ACIT, New Delhi V. Smt. Sushma Gupta, New Delhi

ITA 5216/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74398 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 19-12-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 09-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN GUPTA
• Keywords: Invalid notice; Depreciation; Tangible material; Reason to believe; Reassessment proceedings
• Section: 143(3); 10B; 147; 148; 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G: NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 5216/DEL/2012 ASSESSMENT YEAR: 2002- 2003 ACIT VS. SUSHMA GUPTA CIRCLE 23(1), J-1/28, 1 ST FLOOR, KHIRKI EXTN. MALVIYA NAGA R, NEW DELHI. NEW DELHI 110 0 19. (PAN AEPPG4 473E) (APPELLANT) (RESPONDENT) AND CO NO. 437/DE L/2012 (ITA NO. 5216/DEL/2012) ASSESSMENT YEAR: 2002- 2003 SUSHMA GUPTA VS. ACIT J-1/28, 1 ST FLOOR, KHIRKI EXTN. CIRCLE 23(1) MALVIYA NAGAR, NEW DELHI NEW DELHI. (PAN AEPPG4473E) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. RENUKA JA IN GUPTA, SR. DR RESPONDENT BY : SHRI SALIL AGGAR WAL, ADVOCATE ORDER PER I.C. SUDHIR, JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER ON THE ISSUES OF (I) DELETION OF DISALLOWANCE OF RS. 998580/- CLAIMED ON ACCOUNT OF EXPENSES OF TRADING NATURE AGAINST THE INCOME FROM THE BANK INT EREST ; AND (2) SETTING ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 2 OF BUSINESS LOSS OF RS. 998580/- AGAINST THE INTERE ST INCOME U/S 71 OF THE ACT. 2. THE ASSESSEE ON THE OTHER HAND HAS OBJECTE D THE FIRST APPELLATE ORDER ON LEGAL ISSUE REGARDING VALIDITY OF INITIATI ON OF PROCEEDINGS U/S 147 OF THE ACT AND ON MERITS REGARDING SUSTENANCE OF DISAL LOWANCE OF EXPENDITURE, DISALLOWANCE OF THE CLAIMED EXEMPTION U/S 10B IN RE SPECT OF INTEREST ON FDR AND DISALLOWANCE OF SETTING OF LOSS AGAINST THE INT EREST INCOME. 3. SINCE THE OBJECTION NO. 1 AND 1.1 OF TH E CROSS OBJECTION PREFERRED BY THE ASSESEE RELATE TO THE LEGAL ISSUE QUESTIONIN G VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT, IT WAS HEARD FIRST AND RESPECTIVE ARGUMENTS WERE ADVANCED BY THE PARTIES. 4. THE RELEVANT FACTS ARE THAT THE ASSESEE IS ENGAGED IN THE SOFTWARE DEVELOPMENT BUSINESS AND DURING THE YEAR PROFIT FRO M M/S. MIND MILL AND M/S. STARDATA WAS DECLARED BY SOFTWARE EXPORT AT RS . 43573134/-. THE RETURN WAS FILED ON 31.10.2002 AND PROCESSED U/S 14 3(1) OF THE ACT. SUBSEQUENTLY THE AO NOTED THAT SOME INCOME HAS ESCA PED ASSESSMENT AND RECORDED THE FOLLOWING REASONS:- THE RETURN OF INCOME FOR THE A.Y. 2002-03 HAS BEEN FILED ON 31.10.2002. THE INCOME HAS BEEN DECLARED AT RS. 4,85,250/-. IT IS SEEN THAT THE ASSESSEE IS ENGAGED IN SOFTWARE DEVELOPMENT BUSIN ESS AND DURING THE YEAR PROFIT FROM M/S. MINDMILL AND M/S. STARDATA HA S BEEN DECLARED BY SOFTWARE EXPORT RS. 4,35,73,134/- HAS BEEN DECLARED EXEMPT U/S 10B OF THE I.T. ACT, 1961. IT IS FURTHER SEEN FROM THE PROFIT AND LOSS ACCOUNT OF M/S. STARDATA THAT APART FROM SOFTWARE EXPORT OF RS. 19, 75,177/- THE ASSESSEE HAS ALSO CREDITED INTEREST TO THE TUNE OF RS. 13, 14,637/- AND HAS CLAIMED NET PROFIT OF RS. 1,49,283/-. THE SAME WAS CLAIMED AS EXEMPT U/S 10B. AS ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 3 PER THE PROVISION OF SECTION 10B: THE DEDUCTION IS ADMISSIBLE ONLY ON SUCH PROFITS AND GAINS DERIVED FROM THE EXPORT OF ARTICL ES OR THINGS OR COMPUTER SOFTWARE OUTSIDE INDIA AND THE SALE PROCEEDS ARE RE CEIVED IN, OR BROUGHT INTO INDIA BUT THE ASSESSEE IS CONVERTIBLE FOREIGN EXCHANGE WITHIN THE SPECIFIED. THE INTEREST INCOME SHOWN AT RS. 1,49,28 3/- EARNED IN INDIA AND SHOWN IN THE P & L ACCOUNT OF M/S. STARDATA IS NOT ELIGIBLE FOR DEDUCTION U/S 10B AND THE SAME HAS TO BE TAXED UNDER THE HEAD INC OME FORM OTHER SOURCES AND NO DEDUCTION U/S 10B IS ALLOWABLE ON IN TEREST INCOME EARNED. THUS, I HAVE REASONS TO BELIEVE THAT INCOME CHARGEA BLE TO TAX TO THE TUNE OF RS. 1,49,283/- HAS ESCAPEMENT ASSESSMENT. FURTHE R, WITH THE RETURN OF INCOME THE ASSESSEE HAS FILED LETTER REQUESTING FOR PERMISSION TO AVAIL EXEMPTION U/S 10B OF THE I.T. ACT 1961. HOWEVER, TH ERE IS NO OTHER EVIDENCE ON RECORD TO PROVE THE CLAIM OF THE ASSESS EE THAT SHE IS ENTITLED TO EXEMPTION U/S 10B OF THE I.T. ACT, 1961. HENCE, THE CLAIM OF THE ASSESSEE DOES NOT APPEAR TO BE AS PER LAW. 2. FURTHER, IT IS SEEN THAT THE ASSESSEE HAS AL SO FILED PROFIT AND LOSS ACCOUNT UNDER THE NAME AND STYLE OF MRS. SUSHMA GUP TA AND HAS DECLARED SOFTWARE SALE OF RS. 18,000/- INTEREST ON FDR AT RS . 15,46,523/- AND INTEREST. ON SB ACCOUNT AT RS. 8,467/-. ON THE SAME PROFIT HAS BEEN SHOWN AT RS. 4,86,250/- AFTER DEBITING VARIOUS EXPENDITUR E LIKE SALARY, BANK CHARGES, PROFESSIONAL CHARGES, CONVEYANCE, COURIER CHARGES, BUSINESS PROMOTION, TRAVELING, TELEPHONE, VEHICLE MAINTENANC E, DEPRECIATION ETC. INTEREST ON FDR SHOWN AT RS. 15,46,523/- AND INTT. ON SB A/C SHOW AT RS. 8,467/- IS CHARGEABLE TO TAX U/S 56 OF I.T. ACT UND ER THE HEAD INCOME FROM OTHER SOURCES AS CLAIMED BY THE ASSESSEE IN THE PR OFIT AND LOSS ACCOUNT UNDER THE NAME AND STYLE OF MRS. SUSHMA GUPTA ARE N OT ALLOWABLE BECAUSE THE ASSESSEE HAS NOT ENGAGED IN ANY SORT OF TRADING OR BUSINESS ACTIVITY AS SOFTWARE SALE HAS BEEN SEPARATELY SHOWN UNDER M/S. STARDATA AND M/S. MINDMILL. MOREOVER, ON SOFTWARE SALE, DEDUCTION U/S 10/B HAS SEPARATELY BEEN CLAIMED. 5. THE AO IN THE ASSESSMENT FRAMED U/S 147 READ WITH SECTION 143(3) OF THE ACT MADE ADDITION, WHICH WAS QUESTIONED BEFORE THE LD. CIT(A) BESIDES QUESTIONING THE VALIDITY OF PROCEEDINGS INITIATED U /S 147 OF THE ACT. THE LD. CIT(A) DID NOT AGREE WITH THE ASSESSEE AND UPHELD T HE VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS FOLLOWING THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. 291 ITR ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 4 500 (SC). IT WAS HELD BY HIM THAT THERE WAS SUFFICI ENT RELEVANT MATERIAL TO ENABLE THE AO TO HAVE A PRIMA FACIE INFORMATION THA T INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND AS SUCH INITIAT ION OF PROCEEDINGS IS VALID. AGAINST THIS ACTION OF THE LD. CIT(A) THE AB OVE OBJECTION HAS BEEN RAISED BY THE ASSESSEE BEFORE US. 6. IN SUPPORT OF THE ABOVE OBJECTION THE LD. A R SUBMITTED THAT IT IS EVIDENT FROM THE REASONS RECORDED THAT THERE WAS NO FRESH MATERIAL WHICH SURFACED AFTER FURNISHING OF RETURN OF INCOME AND A S SUCH INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IS WITHOUT JURISDICT ION. HE POINTED OUT THAT THE AO HAD ADMITTED THAT INITIATION IS BASED ON THE SCRUTINY OF ACCOUNTS ATTACHED WITH THE RETURN OF INCOME AND NO MORE. HE CONTENDED THAT MERE REAPPRAISAL OF THE RETURN OF INCOME CANNOT CONFER J URISDICTION TO INITIATE PROCEEDINGS U/S 147 OF THE ACT. HE SUBMITTED THAT IT IS A WELL SETTLED LAW THAT EVEN IN CASES, WHEN NO ASSESSMENT U/S 143 (3) HAS BEEN FRAMED, SURFACING OF FRESH MATERIAL IS NECESSARY AFTER ACCE PTANCE OF RETURN U/S 143(1) OF THE ACT BEFORE ISSUING NOTICE U/S 148 OF THE ACT. HE PLACED RELIANCE ON SEVERAL DECISIONS INCLUDING THE FOLLOWI NG : CIT VS. ORIENT CRAFTS LTD. (2013) 354 ITR 536 (DELH I) SHRI GOPI G NAMBIAR VS. JCIT ITA NO. 1083/D/2010 (A SSTT. YEAR 2007-08 ORDER DATED 26.7.2013 7. THE LD. AR SUBMITTED FURTHER THAT THERE WA S NO MATERIAL MUCH LESS TANGIBLE AND RELEVANT MATERIAL AS IS OTHERWISE EVID ENT FROM THE REASONS ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 5 RECORDED WHICH COULD ENABLE THE AO TO HAVE REASON TO BELIEVETHAT INCOME CHARGEABLE TO TAX TO THE TUNE OF RS. 149283/- HAS E SCAPED ASSESSMENT. LIKEWISE THERE WAS NO MATERIAL ON RECORD TO ALLEGE AND OBSERVE THAT THE ASSESEE IS NOT ENTITLED TO CLAIM DEDUCTION U/S 10B OF THE ACT. HE SUBMITTED FURTHER THAT THE AO HAS ALSO NOT STATED ANY MATERIA L SO AS TO ALLEGE THAT EXPENDITURE CLAIMED WAS NOT ALLOWABLE OTHER THAN HI S MISCONCEPTION THAT ASSESSEE WAS NOT ENGAGED IN ANY TRADING ON BUSINESS ACTIVITY. THUS IN ABSENCE OF ANY MATERIAL TO ALLEGE THAT ASSESSEE WAS NOT ENGAGED IN ANY BUSINESS ACTIVITY , IT COULD NOT BE ALLEGED THAT EX PENSES ARE NOT ALLOWABLE. HE SUBMITTED THAT EVEN ASSUMING THAT THERE WAS NO B USINESS THAN TOO IT COULD NOT HAVE BEEN OBSERVED EVEN PRIMA FACIE THAT SUCH EXPENSES ARE NOT ALLOWABLE AS DEDUCTION. IT IS THUS A CASE WHERE PRO CEEDINGS HAVE BEEN INITIATED ON THE BASIS OF NO MATERIAL AND THEREFORE THE SAME ARE MISCONCEIVED, MISPLACED , ARBITRARY, ERRONEOUS AND NOT BASED ON FACTUAL CONSEQUENCES AND HENCE IT IS WITHOUT JURISDICTION. HE ALSO PLACED RELIANCE ON THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF ASHOK KUMAR SING VS. ITO 132 ITR 707 (DELI), UNITED ELECTRICAL C OMPANY PVT. LTD. VS. CIT 258 ITR 317 (DEL.) AND BAWA ABHAY SINGH VS. DCI T 253 ITR 83 (DELHI). THE LD. AR ALSO PLACED RELIANCE ON THE FOLLOWING DE CISIONS OF THE HONBLE SUPREME COURT CIT VS. INDIAN OIL CORPORATION 159 ITR 956 (SC), ITO VS. LAKHMANI MEWAL DAS 103 ITR 437 (SC) ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 6 8. LD. AR CONTENDED FURTHER THAT PROCEEDINGS TO REOPEN ASSESSMENT U/S 148 CANNOT BE ATTEMPTED TO MAKE AN INVESTIGATION. IN SUPPORT HE PLACED RELIANCE ON THE DECISIONS INCLUDING DECISION OF HON BLE SUPREME COURT IN THE CASE OF CHUGGAMAL RAJPAL VS. S.P. CHALIHA AND OTHER S 79 ITR 603 (SC) AND THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CA SES OF SARTHAK SECURITIES CO. (P) LTD. VS. ITO 329 ITR 110 (DELHI), CIT VS. S FIL STOCK BROKING LTD. 325 ITR 285 (DELHI), CIT VS. ATUL JAIN AND OTHERS 2 99 ITR 383 (DELHI) AND SIGNATURE HOTELS (P) LTD. VS. ITO 60 DTR30 (DELHI). THE LD. AR SUBMITTED FURTHER THAT EVEN IN THE CASE OF ACIT VS. RAJESH JH AVERI STOCK BROKERS P. LTD.(SUPRA) RELIED UPON BY THE LD. CIT(A), THEIR LO RDSHIPS OF HONBLE SUPREME COURT HAVE BEEN PLEASED TO HOLD THAT AT THE STAGE OF ISSUE OF NOTICE THE ONLY QUESTION IS WHETHER THERE WAS RELE VANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BEL IEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. HOWEVER IT IS EQUA LLY TRUE AND UNDENIABLE IN THE PRESENT CASE THAT THERE WAS NO MA TERIAL WHICH CONSTITUTE A RELEVANT MATERIAL TO ESTABLISH OR TO HAVE A BELIE F THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN SUCH CIRCUMSTANCE S EXEMPTION OF JURISDICTION IS UNTENABLE. LD. AR SUBMITTED FURTHER THAT ISSUE OF JURISDICTION CAN EVEN BE RAISED IN THE SECOND ROUND OF PROCEEDIN GS WHICH HAS BEEN WELL SUPPORTED BY SEVERAL DECISIONS INCLUDING THE DECISI ONS BELOW MENTIONED :- 1. P.V. DOSHI VS. CIT 113 ITR 22 (GAU.) HEMAL KNITTING INDUSTRIES VS. ACIT 127 ITD 160 (THI RD MEMBER (CHENNAI)) ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 7 9. LD. DR ON THE OTHER HAND PLACED RELIANCE ON THE FINDING OF THE FIRST APPELLATE AUTHORITY ON THE ISSUE. SHE SUBMITTED THA T NO SUCH ISSUE OF VALIDITY OF NOTICE ISSUED U/S 148 OF THE ACT WAS RA ISED AT FIRST AVAILABLE OCCASION BEFORE THE AO. THE FACTS IN THE CASE OF SH IR GOPI NAMBIAR VS. ITO (SUPRA) ARE DIFFERENT HENCE IT IS NOT HELPFUL TO TH E ASSESSEE. IN THAT CASE THE ASSESSEE HAD RAISED OBJECTION ON THE VALIDITY OF NO TICE ISSUED U/S 148 OF THE ACT AT FIRST OCCASION BEFORE THE AO. SHE SUBMITT ED FURTHER THAT THERE WERE SUFFICIENT RELEVANT MATERIAL TO ENABLE THE AO TO HA VE A PRIMA FACIE OPINION THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. SHE SUBMITTED THAT AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) RELIED UPON BY THE LD. CIT(A) THE WORD REASON IN GIVEN PHRASE REASON TO BELIE F WOULD MEAN CAUSE OR JUSTIFICATION IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT IT CAN BE SAID TO HAV E REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSI ON CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE ASCERTAINED THE FACT B Y LEGAL EVIDENCE OR CONCLUSION. 10. ON PERUSAL OF REASONS REPRODUCED HERE INABOVE, RECORDED BY THE AO TO INITIATE PROCEEDINGS U/S 147 BY ISSUING NOT ICE U/S 148, WE FIND THAT ON THE BASIS OF INFORMATION ALREADY AVAILABLE WITH THE RETURN OF INCOME FILED BY THE ASSESSEE, THE AO CAME TO THE CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE TUNE O F RS. 149283/- HAS ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 8 ESCAPED ASSESSMENT AND THAT THERE WAS NO EVIDENCE O N RECORD TO HOLD THE CLAIM OF THE ASSESSEE FOR EXEMPTION U/S 10B OF THE ACT WAS ELIGIBLE FOR THE SAME. AGAIN ON THE BASIS OF INFORMATION AVAILABLE W ITH THE RETURN OF INCOME ONLY THE AO HAS REASON TO BELIEVE THAT INTEREST ON FDR SHOWN AS RS. 1546523/- AND INTEREST ON SB ACCOUNT SHOWN AS RS. 8 467/- IS CHARGEABLE TO TAX U/S 56 OF THE ACT UNDER THE HEAD INCOME FROM OT HER SOURCES AS CLAIMED BY THE ASSESSEE IN THE PROFIT AND LOSS ACCOUNT UNDE R THE NAME AND STYLE OF MRS. SUSHMA GUPTA ARE NOT ALLOWABLE BECAUSE THE ASS ESSEE HAS NOT ENGAGED IN ANY SORT OF TRADING AND BUSINESS ACTIVIT Y AS SOFTWARE SALE HAS BEEN SEPARATELY SHOWN UNDER M/S. STARDATA AND M/S. MINDMILL. MOREOVER ON SOFTWARE SALE DEDUCTION U/S 10B HAS SEPARATELY BEEN CLAIMED. THUS IT CAN BE ARRIVED AT AN ADMITTED POSITION THAT THERE WAS N O FRESH MATERIAL WHICH SURFACED AFTER FURNISHING OF RETURN OF INCOME. IT I S AN ADMITTED POSITION BY THE AO THAT INITIATION OF PROCEEDINGS U/S 147 OF TH E ACT IS BASED ON THE SCRUTINY OF ACCOUNTS ATTACHED WITH THE RETURN OF IN COME. THE CONTENTION OF THE ASSESSEE BEFORE US ON THE ISSUE OF VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IS THAT MERE REAPPRAISAL OF THE RETURN OF INCOME CANNOT CONFER JURISDICTION TO PROCEED U/S 147 OF THE ACT. IT HAS BEEN CONTENDED BY THE LD. AR THAT EVEN IN THE CASES WHERE NO ASSESSME NT U/S 143(3) HAS BEEN FRAMED IT HAS BEEN HELD IN SEVERAL DECISIONS B Y THE HONBLLE COURTS INCLUDING HONBLE JURISDICTIONAL DELHI HIGH COURT T HAT THE SURFACING OF FRESH MATERIAL IS NECESSARY AFTER ACCEPTANCE OF RETURN U/ S 143(1) AND BEFORE ISSUE ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 9 OF NOTICE U/S 148 OF THE ACT. IN THIS RECENT DECISI ON IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (SUPRA) THE HONBLE JURISDICTIONA L DELHI HIGH COURT HAS BEEN PLEASED TO HOLD THAT THE REASONS DISCLOSED THA T THE AO REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN U/S 143(1) WERE WITHOUT SCRUTINY AND NOTHING MORE. THIS WAS NOTHIN G BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE AO . THE REASONS RECORDED BY THE AO DID CONFIRM THE APPREHENSION ABO UT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVE VIS A VIS AN INTIMATION ISSUED U/S 143 (1) COULD CAUSE TO THE TA X REGIME. IT WAS HELD THAT THERE WAS NOTHING IN THE REASONS RECORDED TO SHOW T HAT ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE AO SUB SEQUENT TO THE ISSUE OF THE INTIMATION. THE HONBLE COURT WAS THUS PLEASED TO HOLD THAT THE NOTICE REFLECTED AN ARBITRARY EXERCISE OF THE POWER CONFER RED U/S 147 OF THE ACT. WHILE DECIDING THIS CASE THE HONBLE DELHI HIGH CO URT HAS ALSO REFERRED DECISION OF HONBLE SUPREME COURT INCLUDING THE DEC ISION IN THE CASE OF CIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (RELIED U PON BY THE LD. CIT(A) TO JUSTIFY THE VALIDITY OF INITIATION OF PROCEEDINGS U /S 147 OF THE ACT IN THE PRESENT CASE BEFORE US). FOR A BETTER APPRECIATION THE RELEVANT EXTRACT OF THE DECISION OF THE DELHI HIGH COURT IN THE CASE O F CIT VS. ORIENT CRAFT LTD. (SUPRA): IN THE PRESENT CASE, THE REASONS DISCLOSE THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMEN T OF ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 10 INCOME ON GOING THROUGH THE RETURN OF INCOME FILE D BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(!) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF P OWER BY THE ASSESSING OFFICER, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN CIT V. KELVINATOR (SUPRA). THE REA SONS RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CA SE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVE VIS --VIS AN INTIMATION ISSUED UNDER SECTION 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECORDED , OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF T HE ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF THE IN TIMATION. IT REFLECTS AN ARBITRARY EXERCISE OF THE POWER CONF ERRED UNDER SECTION 147. FOR THE ABOVE REASONS, WE ANSWER THE SUBSTANTIAL QU ESTION OF LAW FRAMED BY US IN THE AFFIRMATIVE, IN FAVOUR O F THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. THERE SHALL BE N O ORDER AS TO COSTS. 11. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN IN THE ABOVE CITED DECISION OF HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF M/S. ORIENT CRAFT LTD. (SUPRA), THE DELHI BENCH OF THE TRIBUNAL IN TH E CASE OF GOPI G NAMBIAR VS. JCIT (SUPRA) HAS EXPRESSED THE SIMILAR VIEW THA T THE REOPENING WAS BAD IN LAW IN THAT CASE ALSO WHERE REOPENING WAS MADE I N THE ABSENCE OF TANGIBLE MATERIAL OR FRESH INFORMATION. 12. WE ALSO CONCUR WITH THE CONTENTION OF THE LD . AR THAT ISSUE OF JURISDICTION CAN HAVE BEEN RAISED IN THE SECOND ROU ND OF PROCEEDINGS AS IT IS ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 11 SUPPORTED BY THE DECISION OF THIRD MEMBER BENCH OF THE TRIBUNAL IN THE CASE OF HEMAL KNITTING INDUSTRIES VS. ACIT (SUPRA), WHER EIN THE THIRD MEMBER AGREED WITH THE VIEW EXPRESSED BY THE LD. ACCOUNTAN T MEMBER THAT ASSESSEE COULD CHALLENGE VALIDITY OF PROCEEDINGS IN ITIATED U/S 147 IN SECOND ROUND OF LITIGATION BEFORE THE TRIBUNAL. IN THAT CA SE ALSO ASSESSMENT ORDER WAS PASSED ON 31.3.2004 AGAINST WHICH ASSESSEE WENT IN FIRST APPEAL WHEREIN ONE OF THE GROUNDS RELATED TO VALIDITY OF I NITIATION OF REASSESSMENT PROCEEDINGS WAS RAISED. LD. CIT(A) REJECTED THE ASS ESEES APPEAL BOTH ON JURISDICTION AS WELL AS ON MERITS. THE ASSESSEE WEN T IN SECOND APPEAL BEFORE THE TRIBUNAL ON MERITS OF THE CASE. THE TRIBUNAL RE MANDED THE MATTER BACK TO AO FOR DISPOSAL ON MERITS. IN THE COURSE OF PROC EEDINGS BEFORE AO, ASSESSEE AGAIN RAISED AN ISSUE RELATING TO VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. THE AO REJECTED THE OBJEC TION ON THE BASIS THAT TRIBUNAL HAD NOT DIRECTED ANYTHING ABOUT VALIDITY O F PROCEEDINGS U/S 147 OF THE ACT. LD. CIT(A) ENDORSED VIEW OF AO. ON APPEAL BEFORE TRIBUNAL ACCOUNTANT MEMBER HELD THAT ISSUE RELATING TO JURIS DICTION WHICH WENT TO VERY ROOT OF THE MATTER COULD BE RAISED AT ANY POIN T OF TIME INCLUDING IN NEXT ROUND OF LITIGATION. IN THAT CASE THE ASSESSEE HAD NOT CHALLENGED FINDING OF THE LD. CIT(A) ON THE ISSUE OF VALIDITY OF PROCEEDI NG U/S 147 BEFORE THE TRIBUNAL IN EARLIER ROUND OF LITIGATION. THE LD. JU DICIAL MEMBER HELD THAT THE ISSUE RELATING TO JURISDICTION HAD ATTAINED FINALLY AND ASSESEE SHOULD NOT BE PERMITTED TO AGITATE ISSUE IN THE APPEAL TO WHICH T HE LD. THIRD MEMBER DID ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 12 NOT AGREE. LIKEWISE IN THE PRESENT CASE IN THE FIRS T ROUND IN THE APPEAL PREFERRED BY THE REVENUE VIDE I.T.A. NO. 2691/D/200 6 AND 2692/D/2006 THE TRIBUNAL WHILE SETTING ASIDE THE ASSESSMENT TO THE FILE OF THE AO HAD DIRECTED TO CONSIDER THE ISSUES (I) WHETHER THE EXP ENSES WERE INCURRED LEADING TO BUSINESS LOSS (2) WHETHER SET LOSS WAS T O BE SET OFF AGAINST INTEREST INCOME U/S 71. AGAINST THE ASSESSMENT ORDE R PASSED IN COMPLIANCE OF THE ORDER OF THE TRIBUNAL THE ASSESSEE WENT IN F IRST APPEAL AND SHE RAISED THE ISSUE OF VALIDITY OF NOTICE U/S 148 OF THE ACT. SHE COULD NOT SUCCEED THERE AND QUESTIONED THE SAME BEFORE THE TRIBUNAL. WE THUS FIND NO REASON TO DENY THE ADJUDICATION OF THE SAID LEGAL ISSUE BE FORE THE TRIBUNAL IN THE SECOND ROUND IN VIEW OF THE ABOVE CITED DECISION OF THIRD MEMBER BENCH. UNDER ABOVE FACTS AND CIRCUMSTANCES WE CONCLUDE THA T THE AO WAS NOT JUSTIFIED IN INVOKING JURISDICTION U/S 147 OF THE A CT OR INITIATION OF PROCEEDINGS THEREUNDER BY ISSUING NOTICE U/S 148 OF THE ACT IN ABSENCE OF FRESH MATERIAL SURFACED AFTER FURNISHING OF RETURN OF INCOME AND RELEVANT MATERIAL. THE ISSUE IS THUS DECIDED IN FAVOUR OF TH E ASSESSEE. IN RESULT OBJECTION NOS. 1 & 1.1 OF THE CROSS OBJECTION ARE A LLOWED. SINCE THE NOTICE ISSUED U/S 148 OF THE ACT HAS BEEN HELD INVALID, T HE ASSESSMENT FRAMED IN FURTHERANCE TO THE SAID INVALID NOTICE IS ALSO HELD INVALID AND IS QUASHED. ITA NO. 5216/DEL/2012 & CO NO. 437/DEL/2012 13 THE OTHER GROUNDS AND OBJECTIONS RAISED BY THE PART IES ON THE VALIDITY OF ADDITIONS / DISALLOWANCE MADE BY THE AUTHORITIES BE LOW HAVE BECOME INFRUCTUOUS. 13. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION PREFERRED BY THE ASSESSEE IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 28 TH MARCH, 2014. SD/- SD/- (G.D. AGRAWAL) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED 28 TH MARCH, 2014 VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT