THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE SUSTAINED AND CONSE QUENTLY, THEY ARE LIABLE TO BE QUASHED. WE DO SO. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.10.2017 SD/- SD/- (N.K. SAINI) (K.N. CHA RY) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 24.10.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 15 ITA NO.450/DEL/2014 TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI