ITO, New Delhi V. M/s. Jai Gajanan Enterprises Pvt. Ltd., New Delhi

ITA 4861/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1143 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2007-2008
• Appeal Filed On: 24-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: D C AGARWAL
• Keywords: Reopening of assessment; Gift; Deemed to accrue or arise in india; Tangible material; Difference of opinion; Accommodation entries; Competent authority; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 271(1)(c); 143(3); 143(1); 195; 147; 148; 132; 68

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH F, NEW DELHI BEFORE : SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4861/DEL/2015 ASSESSMENT YEAR: 2007-08 INCOME - TAX OFFICER, WARD 13(12), NEW DELHI. (APPELLANT) VS. JAI GAJANAN ENTERPRISES PVT. LTD., E-292, IIND FLOOR, OLD DOUBLE STOREY LANE, RAMESH NAGAR, NEW DELHI. PAN-AABCJ6528Q (RESPONDENT) APPELLANT BY SH. SURENDER PAL, SR. DR RESPONDENT BY SH. D.C. AGARWAL, ADVOCATE ORDER PER L.P. SAHU, A.M.: THIS APPEAL FILED BY THE REVENUE ARISES OUT OF THE IMPUGNED ORDER DATED 26.05.2015 OF LD. CIT(A)-V, NEW DELHI FOR THE ASSES SMENT YEAR 2007-08 ON THE FOLLOWING GROUNDS : 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND FACTS O F THE CASE IN QUASHING THE REASSESSMENT PROCEEDINGS REOPENED U/S 148 OF TH E ACT HOLDING THAT THE RE-OPENING IN THIS CASE HAS NOT BEEN MADE IN AC CORDANCE WITH THE LAW. 2. THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITIO N OF RS. 4,00,00,000/- MADE U/S 68 OF THE I.T. ACT WITHOUT APPRECIATING THE FACT THAT THE ENTRY PROVIDERS DURING THE PROCEEDINGS U/S 132 OF THE I.T. ACT, HAVE ADMITTED THAT THE ASSESSEE COMPANY HAD TAKEN ACCOMMODATION E NTRIES. DATE OF HEARING 26.02.2019 DATE OF PRONOUNCEMENT 1 5 .03.2019 ITA NO. 4861/DEL/2015 2 3. THAT THE LD. CIT(A) WAS NOT RIGHT IN DELETING THE ADDITION OF RS. 10,00,000/- MADE ON ACCOUNT OF COMMISSION PAID TO E NTRY OPERATORS OUT OF ITS UNDISCLOSED INCOME. 4. THAT THE LD. CIT(A) HAS ERRED IN FACTS OF THE CAS E OF ASSESSEE DESERVES INITIATION OF PENALTY U/S 271(1)(C) OF THE I.T. ACT, 1961. 5. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 6. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CAS E ORIGINAL ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HER EINAFTER REFERRED TO AS THE ACT) ON 08.12.2009 AT AN INCOME OF RS.2,18,162/- A S AGAINST RETURNED INCOME OF RS.1,08,405/-. SUBSEQUENTLY, AFTER A LAPSE OF FOUR YEARS, I.E., IN THE YEAR 2013, INFORMATION FROM INVESTIGATION WING, NEW DELHI REGA RDING SOME ACCOMMODATION ENTRY RACKET, OPERATED BY ONE SH. SURENDER KUMAR JA IN GROUP, WAS RECEIVED ALONG WITH LIST OF BENEFICIARIES OF SUCH ACCOMMODATION EN TRIES. THE NAME OF THE ASSESSEE-RESPONDENT WAS ALSO REFLECTED IN THE SAID LIST AS ONE OF THE BENEFICIARIES. THE ASSESSING OFFICER, NOTING THE MODUS OPERANDI O F ENTRY PROVIDER, AS REPORTED BY INVESTIGATION WING, CONCLUDED THAT THE ASSESSEE HAD TAKEN SUCH ACCOMMODATION ENTRIES IN THE GARB OF SHARE CAPITAL WORTH RS.4,60,00,000/- DURING THE YEAR UNDER CONSIDERATION FROM VARIOUS CO MPANIES. BASED ON THE AFORESAID INFORMATION/DETAILS RECEIVED FROM INVESTI GATION WING, THE ASSESSING OFFICER REOPENED THE ASSESSMENT U/S. 147 BY ISSUING NOTICE U/S. 148 AND AFTER RECORDING FOLLOWING REASONS : THE COMMISSIONER OF INCOME TAX-II, NEW DELHI HAS FOR WARDED VIDE F.NO. CIT-II/HQ/MISC. FILE/148/2012-13/ DATED 15.03.2013 LETTER OF THE DIRECTOR OF ITA NO. 4861/DEL/2015 3 INCOME TAX INVESTIGATION-II, (DELHI)F.-NO. DIT (INV.) -II/ U/S 148/2012- 13/197 DATED 12.03.2013 GIVING INFORMATION ABOUT AN EXTENSIVE ACCOMMODATION ENTRY RACKET BEING OPERATED BY SHRI S URENDRA KUMAR JAIN GROUPS OF ENTRY OPERATORS. THE NAME OF THE ASSESSEE, M/S JAI GAJANAN ENTERPRISES PVT LTD NEW DELHI APPEARS IN THE LIST OF BENEFICIARIES WHO HAVE TAKEN ACCOMMODATION ENTRIES IN THE GARB OF SHARE APPLICATION MONEY, LOA N, GIFTS, BOGUS SALES/PURCHASES OR SOME OTHER OSTENSIBLE BUSINESS T RANSACTION THROUGH THE BANK ACCOUNTS EXISTING IN THE NAMES OF THE PAPER/DU MMY CONCERNS/ENTITIES OPERATED BY THE ENTRY-OPERATORS. THE ACCOMMODATION E NTRIES HAVE BEEN TAKEN / PROVIDED IN LIEU OF CERTAIN PERCENTAGE OF C OMMISSION PAID, MOSTLY IN CASH BY THE BENEFICIARIES OF SUCH ENTRIES. I HAVE PERUSED THE INFORMATION RECEIVED FROM THE WI NG. THE REPORT EXPLAINS AT LENGTH THE MODUS OPERAND OF THE ENTRY OPERATORS ALONG WITH THE RELEVANT EVIDENCE UNEARTHED DURING THE SEARCH AND POST-SEARC H INVESTIGATIONS. THE REPORT BRINGS OUT THE FACT THAT THE FLOW OF FUNDS F ROM/BETWEEN THESE DUMMY ENTITIES/CONCERNS AND THE BENEFICIARIES DO NOT REPR ESENT ANY GENUINE OR ACTUAL BUSINESS TRANSACTION. THESE DUMMY ENTITIES AR E NOT CARRYING OUT ANY ACTUAL BUSINESS, OTHER THAN THE ACTIVITY OF PROVIDI NG ACCOMMODATION ENTRIES IN THE GARB OF SOME OSTENSIBLE BUSINESS TRANSACTION S. THE ENTRIES IN THE BANK ACCOUNTS THROUGH WHICH THE AMOUNTS ARE ROUTED DO NO T HAVE ANY UNDERLYING OR ACTUAL BUSINESS TRANSACTION. THE REPORT OF THE' I NVESTIGATION WING CONTAINS COMPREHENSIVE DETAILS COMPRISING, INTER ALIA THE BE NEFICIARY'S NAME, AMOUNT OF ENTRY TAKEN, NAME OF ACCOUNT HOLDER OF ENTRY GIV ING ACCOUNT, BANK DETAILS OF THE ACCOUNTS FROM WHICH ENTRIES ARE GIVE N, THE DATES OF THE ENTRIES ETC. AS PER THE DETAILS RECEIVED, DURING THE YEAR T HE FOLLOWING ENTRIES HAVE BEEN TAKEN BY THE ASSESSEE FROM THE ENTRY OPERATORS :- CHQEUE BOOK DATE FROM COMPANY NAME TO COMPANY NAME NAME OF ISSUING BANK CHEQUE / RTGS / PO NO. CHEQUE DATE AMOUNT (IN RS.) NAME OF THE MIDDLE MAN ANNEXURE NO. PAGE NO. 20-03- 2007 NISHA HOLDING LTD. JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 068294 20-03- 2007 6000000 ARUN JI A-66 49 21-03- 2007 NISHA HOLDING LTD. JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 083775 21-03- 2007 6000000 ARUN JI A-66 49 ITA NO. 4861/DEL/2015 4 21-03- 2007 MEGA TOP PROMOTORS PVT. LTD. JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 011213 21-03- 2007 6000000 ARUN JI A-66 49 21-03- 2007 NISHA HOLDING LTD. JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 083775 21-03- 2007 6000000 ARUN JI A-66 49 21-03- 2007 MANI MALA DELHI PROPERTY PVT. LTD. JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 008517 21-03- 2007 6000000 ARUN JI A-66 49 24-03- 2007 EURO ASIA VENTURE CAPITAL JAI GAJANAN ENTERPRISE S PVT. LTD. UTI CH. NO. 050206 26-03- 2007 8000000 ARUN JI A-66 49 28-03- 2007 MICRO LAND DEVELOPER S PVT. LTD. JAI GAJANAN ENTERPRISE S PVT. LTD\ UTI CH. NO. 009719 29-03- 2007 4000000 ARUN JI A-66 49 28-03- 2007 SJ & AJ BUILDTECH & TOWN PVT. LTD. JAI \ GAJANAN ENTERPRISE S PVT. LTD UTI CH. NO. 009207 29-03- 2007 4000000 ARUN JI A-66 49 THE TOTAL OF THE ABOVE ACCOMMODATION ENTRIES TAKEN B Y THE ASSESSEE COMPANY COMES TO RS.4,60,00,000/- TAKING, ON A CONSERVATIVE BASIS, THE RATE OF COMMISSION PAID TO ENTRY OPERATORS (AT THE RATE OF 2%) , THE ASSESSEE HAS ALSO PAID THE SAID AMOUNT OF COMMISSION (RS.9,20,00 0/-) TO THE ENTRY OPERATORS OUT OF UNDISCLOSED SOURCES. HAVING PERUSE D AND CONSIDERED THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, A S DISCUSSED ABOVE AND IN THE CIRCUMSTANCES OF THE CASE, I HAVE REASON TO BEL IEVE THAT INCOME OF THE ASSESSEE TO THE EXTENT OF RS. 4,69,20,000/- HAS ESC APED ASSESSMENT AND THE CASE IS FIT FOR ISSUING NOTICE U/S 148 OF THE INCOM E TAX ACT, 1961. 5. INCOME TAX RETURN IN THE CASE FOR THE A.Y. 2007- 08 WAS FILED BY THE ASSESSEE COMPANY ON 30.10.2007 AT NIL INCOME. ASSES SMENT IN THE CASE WAS COMPLETED U/S 143(3) ON 08.12.2009 AT RS.2,18,160/- .THE INFORMATION RECEIVED FROM THE INVESTIGATION WING AND THE FINDIN GS RELATING TO THE TRANSACTION WERE NOT AVAILABLE TO THE AO AT THE TIM E OF MAKING ASSESSMENT U/S 143(3) 08.12.2009.THE ASSESSEE HAS INTENTIONALLY AVOIDED TO FURNISH TRUE AND COMPLETE PARTICULARS OF THIS TRANSACTION. THUS T HE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT BY REASON FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT ATTRACTING THE FIRST PROVISO READ WITH EXPLANATION 1 TO SECTIO N 147 OF THE I T ACT. 6. IT IS, THEREFORE, REQUESTED THAT THE NECESSARY APPROVAL MAY KINDLY BE ACCORDED AS PER THE PROVISIONS OF SECTION 151 OF TH E INCOME-TAX ACT 1961. ITA NO. 4861/DEL/2015 5 BASED ON THE AFORESAID REASONS RECORDED, THE ASSESS ING OFFICER, THEREFORE, MADE AN ADDITION OF RS.4,00,00,000/- AS BOGUS SHARE CAPI TAL U/S. 68 OF THE IT ACT AND ADDITION OF RS.10,00,000/- ON ACCOUNT OF COMMISSION PAID @ 2.5% FOR RECEIVING ALLEGED ACCOMMODATION ENTRIES. THE ASSESSEE CARRIE D THE MATTER IN APPEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE DETAILED SUBMISSIONS OF THE ASSESSEE AND VARIOUS CASE LAWS CITED BY THE PARTIES, DELETED THE ADDITION BY HOLDING THE REOPENING OF CASE AS VOID. AGGRIEVED BY THE IMPUGN ED ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL, INTER ALIA, ON THE GROU NDS, MENTIONED HEREIN ABOVE. 3. DURING THE COURSE OF HEARING, THE LD. DR, RELYIN G UPON THE FINDINGS REACHED BY THE ASSESSING OFFICER, SUBMITTED THAT THE LD. CI T(A) WAS NOT JUSTIFIED IN HOLDING THE REASSESSMENT AS INVALID AND CONSEQUENTLY IN DEL ETING THE ADDITIONS MADE BY THE ASSESSING OFFICER. THE ASSESSEE FAILED TO PRODU CE ANY OF THE DIRECTORS OF COMPANIES, FROM WHOM SHARE APPLICATION MONEY WAS RE CEIVED. BARRING DIRECTORS OF THREE COMPANIES, NO RESPONSE WAS RECEIVED FROM D IRECTORS OF OTHER COMPANIES IN COMPLIANCE TO SUMMONS U/S. 131. THEREFORE, ONLY BECAUSE THE ASSESSEE HAD SUBMITTED SOME DOCUMENTS PERTAINING TO THE INVESTIN G COMPANIES, WOULD NOT GO TO DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE UNDE R SECTION 68 OF THE ACT. RELIANCE IS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 (DEL) AND CIT V. NR PORTFOLIO PVT. LTD., 263 CTR 456 (DEL.) AS ALSO RELIED BY THE ASSESSING OFFICER. VARIOUS OTHER DECISIONS HAVE ALSO BEEN RELIED BY THE LD. DR IN SU PPORT OF THE REASSESSMENT ORDER. ITA NO. 4861/DEL/2015 6 4. THE LEARNED AUTHORIZED REPRESENTATIVE, ON THE OT HER HAND, REPUDIATING THE CONTENTIONS OF THE LD. DR SUBMITTED AT THE OUTSET T HAT THE NOTICE U/S. 148 HAS BEEN ISSUED ON 29.03.2014 AFTER EXPIRY OF FOUR YEAR S FROM THE RELEVANT ASSESSMENT YEAR, I.E., 2007-08, BUT IT DOES NOT MEN TION THAT ANY SANCTION OF COMPETENT AUTHORITY WAS OBTAINED AS REQUIRED U/S. 1 51 OF THE ACT BEFORE ISSUING THE NOTICE U/S. 148. THEREFORE, ONLY ON THE BASIS O F THIS STATUTORY LAPSE ON THE PART OF ASSESSING OFFICER, THE RE-OPENING OF COMPLETED A SSESSMENT IS LIABLE TO RENDERED AS VOID. FOR THIS PROPOSITION, THE LD. AR HAS RELIE D ON THE FOLLOWING DECISIONS : (I). CIT V. H.M. CONSTRUCTIONS (2014) 43 TAXMANN.C OM 105 (KAR) (II). MARUTI CLEAN COAL & POWER LTD. VS. ACIT (2018 ) 89 TAXMANN.COM 340 (CHHATTISGARH) (III). RELIABLE FINHOLD LTD. VS. UOI (2015) 54 TAX MANN.COM 318 (ALLD.) (IV). SMT. SONU KHANDELWAL VS. ITO (2018) 97 TAXMAN N.COM 431 (JAIPUR- TRIB.) 4.1 IT WAS NEXT CONTENDED THAT THE ASSESSMENT HAS B EEN REOPENED ON BORROWED SATISFACTION, I.E., ONLY ON THE BASIS OF INFORMATIO N OF THE INVESTIGATION WING AND NO INDEPENDENT INQUIRY IS MADE BY ASSESSING OFFICER BE FORE FORMING THE BELIEF OF ESCAPEMENT OF INCOME. THUS, THE REASSESSMENT IS VOI D HAVING BEEN MADE ONLY ON BORROWED SATISFACTION. FOR THIS PROPOSITION, RELIAN CE IS PLACED ON THE FOLLOWING DECISIONS : PCIT V. MEENAKSHI OVERSEAS (P.) LTD. [2017] 82 T AXMANN.COM 300 (DELHI); HARIKISHAN SUNDERLAL VIRMANI V. DCIT [2017] 88 T AXMANN.COM 548 (GUJARAT); KOTHI STEEL LTD. V. ACIT [2016] 72 TAXMANN.COM 2 52 (GUJARAT) CIT V. SPL'S SIDDHARTHA LTD. [2012] 17 TAXMANN.C OM 138 (DELHI) ITA NO. 4861/DEL/2015 7 DCIT, CIRCLE-3 (3), MUMBAI VERSUS M/S SHAPOORJI PALLONJI & CO. LTD. [2015(7) I ML 447 HAT MUMBAI) 4.2 THE NEXT CONTENTION OF THE LD. AR HAS BEEN THAT THERE IS NON-APPLICATION OF MIND BY ASSESSING OFFICER ON THE INFORMATION RECEIV ED IN AS MUCH AS, IT DID NOT STRIKE TO THE AO THAT THE NAME OF NISHA HOLDINGS IS MENTIONED TWICE IN THE INFORMATION WHICH WAS AD VERBATIM USED FOR DRAWING SATISFACTION. FURTHER, AO MENTIONS THAT INCOME TAX RETURN FOR THE AY 2007-08 WAS FILED ON 30-10-2007 AT NIL INCOME. THE AO DID NOT BOTHER EVEN TO VERIFY TH E RETURN OF INCOME FILED BY THE ASSESSEE WHICH HAD SHOWED RETURNED INCOME AT RS . 1,08,412/-. ALL THIS SHOWS THAT THERE IS NON-APPLICATION OF MIND AND THE AO WA S MECHANICALLY PERSUADED BY THE REPORT OF THE INVESTIGATION WING. HENCE, SUCH A RE-ASSESSMENT DUE TO THIS REASON TOO IS NOT SUSTAINABLE. RELIANCE ON THIS POI NT IS PLACED ON THE FOLLOWING DECISIONS :- SARTHAK SECURITIES CO. (P.) LTD V. ITO [2010] 19 5 TAXMAN 262 (DELHI); SIGNATURE HOTELS (P.) LTD. V. ITO [2012] 20 TAXM ANN.COM 797 (DELHI); CIT V. SFIL STOCK BROKING LTD. [2010] 325 ITR 28 5 (DELHI); CIT V. SUREN INTERNATIONAL (P.) LTD. [2013] 35 T AXMANN.COM 398 (DELHI); ITALICA FLOOR TILES PVT. LTD. AND OTHERS V. ACIT 2015 (6) TMI 382 - ITAT RAJKOT 4.3 IT HAS BEEN NEXT CONTENDED ON VALIDITY OF REOPE NING OF ASSESSMENT HAS BEEN THAT PROVISO TO SECTION 147 IS NOT SATISFIED. THE O RIGINAL ASSESSMENT WAS DONE U/S 143(3). THE FACTUM OF RECEIPT OF SHARE CAPITAL IS M ENTIONED IN THE RETURN AS WELL AS IN THE ASSESSMENT ORDER. THE ASSESSMENT IS SOUGH T TO BE REOPENED AFTER EXPIRY OF FOUR YEARS, WHICH IS AGAINST PROVISO TO SECTION 147 ACCORDING TO WHICH THE ITA NO. 4861/DEL/2015 8 ASSESSMENT CANNOT BE NOT REOPENED AFTER EXPIRY OF F OUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT ASSESSMENT YEAR. IT IS SUBMITTED THAT MERELY MENTIONING OF THIS EXPR ESSION IN THE SATISFACTION NOTE IS NOT SUFFICIENT UNLESS THE AO MENTIONS, THEREIN, ANY MATERIAL FACT WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE. IN THE PRESENT CASE , AO HAS NOT MENTIONED ANY FACT OR EVIDENCE WHICH WAS REQUIRED TO BE DISCLOSED AND WHICH HAS NOT BEEN DISCLOSED BY THE ASSESSEE IN ASSESSMENT PROCEEDINGS . THEREFORE, THIS PROVISO IS NOT SATISFIED AND HENCE REOPENING IS BAD IN LAW. FO R THE PROPOSITION THAT IF PROVISO TO SECTION 147 IS NOT SATISFIED THEN REOPEN ING WILL BE BAD, THE LD. AR HAS RELIED ON THE FOLLOWING AUTHORITIES- GLOBAL SIGNAL CABLES (INDIA) (P.) LTD. V. DCIT [ 2015] 54 TAXMANN.COM 114 (DELHI) HARYANA ACRYLIC MANUFACTURING CO. V. CIT [2008] 175 TAXMAN 262 (DELHI) SWAROVSKI INDIA (P.) LTD. V. DCIT [2014] 50 TAXM ANN.COM 57 (DELHI) 4.4 THE AR ALSO CONTENDED THAT SINCE, THE AO HAS RE OPENED THE ASSESSMENT COMPLETED U/S 143(3) ONLY ON THE BASIS OF INFORMATI ON RECEIVED FROM INVESTIGATION WING, AND THERE WAS NO FURTHER MATERI AL COLLECTED, THEN REOPENING WILL NOT BE JUSTIFIED. FOR THIS PROPOSITION HE PLAC ED RELIANCE ON FOLLOWING AUTHORITIES:- A.P. REFINERY (P.) LTD. V. ADDL. CIT [2017] 81 T AXMANN.COM 362 (CHANDIGARH - TRIB.); PARDESI DEVELOPERS & INFRASTR UCTURE (P.) LTD. V. CIT [2013] 40 TAXMANN.COM 9 (DELHI)] PCIT V. G & G PHARMA INDIA LTD. [2017] 81 TAXMAN N.COM 109 (DELHI) ITA NO. 4861/DEL/2015 9 PCIT V. RMG POLYVINYL (I) LTD. [2017] 83 TAXMANN .COM 348 (DELHI) CIT V. INSECTICIDES (INDIA) LTD. [2013] 38 TAXMA NN.COM 403 (DELHI) CIT V. ATUL JAIN [2007] 164 TAXMAN 33 (DELHI) HINDUSTAN LEVER LTD. V. R.B. WADKAR [2004] 137 T AXMAN 479 (BOM.) VARSHABEN SANATBHAI PATEL V. ITO [2015] 64 TAXMA NN.COM 179 (GUJARAT) ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 (SC ) LIGHT CARTS PVT LTD V. ITO 2016 (2) TMI 224 - IT AT DELHI BASED ON THE AFORESAID CONTENTION, THE LD. AR OF T HE ASSESSEE SUBMITTED THAT THE RE-ASSESSMENT PROCEEDINGS HAVE RIGHTLY BEEN QUASHED BY THE LD. CIT(A). ON MERITS ALSO THE LD. AR HAS MADE EXTENSIVE ARGUMENTS , BUT BEFORE DEALING WITH THEM, WE FEEL IT APPROPRIATE TO DECIDE THE APPEAL O N LEGAL ASPECTS FIRST. 5. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND HAVE GONE THROUGH THE ENTIRE MATERIAL AVAILABLE ON RECORD AND WE FIND NO JUSTIFICATION TO INTERFERE WITH THE DECISION REACHED BY THE LD. CIT(A) ON VALI DITY OF REASSESSMENT. FOR READY REFERENCE, THE FINDINGS REACHED BY THE LD. CIT(A) R EAD AS UNDER : I HAVE VERY CAREFULLY GONE THROUGH THE SATISFACTIO N NOTE RECORDED BY THE AO AS WELL AS THE WRITTEN AND ORAL SUBMISSIONS MADE BY THE APPELLANT. THE AO WAS PRESENT DURING THE ENTIRE COURSE OF THE HEARING ON 19TH MAY 2015. IT IS SETTLED NOW THAT THE POWER UNDER SECTION 147 IS NOT ABSOLUTE AND UNBRIDLED AND THE SAME HAVE TO BE EXERCISED WITHIN THE FOUR C ORNERS OF LAW. IT IS ALSO SETTLED THAT THE AO HAS NO POWER TO REVIEW HIS ORDE RS AND WHAT CANNOT BE DONE DIRECTLY CAN ALSO NOT BE DONE INDIRECTLY. LAW ENABLES REOPENING IF THE CONDITIONS FOR THE SAME ARE SATISFIED AND IT CANNOT BE ON THE BASIS OF CHANGE OF OPINION. CONDITIONS LAID DOWN BY LAW FOR REOPENI NG ARE ON SEVERAL ASPECTS LIKE THE TIME ELAPSED FROM THE END OF ASSESSMENT YE AR WHICH IS BEING SOUGHT ITA NO. 4861/DEL/2015 10 TO BE REOPENED, WHETHER THE ORIGINAL PROCEEDINGS WE RE COMPLETED U/S 143(3) OR NOT, HOW MUCH IS THE INCOME WHICH HAS ESCAPED AS SESSMENT ETC. THE LAW PROVIDES FOR REOPENING, IF THERE ARE REASONS TO BELIEVE. REASONS TO BELIEVE ARE THE OBJECTIVE REASONS BEFORE THE AO AND THE SANCTIONING AUTHORITY AT THE TIME OF REOPENING. THE AO IS REQUIRED TO EXPR ESS THE SAME THROUGH THE REASONS RECORDED. THE SANCTIONING AUTHORITY IS ALSO REQUIRED TO SIMILARLY EXPRESS ITSELF AND ONLY WHEN THE SANCTIONING AUTHOR ITY IS ALSO OBJECTIVELY AND EXPRESSLY SATISFIED THEN ONLY THE REOPENING CAN BE JUSTIFIED. THE EXAMINATION OF SATISFACTION NOTE REVEALS THE FOL LOWING; 1. THE REASONS RECORDED DO NOT INDICATE WHAT EVIDEN CES WERE AVAILABLE TO THE AO WHICH ENABLED HIM TO DRAW THE CONCLUSION THA T THERE WAS AN ACCOMMODATION ENTRY RACKET OPERATED BY SURENDRA KUM AR JAIN GROUP OF ENTITIES. 2. AS THE EVIDENCES ARE NOT MENTIONED, QUITE OBVIO USLY THERE IS NO APPLICATION OF MIND BY THE AO IN TERMS OF APPRECIAT ION OF EVIDENCES, WHICH WERE SUFFICIENT FOR THE AO TO HAVE REASONS TO BELIEVE THAT THERE WAS AN ACCOMMODATION ENTRY RACKET. 3. IT SEEMS VERY LIKELY THAT THE AO WAS MECHANICAL LY PERSUADED BY THE REPORT OF THE INVESTIGATION WING. 4. THERE IS NO MENTION IN THE REASONS RECORDED ABOU T ANY EVIDENCE WHICH COULD LEAD THE AO TO THE CONCLUSION THAT THE APPELL ANT WAS A BENEFICIARY OF THE ACCOMMODATION ENTRY. 5. THERE IS NO MENTION OF ANY CONFESSION OF THE ALLE GED ENTRY OPERATOR THAT THE APPELLANT HAD OBTAINED ANY ACCOMMODATION E NTRY FROM ANY PERSON. 6. ON PAGE 2 OF THE NOTE, THE AO HAS REPRODUCED A TABLE WHICH WAS APPARENTLY DRAWN AND PREPARED BY THE DI (INVESTIGAT ION) - II. THE ITA NO. 4861/DEL/2015 11 PERUSAL OF THE TABLE INDICATES THAT THE ENTRIES IN ROW NO 2 AND THE ROW NO 4 ARE TOTALLY IDENTICAL. IN BOTH THESE ROWS SAME CHEQUE NOS. ARE MENTIONED FOR THE SAME AMOUNTS ALLEGEDLY RECEIVED B Y THE APPELLANT. THE TABLE INDICATES THE GROSS NON-APPLICATION OF MIN D BY THE AO TO THE FACTS OF THE CASE AND ANALYSIS OF THE SAME VIS A VI S THE EVIDENCE ON HAND. THIS ALSO SUGGESTS THAT THE AO DID NOT EVEN LOOK AT THE BALANCE SHEET OF THE APPELLANT BEFORE ISSUING NOTICE U/S 148. I AGRE E WITH THE ARGUMENT OF THE APPELLANT THAT THE ISSUE IS NOT WHETHER THE CORRECT FIGURE IS RS 4 CRORE OR RS 4.6 CRORE BUT WHETHER THE AO HAS APPLIE D HIS MIND OR NOT BEFORE REOPENING THE ASSESSMENT WHICH WAS COMPLETED U/S 143(3). THE FACT POINTED OUT CLEARLY EVIDENCES NON APPLICATION OF MIND BY THE AO. 7. THE AO HAS ESTIMATED THE RATE OF COMMISSION TO T HE ENTRY OPERATORS AT THE RATE OF 2 %. THIS ALSO INDICATES THAT THE SUSPIC ION OF THE ALLEGED ACCOMMODATION ENTRY OPERATOR AND ITS CONNECTION WIT H THE APPELLANT IS NOT WELL FOUNDED. 8. COPY OF THE REASONS GIVEN TO THE APPELLANT DO NO T INDICATE THAT THE PERMISSION OF SANCTIONING AUTHORITY AS STIPULATED U NDER SECTION 151 OF THE ACT WAS TAKEN AND APPLICATION OF MIND BY THE SA NCTIONING AUTHORITY WAS MADE BEFORE ACCORDING THE SANCTION. 9. COPY OF THE REASONS GIVEN TO THE APPELLANT DOES NOT INDICATE THAT THE AO APPLIED MIND ON VARIOUS PARAMETERS FIXING THE STATU TORY TIME LIMITS AS PROVIDED U/S 149 TO THE FACTS OF APPELLANTS CASE. 10. THE APPELLANT HAS BEEN VERY EMPHATIC ON THE FACT THAT IN THE CASE OF THE APPELLANT SCRUTINY U/S 143(2) WAS EARNED OUT AND TH E ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 08.12.2009. DURING T HE COURSE OF SCRUTINY PROCEEDINGS, ALL THE DETAILS W.R.T. THE SH ARE CAPITAL RECEIVED INCLUDING THE CONFIRMATIONS FROM THE RELEVANT PARTI ES WERE FILED. THE AO IN REASONS HAS NOT MENTIONED WHAT MATERIAL FACT WAS NOT DISCLOSED FULLY AND TRULY BY THE APPELLANT. FOR THIS REASON A LONE IT WAS ARGUED THAT THE REOPENING WAS BARRED BY LIMITATION AS MORE THAN FOUR YEARS HAD ELAPSED SINCE THE END OF THE ASSESSMENT YEAR. ITA NO. 4861/DEL/2015 12 I HAVE ALSO CAREFULLY GONE THROUGH NUMEROUS CASE LA WS RELIED UPON BY THE APPELLANT AS WELL AS VARIOUS OTHERS AVAILABLE O N THE ISSUE. I AGREE THAT THE FACTS OF SEVERAL CASES MENTIONED BY THE APPELLANT A RE SIMILAR TO THE FACTS OF THE APPELLANTS CASE. IN MOST OF THE CASES INFORMAT ION WAS SIMILARLY RECEIVED FROM THE INVESTIGATION WING AND WAS APPARENTLY BASE D UPON SIMILAR INVESTIGATIONS/EVIDENCES RELATED TO THE ENTRY OPERA TORS. NOTWITHSTANDING THE STRONG ALLEGED EVIDENCES IN THOSE CASES AS WELL THE COURTS/TRIBUNALS HAVE BEEN VERY CONSISTENT IN THEIR INTERPRETATION OF LAW . COMMON PROPOSITIONS COMING OUT OF THESE RULING ARE AS BELOW; 1. IT HAS TO BE INDEPENDENT AND SUBSTANTIVE SATISFA CTION OF THE AO THAT HE HAS REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT, 2. SIMILARLY, IT HAS TO BE INDEPENDENT AND SUBSTAN TIVE SATISFACTION OF THE SANCTIONING AUTHORITY THAT HE HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. HE CANNOT SIMPLY WRITE I AG REE/OR I APPROVE ETC. 3. THE AO CANNOT BE MECHANICALLY PERSUADED BY THE R EPORT OF ANY OTHER INCOME TAX AUTHORITY OR FOR THAT MATTER ANY I NFORMATION/REPORT FROM OUTSIDE THE INCOME TAX DEPARTMENT. 4. IF MORE THAN FOUR YEARS HAVE ELAPSED FROM THE E ND OF THE ASSESSMENT YEAR AND THE PERSON WAS ASSESSED EARLIER U/S 143(3) THE ASSESSMENT CAN BE REOPENED ONLY IF THE ASSESSEE HAS NOT FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS. THE REASONS RECORD ED BY THE AO MUST MENTION WHAT ARE THOSE MATERIAL FACTS WHICH HAVE NO T BEEN TRULY AND FULLY DISCLOSED. 5. THE AO MUST CLEARLY MENTION AND MAKE THE RELEVAN T EVIDENCES PART OF THE REASONS RECORDED. AFTER HAVING GONE THROUGH THE FACTS AND CIRCUMSTANC ES OF THE CASE AND GOING THROUGH THE LAW INCLUDING VARIOUS CASE LAWS, AS BRIEFLY SUMMED UP IN THE PRECEDING PARAS, I AM CONVINCED THAT REOPENING IN THIS CASE HAS NOT BEEN MADE IN ACCORDANCE LAW. REASSESSMENT MADE IN CONSEQ UENCE OF THE SAME IS ITA NO. 4861/DEL/2015 13 THEREFORE, QUASHED. GROUND NO 2&3 OF THE APPEAL ARE , THEREFORE, DECIDED IN FAVOR OF THE APPELLANT. GROUND NO. 4 THE LD. AO HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE APPELLANT DID NOT OFFER ANY EXPLANATION ABOUT THE NATURE OR S OURCE OF THE SUM OF RS. 4,00,00,000/- AND HAS FURTHER ERRED IN ADDING T HE SAME TO THE INCOME OF THE APPELLANT IN GROSS VIOLATION OF THE P RINCIPLES OF NATURE JUSTICE. AND GROUND NO. 5 THE LD. AO HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS. 4,00,00,000/- UNDER SECTION 68 OF THE INCOME TAX ACT , 1961 WITHOUT MENTIONING ANY EVIDENCE/ DOCUMENTS AGAINST THE APPE LLANT WHICH INDICATE THAT THE EXPLANATION GIVEN BY THE APPELLAN T WAS INCORRECT. THE APPELLANT HAS ARGUED THAT THE AO HAS PRIMARILY M ADE THE ADDITIONS FOR THE REASON THAT THE DIRECTORS OF THE INVESTING COMPANIES DID NOT APPEAR BEFORE HIM. HE HAS NOT MENTIONED ANY EVIDENCE, WHAT SOEVER, INDICATING THE ALLEGED ENTRY OPERATOR RACKET AND EVIDENCE PERTAINI NG TO THE APPELLANT BEING RELATED OR BENEFICIARY OF THAT IN ANY MANNER. THE AP PELLANT HAS, THEREFORE CLAIMED THAT THE REASSESSMENT IS NOT AT ALL BASED O N ANY EVIDENCE. THE AO HAS ALSO NOT CARRIED OUT ANY INDEPENDENT ENQUIRY WHATSO EVER AND HAS TAKEN THE REPORT OF THE INVESTIGATION TO BE THE GOSPEL TRUTH. IF THE AO HAD ANY EVIDENCE PROVING THE APPELLANT TO BE BENEFICIARY HE SHOULD H AVE AT LEAST MENTIONED THE SAME IN THE ORDER. THE APPELLANT WAS NEVER CONFRONTE D WITH ANY OF THE EVIDENCE WHICH APPARENTLY LED THE AO TO RE-OPEN THE CASE AND ON THE BASIS OF WHICH HE ULTIMATELY MADE THE ADDITION OF RS. 4,00,0 0,000/-. THE APPELLANT GOT AN INVESTMENT OF RS. 400,00,000/- FOR ISSUING 8,00,000 EQUITY SHARES DURING THE RELEVANT FINANCIA L YEAR. THE APPELLANT HAS GIVEN DETAILS OF VARIOUS DOCUMENTS FILED BEFORE THE AO TO ESTABLISH IDENTITY, ITA NO. 4861/DEL/2015 14 CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S AND HAVE PLACED THE COPIES OF THE SAME IN THE PAPER BOOK AND THE SAME A RE NOT REPRODUCED HERE FOR THE SAKE OF BREVITY. THE APPELLANT HAS EMPHATICA LLY STATED THAT THAT THOUGH THE INVESTMENT IN THE SHARE CAPITAL WAS MADE LONG BACK IN THE FINANCIAL YEAR 2006-07 ALL THE INVESTING COMPANIES WERE EXISTING ON THE RECORDS OF THE ROC AS WELL AS TAX DEPARTMENT NOTHIN G ADVERSE HAS BEEN HELD OR DETERMINED AGAINST THEM. THE APPELLANT HAS ARGUED THAT THE AO ISSUED SUMMONS TO THE OLD DIRECTORS OF THE INVESTING COMPANIES. THE DIRECTORS TO WHOM SUMMONS WERE ISSUED WERE NOT EVEN DIRECTORS AT THE TIME OF ISSUI NG SUMMONS AS CAN BE GATHERED FROM THE EVIDENCES MADE AVAILABLE ON RECOR D. THE AO HAS THEREFORE, REOPENED THE CASE AND MADE THE ADDITIONS WITH AN AB SOLUTELY PREMEDITATED MIND WITHOUT CARRYING OUT ANY VERIFICATION WHATSOEV ER ACCORDING TO THE APPELLANT. THE ONLY EFFORT MADE BY THE AO WAS TO CAL L THE DIRECTORS FOR VERIFICATION. EVEN THIS EFFORT WAS TOTALLY MISDIREC TED AND MISCONCEIVED AS THE DIRECTORS TO WHOM THE SUMMONS WERE ISSUED WERE NOT EVEN DIRECTORS ON THE DATE ON WHICH THE SUMMONS WERE ISSUED. FURTHER, THE APPELLANT ARGUED THAT NOTWITHSTANDING THE UNSUBSTANTIATED ALLEGATION OF THE AO. THE COMPANIES WHO WERE ALLEGED TO BE RUN BY THE ENTRY OPERATE;' SURENDRA KUMAR JAIN WERE ASSESSED BY THE INCOME TAX DEPARTMENT UNDER SECTION 153C OF THE ACT AND THE ITR FILED BY THESE COMPANIES WERE ACCEPTED AS LATE AS MARCH 2013 U/S 1 53C. COPY OF THE ASSESSMENT ORDER IN THE CASE OF M/S MANI MALA DELHI PROPERTIES (P) LTD FOR THE AY 2007-08 UNDER SECTION 153C/ 153 A OF THE INC OME TAX ACT MENTION NOTHING INCRIMINATING AGAINST THE AFORESAID COMPANY AND THE ITR HAS BEEN DULY ACCEPTED BY THE AO IN THE CENTRAL CIRCLE- 23, NEW DELHI. THE FACT THAT PROCEEDINGS INITIATED U/S 153C ULTIMATELY DID NOT R ESULT INTO ANY ADDITION/INCRIMINATING FINDINGS INDICATE THAT THE D EPARTMENT HAD NO EVIDENCE AGAINST THESE COMPANIES. SIMILARLY, M/S HI LL RIDGE INVESTMENT LTD WAS ALSO ASSESSED UNDER SECTION 153C FOR THE AY 200 7-08 ON 28.03.2013 BY THE SAME AO IN THE CENTRAL CIRCLE- 23, NEW DELHI AN D THE ITR FILED BY THIS COMPANY WAS DULY AND PROPERLY ACCEPTED BY THE DEPAR TMENT. M/S MEGA TOP ITA NO. 4861/DEL/2015 15 PROMOTERS (P) LTD WAS ALSO ASSESSED FOR THE AY 2007 -08 UNDER SECTION 143(3) ON 04.12.2009 AND THE ITR OF THIS COMPANY HAS BEEN A CCEPTED BY THE AO. THE APPELLANT HAS REEMPHASIZED THE FACT THAT THAT TH E ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) AFTER DUE VERIFICAT ION OF ENHANCEMENT OF THE SHARE CAPITAL. THE APPELLANT HAS SUBMITTED THAT THE ISSUE WITH RESP ECT TO INVESTMENT THROUGH SHARE CAPITAL ETC. HAS BEEN ONE OF THE MOST CONTROVERSIAL ISSUES IN THE RECENT TIMES. JUDICIAL INTERPRETATION ON THE SAME H AS CONSIDERABLY VARIED OVER A PERIOD OF LAST 7/8 YEARS. AFTER LOT OF APPLICATIO N OF MIND BY THE JUDICIAL AUTHORITIES INCLUDING THE HIGH COURTS AND THE TRIBUN ALS, NOW THERE SEEMS TO BE LOT OF CONSISTENCY IN THE INTERPRETATION OF LAW. HONORABLE DELHI HIGH COURT IN THE VERY RECENT JUDGMENT IN THE CASE OF GANGESHW ARI METAL (P) LTD HAS CATEGORIZED THE GROUND SITUATION IN TWO BROAD CATEG ORIES. ONE ARE THE CASES WHERE THE A.O. CARRIES OUT DETAILED INVESTIGATION A ND FINDS OUT THAT THE OSTENSIBLE INVESTORS ARE JUST THE NAME LENDERS AND THERE IS SECOND CATEGORY WHERE THE AO MAKES NO EFFORTS TO REPUDIATE THE CLAI M OF THE ASSESSEE AND ABSOLUTELY ON VAGUE BASIS LIKE NON-APPEARANCE OF DI RECTORS ETC. HOLD THE INVESTORS TO BE FAKE OR UNREAL AND HOLD THE TRANSAC TIONS TO BE NON-GENUINE. THE AFORESAID PROPOSITION OF LAW CLEARLY EMERGES FRO M THE CASES MENTIONED BELOW:- 1. GANGESHWARI METAL (P.) LTD: [2013] 30 TAXMANN.C OM 328 (DELHI) 2. CIT V. GOEL SONS GOLDEN ESTATE (P) LTD ITA NO. 21 2/2012 3. CIT V. LOVELY EXPORTS (P.) LTD. [2008] 216 CTR 195 (SC) 4. CIT V. DWARKADHISH INVESTMENT (P) LTD [2010] 194 TAXMAN 43 (DELHI) 5. CIT V. DIVINE LEASING & FINANCE LTD. [2007] 158 TA XMAN 440 (DELHI) IN THIS CONTEXT THE APPELLANT HAS AGAIN ASSERTED TH AT ITS CASE IS NOT OF A NORMAL SCRUTINY UNDER SECTION 143(3). IN FACT, THE APPELLANT WAS ORIGINALLY ASSESSED UNDER SECTION 143(3) AS MENTIONED EARLIER IN THIS SUBMISSION AND ALL THE INVESTORS WERE DULY VERIFIED. IN THE RE-ASSESSM ENT PROCEEDINGS, THE AO HAS BROUGHT NO EVIDENCE ON RECORD TO SUGGEST THAT THE A PPELLANT WAS ACTUALLY A BENEFICIARY OF ACCOMMODATION ENTRIES. NO EVIDENCE W HATSOEVER ALLEGEDLY REFERRED TO HIM BY THE INVESTIGATION WING WAS MARSH ALED OR CONFRONTED WITH ITA NO. 4861/DEL/2015 16 THE APPELLANT. THE AO HAS NOT EVEN ISSUED A SHOW CAU SE NOTICE TO THE APPELLANT SEEKING EXPLANATION W.R.T. THE SHARE CAPI TAL INVESTORS. THE DIRECTORS ALLEGEDLY SUMMONED BY THE AO WERE NOT THE DIRECTORS OF THE COMPANY ON THE DATE OF ENQUIRY. NO VERIFICATION WHATSOEVER WAS CAR RIED OUT BY THE AO W.R.T. THE INVESTING COMPANIES. ALL THE INVESTING COMPANIE S EXIST ON THE INCOME TAX DEPARTMENT RECORDS AS WELL AS ROC RECORDS. THE DETAI LS OF THE SAME WERE PROVIDED TO THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. SOME OF THE INVESTING COMPANIES WERE ASSESSED UNDER SECTION 153 C OF THE ACT BY THE OFFICER IN THE CENTRAL CIRCLES, NEW DELHI AND NOTHI NG ADVERSE HAS BEEN RECORDED OF THOSE COMPANIES BY THE AO. SOME OF THE COMPANIES WERE ASSESSED U/S 143(3) AND THEIR AFFAIRS WERE DULY ACCEPTED BY THE RESPECTIVE AO. NO EVIDENCE OF ANY NATURE LIKE ANY STATEMENT OF THE ALLEGED ENTRY OPERATOR SURENDRA KUMAR JAIN WAS CONFRONTED WITH TH E APPELLANT. NO EVIDENCE OF ANY OTHER NATURE WHICH LED THE AO TO RE -OPEN THE ASSESSMENT WAS EVER BROUGHT TO THE NOTICE OF THE APPELLANT LEAVE A LONE ASKING FOR ANY EXPLANATION ON THE SAME. THE AO WAS DULY GIVEN COPIE S OF THE BANK ACCOUNTS OF THE INVESTING COMPANIES AND NO CASH DEPOSIT WAS FOUND TO HAVE BEEN MADE IN THOSE BANK ACCOUNTS WHICH CLEARLY LEAD TO THE CO NCLUSION THAT THESE ENTITIES HAD THE CREDIT WORTHINESS AND THE SOURCE WAS FULLY EXPLAINED. CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES OF TH E CASE, IT IS SUBMITTED THAT THE ADDITIONS MADE BY THE AO U/S 68 OF THE ACT ARE ABSOLUTELY PRE-MEDIATED AND HAVE NO MERIT WHATSOEVER. I HAVE GONE THROUGH ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS UNDISPUTED THAT THE APPELLANT WAS EARLIER ASSESSED U/S 143(3) AND THIS ASPECT OF ENHANCEMENT OF THE SHARE CAPITAL WAS VERIFIED BY THE AO. IT IS ALSO TRUE THAT THE APPELLANT WAS NEVER CONFRONTED WITH ANY EVIDENC E OF ACCOMMODATION ENTRY RACKET OR THE APPELLANT BEING A PART OF THE S AME. AS A MATTER OF FACT NO SUCH EVIDENCE HAS EVEN BEEN MENTIONED IN THE ASSESS MENT ORDER. ON THE CONTRARY THE ASSESSING OFFICER IN THE CENTRAL CIRCL E IN THE CASES OF SOME OF THE INVESTING COMPANIES HAVE NOT STATED ANYTHING INCRIM INATING AGAINST THEM IN THE ASSESSMENTS MADE U/S 153C OF THE ACT. SOME OF T HE INVESTING COMPANIES HAVE ALSO BEEN ASSESSED U/S 143(3). I ALSO TAKE NOT E OF THE FACT THOSE DIRECTORS ITA NO. 4861/DEL/2015 17 OF INVESTING COMPANIES WHO WERE APPARENTLY SUMMONED BY THE AO AND HAD CEASED TO BE DIRECTORS ON THE DATE OF THE ATTEMPTED ENQUIRY. IT IS ALSO ESTABLISHED THAT ALL THE INVESTING COMPANIES WERE V ERY MUCH EXISTING ON THE RECORDS OF THE DEPARTMENT AS WELL AS ROC. I HAVE AL SO NOTED THAT THERE IS NO CASH DEPOSIT IN THE BANK ACCOUNTS OF THE INVESTING COMPANIES BEFORE MAKING THE INVESTMENTS IN THE APPELLANT COMPANY. I HAVE AL SO CONSIDERED VARIOUS CASES ON THE ISSUE OF DEEMED INCOME U/S 68 OF THE A CT. IT IS TRUE THERE HAVE BEEN JUDGMENTS IN FAVOUR OF REVENUE AS WELL AS TAXP AYER. THIS PERHAPS HAPPENS BECAUSE FACTS OF THE CASES ARE DIFFERENT AN D MORE IMPCRIANTLY INVESTIGATION AND APPRECIATION OF CORRECT FACTS BY THE AO IS DIFFERENT. THIS IS THE REASON PERHAPS HONBLE JURISDICTIONAL HIGH COUR T IN THE CASE GANGESHWARI METAL AND GOEL SONS (SUPRA) DIVIDED THE CASES IN TWO BROAD CATEGORIES. CONSIDERING ALL THESE COMPELLING FACTS AND PROPOSIT IONS OF LAW, I AM OF THE CONSIDERED OPINION THAT THE ADDITIONS IN THE CA SE OF THE APPELLANT ARE BEREFT OF ANY EVIDENCE AND THE SAME SEEMS TO HAVE B EEN MADE ON ASSUMPTIONS. THIS IS ALL THE MORE UNACCEPTABLE BECAU SE IT IS SECOND ROUND OF ASSESSMENT AFTER ORIGINAL ASSESSMENT U/S 143(3). THE ACTION OF THE AO IN TREATING THESE SUMS AS DEEMED INCOME U/S 68 HOLDING THE SHARE CAPITAL INVESTMENTS RECEIVED BY IT AS UNEXPLAINED FOR THE A LLEGATION OF THE SAME BEING NON GENUINE OR NOT HAVING CREDITWORTHINESS OR FOR N OT BEING ABLE TO ESTABLISH IDENTITY OF THE INVESTING COMPANIES ARE UNSUSTAINAB LE AND THE SAME IS DELETED. GROUND NO 4&5 ARE, THEREFORE, ALLOWED. GROUND NO. 6 THE LD. AO HAS ERRED ON FACTS AND IN LAW IN ASSUMIN G THAT A COMMISSION AT THE RATE OF 2.5 % ON RS. 4,00,00,000/ - WAS PAID TO OBTAIN ACCOMMODATION ENTRIES WITHOUT ANY EVIDENCE WHATSOEV ER OR WITHOUT IDENTIFYING THE PERSON TO WHOM THE COMMISSION WAS P AID. THIS GROUND IS LINKED TO THE GROUND NO. 4 AND GROUND NO. 5 & ALL THE ARGUMENTS MADE THEREIN ARE APPLICABLE TO THIS GROUN D AS WELL. IN ADDITION TO THE ARGUMENTS GIVEN IN THE GROUND NO. 4 & 5 THE APP ELLANT SUBMITTED THAT THE ITA NO. 4861/DEL/2015 18 AO HAS NO EVIDENCE WHATSOEVER FOR PAYMENT OF COMMIS SION AT THE RATE OF 2.5 % WHICH HE HAS ESTIMATED. IT IS ALL THE MORE IRONIC AL THAT THE A.O. HAS NO CLUE ABOUT THE RECIPIENT OF THE COMMISSION WHEN THE ENTI RE CASE WAS ALLEGEDLY BASED UPON EVIDENCES GATHERED FROM THE ALLEGED ACCO MMODATION ENTRY OPERATOR. THE ADDITION OF RS.10, 00,000/- THEREFORE DESERVES TO BE DELETED ACCORDING TO THE APPELLANT. I HAVE ALLOWED GROUND NUMBER 4&5. THIS IS DIRECTLY CONNECTED AND CONSEQUENTIAL TO THE SAME ISSUE. THIS ADDITION OF RS 10,00,000/- IS, THEREFORE ALSO DIRECTED TO BE DELETED. 6. WE ALSO FIND THAT THE ASSESSING OFFICER HAS ACTE D MECHANICALLY ON THE INFORMATION OF INVESTIGATION WING ABOUT THE ALLEGED ACCOMMODATION ENTRIES AND HAS DRAWN HIS CONCLUSIONS WITHOUT APPLYING HIS MIND OR MAKING ANY ENQUIRY IN THE MATTER BEFORE FORMING THE BELIEF OF ESCAPEMENT. IN THE CASE OF CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (SUPRA) IN THE IDENTIC AL FACTS, SIMILAR REASONS WERE RECORDED BY THE ASSESSING OFFICER ON THE BASIS OF I NFORMATION OF INVESTIGATION WING WHERE THERE WAS NO INDEPENDENT APPLICATION OF MIND TO ANY TANGIBLE MATERIAL WHICH FORMED THE BASIS OF BELIEF OF ESCAPE MENT. IN THAT CASE ALSO, THE INFORMATION RECEIVED CONTAINED (I) THE NAMES OF BEN EFICIARIES (II) BANK NAME & BRANCH OF BENEFICIARIES BANKS AND ENTRY GIVING BANK S, (III) VALUE OF ENTRIES TAKEN (IV) NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT AND THE ASSESSING OFFICER AFTER GOING THROUGH THE SAID INFORMATION STRAIGHTWA Y DERIVED ITS CONCLUSION WITHOUT APPLICATION OF HIS MIND. IN THESE FACTS, TH E HONBLE JURISDICTIONAL HIGH COURT AFTER FOLLOWING VARIOUS OTHER DECISIONS HAS H ELD AS UNDER : A PERUSAL OF THE REASONS AS RECORDED BY THE A.O. R EVEALS THAT THERE WERE THREE PARTS TO IT. IN THE FIRST PART, THE AO H AS REPRODUCED THE PRECISE INFORMATION HE HAS RECEIVED FROM THE INVESTIGATION WING OF THE REVENUE. THIS INFORMATION IS IN THE FORM OF DETAILS OF THE AMOUNT OF CREDIT RECEIVED, THE ITA NO. 4861/DEL/2015 19 PAYER, THE PAYEE, THEIR RESPECTIVE BANKS, AND THE C HEQUE NUMBER. THIS INFORMATION BY ITSELF CANNOT BE SAID TO BE TANGIBLE MATERIAL. 20. COMING TO THE SECOND PART, THIS TELLS US WHAT THE AO DID WITH THE INFORMATION SO RECEIVED. HE SAYS: 'THE INFORMATION S O RECEIVED HAS BEEN GONE THROUGH.' ONE WOULD HAVE EXPECTED 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 ASSESSME NT. BUT THIS IS ABSENT. HE STRAIGHTAWAY RECORDS THE CONCLUSION THAT 'THE ABOVE SAID INSTRUMENTS ARE IN THE NATURE OF ACCOMMODATION ENTRY WHICH THE ASSESSE E HAD TAKEN AFTER PAYING UNACCOUNTED CASH TO THE ACCOMMODATION ENTRY GIVEN (SIC GIVER)'. THE AO ADDS THAT THE SAID ACCOMMODATION WAS 'A KNOWN EN TRY OPERATOR THE SOURCE BEING 'THE REPORT OF THE INVESTIGATION WING' . 21. THE THIRD AND LAST PART CONTAINS THE CONCLUSION DRAWN BY THE AO THAT IN VIEW OF THESE FACTS, 'THE ALLEGED TRANSACTION IS NOT THE BONAFIDE ONE. THEREFORE, I HAVE REASON TO BE BELIEVE THAT AN INCOM E OF RS. 5,00,000 HAS ESCAPED ASSESSMENT IN THE AY 2004-05 DUE TO THE FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT... ' 22. AS RIGHTLY POINTED OUT BY THE ITAT, THE 'REASO NS TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIONS, ONE AFTER THE OT HER. THE EXPRESSION 'ACCOMMODATION ENTRY' IS USED TO DESCRIBE THE INFOR MATION SET OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUS ION. THE STATEMENT THAT THE SAID ENTRY WAS GIVEN TO THE ASSESSEE ON HIS PAYING 'UNACCOUNTED CASH' IS ANOTHER CONCLUSION THE BASIS FOR WHICH IS NOT DISCL OSED. WHO IS THE ACCOMMODATION ENTRY GIVER IS NOT MENTIONED. HOW HE CAN BE SAID TO BE 'A KNOWN ENTRY OPERATOR' IS EVEN MORE MYSTERIOUS. CLEA RLY THE SOURCE FOR ALL THESE CONCLUSIONS, ONE ALTER THE OTHER, IS THE INVE STIGATION REPORT OF THE DIT. NOTHING FROM THAT REPORT IS SET OUT TO ENABLE THE R EADER TO APPRECIATE HOW THE CONCLUSIONS FLOW THEREFROM. 23. THUS, THE CRUCIAL LINK BETWEEN THE INFORMATION MADE AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS ABSENT. THE REASON S MUST BE SELF EVIDENT, THEY MUST SPEAK FOR THEMSELVES. THE TANGIBLE MATERIA L WHICH FORMS THE BASIS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT M UST BE EVIDENT FROM A READING OF THE REASONS. THE ENTIRE MATERIAL NEED NOT BE SET OUT. HOWEVER, ITA NO. 4861/DEL/2015 20 SOMETHING THEREIN WHICH IS CRITICAL TO THE FORMATIO N OF THE BELIEF MUST BE REFERRED TO. OTHERWISE THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 I S A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINLY CANNOT BE INV OKED CASUALLY OR MECHANICALLY. THE HEART OF THE PROVISION IS THE FORM ATION OF BELIEF BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS SO R ECORDED HAVE TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING THE REASONS. IT CANNOT BE SUPPLIED SUBSEQUENTLY EITHER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPENING ARE CONSIDERED OR EVEN DURING THE ASSESSMENT PROCEEDINGS THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SIN CE THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, AND NOT SECTION 143 (3) OF THE ACT, THE PROVISO TO SECTION 147 WILL NOT APPLY. IN OTHER WORDS, EVEN THOUGH THE REOPENING IN THE PRESENT CASE WAS ALTER THE EXP IRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY, IT WAS NOT NECESSARY FOR TH E AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRULY ALL MATE RIAL FACTS NECESSARY FOR THE ASSESSMENT. 26. THE FIRST PART OF SECTION 147(1) OF THE ACT REQU IRES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IT IS THUS FORMATION OF REASON TO BELIEV E THAT IS SUBJECT MATTER OF EXAMINATION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJEC TIVE CRITERIA. WHILE THE REPORT OF THE INVESTIGATION WING MIGHT CONSTITUTE T HE MATERIAL ON THE BASIS OF WHICH HE FORMS THE REASONS TO BELIEVE THE PROCESS O F ARRIVING AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REP ORT OF INVESTIGATION. THE RECORDING OF REASONS TO BELIEVE AND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASSUMPTION OF JURISDICTION UNDER S ECTION 147 OF THE ACT. THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN TH E TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REASON TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT. 27. EACH CASE OBVIOUSLY TURNS ON ITS OWN FACTS AND NO TWO CASES ARE IDENTICAL. HOWEVER, THERE HAVE BEEN A LARGE NUMBER OF CASES EX PLAINING THE LEGAL REQUIREMENT THAT REQUIRES TO BE SATISFIED BY THE AO FOR A VALID ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT TO REOPEN A PAST ASSESSMENT. ITA NO. 4861/DEL/2015 21 28.1 IN SIGNATURE HOTELS (P.) LTD. (SUPRA), THE RE ASONS FOR REOPENING AS RECORDED BY THE AO IN A PROFORMA AND PLACED BEFORE THE CIT FOR APPROVAL READ THUS: '11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.- INFORMATION IS RECEIVED FROM THE DIT (INV.-L), NEW D ELHI THAT THE ASSESSEE HAS INTRODUCED MONEY AMOUNTING TO RS. 5 LA KH DURING THE F.Y. 2002-03 RELATING TO A.Y. 2003-04. DETAILS ARE CONTA INED IN ANNEXURE. AS PER INFORMATION _ AMOUNT RECEIVED IS NOTHING BUT AC COMMODATION ENTRY AND ASSESSEE IS A BENEFICIARY.' 28.2 THE ANNEXURE TO THE SAID PROFORMA GAVE THE NAM E OF THE BENEFICIARY, THE VALUE OF ENTRY TAKEN, THE NUMBER OF THE INSTR UMENT BY WHICH ENTRY WAS TAKEN, THE DATE ON WHICH THE ENTRY WAS TAKEN, NAME OF THE ACCOUNT HOLDER OF THE BANK FROM WHICH THE CHEQUE WAS ISSUED, THE ACCO UNT NUMBER AND SO ON. 28.3 ANALYSING THE ABOVE REASONS TOGETHER WITH THE ANNEXURE, THE COURT OBSERVED: '14. THE FIRST SENTENCE OF THE REASONS STATES THAT I NFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCOME-TAX (INVESTIGATION ) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING FINANCIAL YEAR 2002-03 AS PER THE DETAILS GIVEN IN ANNEXURE. THE SAID ANNEXURE. REPRODUCED ABOVE, RELATES TO A CHEQUE REC EIVED BY THE PETITIONER ON 9TH OCTOBER, 2002 FROM SWETU STONE PV FROM THE BANK AND THE ACCOUNT NUMBER MENTIONED THEREIN. THE LAST S ENTENCE RECORDS THAT AS PER THE INFORMATION, THE AMOUNT RECEIVED WA S NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFI CIARY. 15. THE AFORESAID REASONS DO NOT SATISFY THE REQUIRE MENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFE RRED TO IS EXTREMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT ANNEXURE, WHICH HAS BEEN QUOTE D ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT P RIMA FACIE SHOWS OR ESTABLISHES NEXUS OR LINK WHICH DISCLOSES ESCAPEMEN T OF INCOME, ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESC APEMENT OF INCOME. FURTHER, IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND M ATERIAL OF THE INFORMATION. THE ASSESSING OFFICER ACCEPTED THE PLE A ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANNER. THE COMMIS SIONER ALSO ITA NO. 4861/DEL/2015 22 ACTED ON THE SAME BASIS BY MECHANICALLY GIVING HIS APPROVAL. THE REASONS RECORDED REFLECT THAT THE ASSESSING OFFICER DID NOT INDEPENDENTLY APPLY HIS MIND TO THE INFORMATION REC EIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) AND ARRIVE AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT.' 7. IN THE INSTANT CASE ALSO, SIMILAR REASONS ALONG WITH SIMILAR WORDINGS HAVE BEEN RECORDED AND THE ASSESSING OFFICER WHILE CONCL UDING THE ACCOMMODATION ENTRIES IN THE GARB OF SHARE CAPITAL, HAS FAILED TO APPLY ITS MIND IN SUPPORT OF ITS BELIEF. HERE IN THIS CASE, THE REASONS RECORDED DO NOT REFER ANY EVIDENCE OR ANY CONFESSION /STATEMENTS OF ENTRY OPERATOR, CASH PAYM ENT BY ASSESSEE, PAYMENT OF COMMISSION ETC. SO AS TO SUPPORT ITS BELIEF THAT TH E ASSESSEE WAS BENEFICIARY OF THE ENTRY OPERATING RACKET. THERE IS ALSO NO WHISPER IN THE REASSESSMENT ORDER AGAINST THE CONTENTION OF THE ASSESSEE THAT THE INC OME-TAX AUTHORITIES THEMSELVES HAVE ASSESSED THE ALLEGED ENTRY OPERATOR U/S. 153C OF THE ACT AND THE INCOME-TAX RETURN FILED BY THESE GROUP COMPANIES HAVE BEEN ACC EPTED IN MARCH, 2013. THE LD. AR OF THE ASSESSEE HAS SUBMITTED COPIES OF ASSE SSMENT ORDERS IN THE CASE OF MANI MALAL DELHI PROPERTIES (P) LTD. FOR THE ASSESS MENT YEAR 2007-08 U/S. 153C/153A WHERE THE ITR FILED BY THIS COMPANY STAND S ACCEPTED BY ITO CENTRAL CIRCLE 23 NEW DELHI RESULTING INTO NO ADDITION. SIM ILAR IS THE POSITION WITH RESPECT TO OTHER COMPANIES M/S. HILL RIDGE INVESTME NT LTD. AND M/S. MEGA TOP PROMOTERS (P) LTD. 8. THUS, KEEPING IN VIEW THE FACT THAT THERE WAS RE FERENCE IN THE NOTICE OF ANY SATISFACTION OF COMPETENT AUTHORITY AS CONTEMPLATED U/S. 151 EVEN AFTER ISSUANCE OF NOTICE AFTER FOUR YEARS FROM THE END OF ASSESSME NT YEAR; THAT THERE IS NO REFERENCE OF ANY EVIDENCE SUCH AS STATEMENT OR CONF ESSION OF THE ALLEGED ENTRY OPERATOR AGAINST THE ASSESSEE; THAT THERE IS ABSENC E OF ANY PARTICULAR FACT WHICH ITA NO. 4861/DEL/2015 23 THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY REG ARDING THE SHARE CAPITAL AT THE TIME OF ORIGINAL ASSESSMENT; THAT THE SATISFACTION NOTE OF THE ASSESSING OFFICER IS SOLELY BASED ON INFORMATION OF INVESTIGATION WING; AND THAT IN THE ASSESSMENTS OF ALLEGED ENTRY OPERATOR GROUP U/S. 153C, THE RETURNS FILED BY THEM STOOD ACCEPTED BY THE DEPARTMENT ITSELF AND AFTER CONSIDERING VARI OUS AUTHORITIES CITED BY THE LD. AR AND THE LD. CIT(A), WE FIND NO INFIRMITY IN THE DECISION OF THE LD. CIT(A) WHILE HOLDING THE REOPENING PROCEEDINGS AS VOID AND ILLEG AL. THEREFORE, WITHOUT GOING INTO THE MERITS OF ADDITION, THE DECISIONS OF LD. C IT(A) DESERVES TO BE UPHELD ON THE LEGAL ASPECT OF THE CASE. THE DECISIONS CITED B Y THE LD. DR ARE FOUND NO APPLICABLE IN THE INSTANT CASE, HAVING BEEN BASED O N DIFFERENT SET OF FACTS. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2019. SD/- SD/- (AMIT SHUKLA) (L.P. S AHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15.03.2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI