M/s. Dharampal Satyapal Ltd., New Delhi V. DCIT, New Delhi

ITA 5581/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2816 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 12-10-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 17-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NANDITA KANCHAN
• Keywords: Reopening of assessment; Depreciation; Rectification of order; Search and seizure; Principle of natural justice; Period of limitation; Retrospective amendment; Tangible material; Bad and doubtful debts; Difference of opinion; Competent authority; Assessment record; Block assessment; Right to appeal; Onus to prove; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 153A; 234B; 14A; 115JB; 147; 131; 148; 263; 63; 132; 144; 154; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B: NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.5611/DEL./2013 (ASSESSMENT YEAR : 2004-05) DCIT, CENTRAL CIRCLE 4, VS. M/S. DHARAMPAL SATYAPA L LTD., NEW DELHI. 1711, S.P. MUKHERJEE MARG, DELHI 110 006. (PAN NO. AAACD0132H) ITA NO.5581/DEL./2013 (ASSESSMENT YEAR : 2004-05) M/S. DHARAMPAL SATYAPAL LTD., VS. DCIT, CENTRAL CIR CLE 4, 1711, S.P. MUKHERJEE MARG, NEW DELHI. DELHI 110 006. (PAN : AAACD0132H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, CA AND SHRI SATYAJEET GOEL, CA REVENUE BY : MS. NANDITA KANCHAN, CIT DR O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THESE ARE CROSS APPEALS FILED BY THE REVENUE AND TH E ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XXXIII, NEW DELHI DATED 24.06.2013 FOR THE ASSESSMENT YEAR 2004-05. 2 ITA NO.5611 & 5581/DEL/2013 2. FROM THE ASSESSMENT ORDER, WE FIND THAT THE ASSE SSEE COMPANY HAD FILED RETURN DECLARING NIL INCOME ON 30-10-2004. GROSS TOTAL INC OME BEFORE CLAIMING DEDUCTION UNDER CHAPTER VI OF THE INCOME TAX ACT, 1961 (HEREI NAFTER THE ACT) WAS DECLARED AT RS.90,22,42,282/-. CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT WAS MADE AT RS.97,37,28,085/ WHICH WAS RESTRICTED TO TOTAL INCO ME, HENCE THE NIL TAXABLE INCOME. THE PROVISIONS OF SECTION 115JB WERE APPLIED ON THE DECLARED BOOK PROFITS OF RS.67,08,71,105/ AND THE ASSESSEE COMPANY PAID MINI MUM ALTERNATE TAX OF RS.5,16,76,089/ . 3. ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS C OMPLETED ON 28.12.2006 AT AN INCOME OF RS.60,75,16,480/- BY MAKING ADDITION OF R S.1,00,00,000/- ON ACCOUNT OF DISALLOWANCE OF ADVERTISEMENT EXPENSES, RS.8,48,033 /- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, RS.24,50,893/- ON ACCOUNT OF BAD DEBTS AN D RS.27,98,173/- ON ACCOUNT OF REPAIR AND MAINTENANCE. DEDUCTION UNDER SECTION 80I C WAS ALSO RESTRICTED TO RS.31,10,33,397/-. 4. ON AN APPLICATION DATED 09.01.2007 FILED BY THE ASSESSEE COMPANY BEFORE THE CIT-IV, NEW DELHI FOR REVISION OF THE ASSESSMENT OR DER, THE ASSESSMENT ORDER WAS SET ASIDE VIDE ORDER DATED 29.01.2007 PASSED UNDER SECT ION 264 OF THE ACT. PURSUANT THERETO, ASSESSMENT WAS REFRAMED ON 28.03.2007 AT A N INCOME OF RS.3,57,82,200/ WHEREIN CLAIM OF DEDUCTION UNDER SECTION 80IC WAS A LLOWED AT RS.85,59,98,358/-. IN COMPUTING THE INCOME, DISALLOWANCES OF RS.2,00,000/ - UNDER SECTION 14A, RS.4,31,154/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES AND RS.2,50,500/- ON ACCOUNT OF ROC CHARGES WERE MADE. IN AN APPEAL FILED BY THE AS SESSEE, DISALLOWANCE OF ROC FEE WAS DELETED BY THE CIT(APPEALS). 3 ITA NO.5611 & 5581/DEL/2013 5. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E COMPANY WAS ENGAGED IN THE BUSINESS OF 'MANUFACTURES AND TRADERS' IN PAN MASAL A, GUTKHA, ZARDA, PERFUMERY COMPOUNDS & HERBS, MOUTH FRESHENER, SALT & SPICES, SNACK FOODS, NATURAL SPRING WATER, TEA, RICE, COMPOSITE CANS AND PROCESSING OF SILVER. APART FROM THIS, THE ASSESSEE COMPANY WAS ALSO ENGAGED IN THE BUSINESS O F TRADING IN SECURITIES AND UNITS OF MUTUAL FUNDS. MANUFACTURING UNITS OF THE COMPANY AR E LOCATED AT NOIDA (UP), BAROTIWALA (HP), AGARTALA, GUWAHATI AND DELHI. FOR THE YEAR UNDER CONSIDERATION, THE SALES WERE DECLARED AT RS.5,98,28,58,879/- AS COMPA RED TO RS.4,70,16,48,293/- IN THE IMMEDIATELY PRECEDING YEAR AND PROFITS BEFORE TAXES AMOUNTING TO RS.67,32,63,987/- AS AGAINST RS.34,54,64,291/- IN THE IMMEDIATELY PRECED ING YEAR HAD BEEN DECLARED. 6. ON 21.01.2011, A SEARCH & SEIZURE OPERATION UNDE R SECTION 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF M/S DHARAMPAL SATYAPAL L TD, AND OTHER GROUP CONCERNS / INDIVIDUALS. IN THE COURSE OF SEARCH OPERATION, PRO DUCTION UNITS OF THE DS GROUP SITUATED IN THE NORTH EASTERN STATES, NAMELY, GUWAHATI & AGA RTALA WERE ALSO COVERED UNDER SECTION 132 / 133A. ON THE STRENGTH OF THESE PRODUC TION CENTERS, DS GROUP COMPANIES WERE CLAIMING DEDUCTION UNDER SECTION 80IC OF THE A CT. PURSUANT TO SEARCH, ACCORDING TO DEPARTMENT, CERTAIN FACTS HAD EMERGED WHICH SUGG ESTED THAT THE CLAIM OF DEDUCTION UNDER CHAPTER VIA MADE BY THE DS GROUP COMPANIES WA S GROSSLY INFLATED. 7. ACCORDING TO THE DEPARTMENT, FINDINGS OF THE SEA RCH PROCEEDINGS SUGGESTED THAT FUNCTIONS PERFORMED AT GUWAHATI WERE THAT OF DRYING UP OF PROCESSED BEETLE NUT (PROCESSED SUPARI) RECEIVED FROM HEAD OFFICE, NOIDA AND PACKING IS DONE. ALL THE RAW MATERIALS, NAMELY, CATECHU, BEETLE NUT, CARDAMOM AN D SUGAHDI WERE PROCURED AT HEAD OFFICE SITUATED IN NOIDA. CATECHU (KATHA) IS PROCUR ED AND PROCESSED AT NOIDA. CARDAMOM WAS PROCURED AND ITS SEEDS WERE EXTRACTED FROM THE SHELL. BEETLE NUT (SUPARI) WAS ALSO PROCURED AT NOIDA AND THEN CHOPPED INTO SM ALLER PIECES AND PROCESSED. 4 ITA NO.5611 & 5581/DEL/2013 VARIOUS OTHER INGREDIENTS WERE ALSO RECEIVED FROM H EAD OFFICE AT NOIDA. THIS MIXTURE WAS THEN PACKED AND DISPATCHED TO DESTINATION ORDER ED BY HEAD OFFICE. 8. THE AO TAKES NOTE OF AN INFORMATION WHICH HE REC EIVED FROM INVESTIGATION WING IN PARA 7 OF HIS ORDER THAT THE ASSESSEE COMPA NY HAS CLAIMED EXCESSIVE DEDUCTION UNDER SECTION 80IC OF THE ACT BY ATTRIBUTING ENTIRE VALUE ADDITION TO THE GUWAHATI UNIT, BEING THE ELIGIBLE UNIT AND THEREBY CONTRAVENING TH E PROVISIONS OF SECTION 80IA(8) OF THE ACT, BY NOT TRANSFERRING THE GOODS AND SERVICES HELD FOR THE PURPOSE OF THE ELIGIBLE UNITS TO ANY OTHER BUSINESS CARRIED OUT BY THE ASSE SSEE AND VICE VERSA AT THE MARKET VALUE OF SUCH GOODS AND IN THE PROCESS SHOWING MORE THAN NORMAL PROFITS OF THE ELIGIBLE UNDERTAKING AND SO, REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITIATED. IT IS NOTED IN PARA 8 OF THE IMPUGNED REASSESSMENT ORDER OF AO THAT HE HAS AFTER RECORDING REASONS AND OBTAINING DUE SANCTION UNDER SECTION 151 OF THE ACT, A NOTICE UNDER SECTION 147 OF THE ACT DATED 29.03.201 1 WAS SERVED UPON THE ASSESSEE COMPANY. THE AO TAKES NOTE THAT IN COMPLIANCE TO TH E SAID NOTICE UNDER SECTION 147 / 148, THE ASSESSEE COMPANY FILED THE SAME RETURN THA T WAS ORIGINALLY FILED UNDER SECTION 139(1) OF THE ACT. THE REASONS RECORDED FOR REOPENI NG OF THE ASSESSMENT PROCEEDINGS WAS SOUGHT BY THE ASSESSEE COMPANY AND WAS PROVIDED TO IT ON 03.06.2011 (HOWEVER LD. CIT DR AFTER PERUSAL OF THE ASSESSMENT RECORDS HAS STATED THAT THE DATE IS 24.04.2011). THE AO IN PARA 9 HAS NOTED THAT THE ASSESSEE COMPAN Y FILED OBJECTIONS TO THE INITIATION OF REASSESSMENT PROCEEDINGS VIDE ITS LETTER DATED 2 8.11.2011 WHICH WAS DISPOSED OFF BY THE AO VIDE A SPEAKING ORDER DATED 05.12.2011. THE REAFTER, AFTER DISCUSSING THE PROFILE OF THE ASSESSEE COMPANY AND AFTER ORDERING SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT, THE REASSESSMENT WAS COMPLETED AND THE AO HAS HELD THAT SINCE TAX COMPUTED UNDER SECTION 115JB OF THE ACT IS LOWER THAN THE TA X COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT, THEREFORE, THE INCOME WAS RE ASSESSED AT RS.73,89,84,220. 5 ITA NO.5611 & 5581/DEL/2013 9. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY RAISING THE LEGAL ISSUE CHALLENGING THE REOPENING O F THE ASSESSMENT, NON-RECEIPT OF 143(2) NOTICE AND ON MERITS. THE LD. CIT (A) REJEC TED THE GROUND RAISED BY THE ASSESSEE AGAINST REOPENING BY THE AO WHICH IS DISCUSSED ON P AGES 26 TO 29 OF HIS IMPUGNED ORDER. 10. IN RESPECT TO THE GROUND RAISED AGAINST ISSUANC E AND NON-RECEIPT OF NOTICE U/S 143 (2), THE CIT (A) REPELLED THE SAID GROUND ALSO AGAINST THE ASSESSEE AND IT IS DISCUSSED IN PAGE 28 OF THE IMPUGNED ORDER. THE GR OUND AGAINST NON-APPLICATION OF MIND BY ADDL.CIT AND CIT UNDER SECTION 151 OF THE A CT WAS ALSO REJECTED BY THE LD. CIT (A). AGGRIEVED BY THE AFORESAID ORDER AGAINST THE ASSESSEE, THE ASSESSEE HAS PREFERRED AN APPEAL BEING ITA NO.5581/DEL/2013 AND THE REVENUE IS AGGRIEVED BY THE PARTIAL RELIEF GIVEN TO THE ASSESSEE ON MERITS AND FILED ITA NO.5611/DEL/2013. 11. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN ASSUMING JURISDICTION U/S 147, MORE SO WHEN J URISDICTIONAL CONDITIONS AS MENTIONED IN SECTION 147 TO 151 ARE N OT SATISFIED. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN REOPENING THE IMPUGNED ASSESSMENT U/S 147, MO RE SO WHEN THE APPELLANT WAS SEARCHED U/S 132 OF INCOME TAX ACT, 1 961. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN UPHOLDING THE REASSESSMENT ORDER MADE BY LD. AO IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN PASSING THE IMPUGNED REASSESSMENT ORDER, EVEN THOUGH NOTICE U/S 143(2) WAS NOT SERVED WITHIN THE STATUTORY ALLO WABLE PERIOD. 5. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN NOT QUASHING THE IMPUGNED REASSESSMENT OR DER FRAMED BY LD. AO IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMST ANCES OF THE CASE, 6 ITA NO.5611 & 5581/DEL/2013 MORE SO WHEN LD. CIT(A) HIMSELF ADMITTED THAT THE N OTICE U/S 143(2) WAS NOT SERVED. 6. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAIN ING THE DISALLOWANCE OF RS.3,895/- OUT OF TOTAL DISALLOWANCE OF RS.20,54 ,172/- ALLEGEDLY BEING PRIOR PERIOD EXPENSES, MORE SO WHEN SUCH DISALLOWAN CE COULD NOT HAVE BEEN MADE IN THE PROCEEDINGS U/S 147. 7. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING ADDITION IN THE VALUE OF STOCK OF WIP AND HAS ERRED IN NOT DELETING THE ENTIRE ADDITION OF RS.2,94,83,915/- AN D HAS FURTHER ERRED IN NOT GIVING DIRECTION TO ADOPT ENHANCED CLOSING STOC K AS OPENING STOCK OF NEXT YEAR, MORE SO WHEN SUCH ADDITION COULD NOT HAV E BEEN MADE IN THE PROCEEDINGS U/S 147. 8. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DEL ETING THE DISALLOWANCE OFRS.1,71,995/- FULLY, AS MADE BY LD. AO AND HAS FURTHER ERRED IN DIRECTING THE ASSESSING OFFICER TO CHARGE THE INTEREST TO THE SISTER CONCERN AT THE RATE OF INTEREST PAID ON CASH CREDIT LOAN TO THE BANK AND TO RESTRICT THE DISALLOWANCE TO THAT EXTENT, MORE SO W HEN SUCH DISALLOWANCE COULD NOT HAVE BEEN MADE IN THE PROCEEDINGS U/S 147 . 9. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DEL ETING THE DISALLOWANCE OF RS.71,48,144/- FULLY AS MADE BY LD. AO U/S 14A AND HAS FURTHER ERRED IN SUSTAINING THE DISALLOWANCE TO THE EXTENT OF RS.23,92,882/-, MORE SO WHEN SUCH DISALLOWANCE COUL D NOT HAVE BEEN MADE IN THE PROCEEDINGS U/S 147, MORE SO WHEN DISAL LOWANCE WAS ALREADY MADE IN THE ORIGINAL ASSESSMENT ORDER. 10. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DEL ETING THE DISALLOWANCE OF RS.10,28,000/- FULLY AS MADE BY LD. AO ON ACCOUNT OF EXPENSES ALLEGEDLY NOT SUPPORTED BY BILLS AND HAS F URTHER ERRED IN SUSTAINING THE DISALLOWANCE TO THE EXTENT OF RS.8,0 0,000/-, MORE SO WHEN SUCH DISALLOWANCE COULD NOT HAVE BEEN MADE IN THE P ROCEEDINGS U/S 147. 11. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING AN AGGREGATE ADJUSTMENT OF RS.16,05,45 ,924/- TO THE AMOUNT OF BOOK PROFITS I.E. RS.2,30,00,000/- ON ACC OUNT OF ALLEGED INCOME FROM SALE OF INVESTMENT AND RS.11,99,78,929/ - ON ACCOUNT OF ALLEGED UNASCERTAINED LIABILITY AND RS.1,75,66,995/ - ON ACCOUNT OF ALLEGED DIMINUTION OF THE VALUE OF INVESTMENT, MORE SO WHEN SUCH DISALLOWANCE COULD NOT HAVE BEEN MADE IN THE PROCEE DINGS U/S 147. 7 ITA NO.5611 & 5581/DEL/2013 12. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT( A) HAS ERRED IN LAW AND ON FACTS IN NOT RE VERSING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.5,49,33,161/- AND M ORE SO WHEN THE IMPUGNED ADDITION COULD NOT HAVE BEEN MADE IN THE P ROCEEDINGS U/S 147 AND MORE SO WHEN BURDEN TO PROVE THE ADDITION U/S 8 01A(8) AND 801A(10) WAS ON THE REVENUE WHICH HAS NOT BEEN DISC HARGED AND HAS FURTHER ERRED IN OBSERVING AS UNDER:- (A) LD. CIT(A) DIRECTING TO LD. AO IN ESTIMATING TH E PROFIT MARGIN @ 2% INSTEAD OF @ 10% ON THE VALUE OF GOODS TRANSFERRED WHICH ARE NOT PROCESSED AT ALL AND NOT ALLOWING THE DEDUCTION U/S 801B/801C IN THIS REGARD. (B) LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F LD. AO IN LOADING OF MANUFACTURING EXPENSES AT THE ESTIMAT ED RATE OF 37.85% AND CHARGING OF PROFIT MARGIN @ 10% ON THE A MOUNT OF GOODS CALLED KATHHA (CATECHU) WHICH GETS PROCESSED THROUGH JOB WORKER AND NOT ALLOWING THE DEDUCTION U/S 801B/801C IN THIS REGARD. (C) LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F LD. AO IN LOADING OF MANUFACTURING EXPENSES AT THE ESTIMAT ED RATE OF 37.85% AND CHARGING OF PROFIT MARGIN @ 10% ON THE A MOUNT OF GOODS CALLED CARDAMOM (ELAICHI) AND NOT ALLOWING TH E DEDUCTION U/S 801B/801C IN THIS REGARD. 13. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.1,16,39,096/- ON THE GR OUND THAT 'CAN PACK' TRANSFERRED FROM 'CAN PACK' DIVISION TO ELIGIBLE UN ITS HAVE NOT BEEN TRANSFERRED AT MARKET VALUE AND THAT TOO PLACING RE LIANCE ON THE WORKING OF SPECIAL AUDITOR AND HAS FURTHER ERRED IN NOT GRA NTING THE BENEFIT OF DEDUCTION U/S 80IB/80IC IN THIS REGARD, MORE SO WHE N THE IMPUGNED ADDITION COULD NOT HAVE BEEN MADE IN THE PROCEEDING S U/S 147 AND MORE WHEN BURDEN TO PROVE THE ADDITION U/S 80IA(8) AND 8 0IA(10) WAS ON THE REVENUE. 14. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTI NG THE LD. AO TO REWORK THE VALUE OF ROYALTY AND PROFIT MARGIN OF 10 % SHOULD BE LOADED ON SUCH ROYALTY PAID. 15. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.1,30,10,138/- U/S 80IA( 8) ON THE GROUND THAT ROYALTY ATTRIBUTABLE TO THE USAGE OF BRAND 'RA JNIGANDHA' HAS NOT BEEN CHARGED FROM THE ELIGIBLE UNDERTAKINGS, MORE S O WHEN THE IMPUGNED ADDITION COULD NOT HAVE BEEN MADE IN THE P ROCEEDINGS U/S 147 8 ITA NO.5611 & 5581/DEL/2013 AND MORE WHEN BURDEN TO PROVE THE ADDITION U/S 80IA (8) AND 80IA(10) WAS ON THE REVENUE. 16. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.37,05,S97/- U/S 80IA(10 ) IN RESPECT OF JOB CHARGES PAYABLE TO M/S FLOSYN FRAGRANCES AND M/S SW ASTIK ENTERPRISES, MORE SO WHEN THE IMPUGNED ADDITION COULD NOT HAVE B EEN MADE IN THE PROCEEDINGS U/S 147 AND MORE WHEN BURDEN TO PROVE T HE ADDITION U/S 80IA(8) AND 80IA(10) WAS ON THE REVENUE. 17. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN REJECTING THE AUDIT REPORT U/S 10CCB AND THAT TOO WITHOUT ANY BASIS AND MERELY ON THE BASIS OF SURMISES AND CONJE CTURES. 18. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT DEL ETING THE DISALLOWANCES MADE IN THE CLAIM OF APPELLANT UNDER SECTION 80IA/80IC AND HAS ERRED IN NOT ALLOWING THE DEDUCTION UNDER T HESE SECTIONS ON THE AMOUNT ADDED/DISALLOWED. 19. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. AO IN PASSING THE REASSESSMENT ORDER BEYOND THE LIM ITATION PERIOD AND THUS REASSESSMENT ORDER IS BARRED BY LIMITATION. 20. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, IMPUGNED ADDITIONS/DISALLOWANCES AND IMPUGNED ASSESSMENT ORD ER ARE BAD IN LAW, ILLEGAL, UNJUSTIFIED, BARRED BY LIMITATION, CONTRAR Y TO FACTS & LAW AND BASED UPON RECORDING OF INCORRECT FACTS AND FINDING , WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEARING, IN VIOLATION OF PR INCIPLES OF NATURAL JUSTICE AND THE SAME DESERVES TO BE QUASHED. 21. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER ACTION OF LD. A.O IN FRAMING THE IMPUGNED ASSESSMENT ORDER IS CONTRARY T O LAW AND FACTS, VOID AB INITIO, BEYOND JURISDICTION AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS 22. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REV ERSING THE ACTION OF LD. AO IN CHARGING INTEREST 234B AND 234D OF THE IN COME TAX ACT, 1961. 23. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MOD IFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 9 ITA NO.5611 & 5581/DEL/2013 12. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT (A) HAS ERRED IN REJECTING THE REDUCTION IN ELIGIBLE PR OFIT OF RS.55,19,975/- OUT OF TOTAL REDUCTION OF RS.5,49,33,1611-, MADE BY THE AO BY INCREASING THE VALUE OF GOODS TRANSFERRED FROM NOID A UNITS TO ELIGIBLE UNITS TREATING THEM PROCESSED GOODS AND BY REDUCING THE SOIB/SOIC TO THAT EXTENT IN SPITE OF THE FACT THAT THE CIT(A) HA S CONFIRMED THE ACTION OF AO OF LOADING OF AVERAGE MANUFACTURING EXPENSES OF 37.S5% AND CHARGING PROFIT @ 10%. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DIRECTING THE AO TO CALCULATE ROYALTY @ 2.5% OF RAW MATERIAL WITHOUT EXCISE DUTY AS AGAINST THE RATE OF 3% APPROVED BY THE MINISTRY OF COMPANY AFFAIRS IN RESPECT OF GOODS TRA NSFERRED FROM 'PERFUMERY DIVISION' TO ELIGIBLE UNITS WHICH RESULT ED IN INCREASE OF PROFIT ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT TO THAT EXTENT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN REJECTING THE REDUCTION IN ELIGIBLE PR OFIT OF RS.1,09,32,042/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON FIXED ASSETS OF CORPORATE OFFICE WHICH RESULTED IN INCREASE OF PROFIT ELIGIBL E FOR DEDUCTION U/S SOIB/SOIC OF THE ACT TO THAT EXTENT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN REJECTING THE REDUCTION IN ELIGIBLE PR OFIT OF RS.9,47,79,501/- MADE BY AO BY TAKING INTO CONSIDERATION THE FAIR MA RKET VALUE OF THE SERVICES OBTAINED BY ELIGIBLE UNITS FROM THE CORPOR ATE OFFICES, DEPOT AND BRANCHES ETC. WHICH RESULTED IN INCREASE OF PROFIT ELIGIBLE FOR DEDUCTION U/S 80IB/80IC OF THE ACT TO THAT EXTENT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DIRECTING THE AO TO ALLOW SET OFF OF L OSS OF RS.2,68,80,136/- & RS.11,42,403/- RESPECTIVELY FOR GUWAHATI & TRIPUR A UNITS ELIGIBLE FOR DEDUCTION U/S 80IB/80IC WITH THE PROFIT OF NON ELIG IBLE UNITS. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DIRECTING THE AO TO GRANT DEDUCTION U/ S 80IB/80IC ON THE REFUND OF EXCISE DUTY OF RS.56,96,17,646/- OF WHICH IMMEDIATE SOURCE IS NOT MANUFACTURING. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DELETING DISALLOWANCE OF RS.20,40,277/ -, OUT OF TOTAL ADDITION OF RS.20,54,172/- MADE BY THE AO ON ACCOUN T OF PRIOR PERIOD EXPENSES. 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DELETING ADDITION OF RS.2,94,83,915/- MADE BY THE AO ON ACCOUNT OF INCREASE IN THE VALUE OF STOCK OF WORK I N PROGRESS, FINISHED GOODS AND UNPACKED GOODS. 10 ITA NO.5611 & 5581/DEL/2013 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT (A) HAS ERRED IN DELETING DISALLOWANCE OF RS.47,55,262/ -, OUT OF TOTAL ADDITION OF RS.71,48,144/- MADE BY THE AO ON ACCOUN T OF 14A OF THE INCOME TAX ACT, 1961. 10. THE ORDER OF THE CIT (A) IS ERRONEOUS AND IS NO T TENABLE ON FACTS AND IN LAW. 11. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF TH E HEARING OF THE APPEAL. 13. FIRST, WE WILL DEAL WITH THE ASSESSEES APPEAL. THE LD. AR FILED THE WRITTEN SYNOPSIS WHICH ARE REPRODUCED BELOW FOR THE SAKE OF CLARITY OF LEGAL ISSUES :- 1. THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLE TED U/S. 143(3) VIDE ORDER DTD. 28/12/2006 AT AN INCOME OF RS. 60,7 5,16,480/-. THE STATUTORY DEDUCTION U/S. 80IC CLAIMED IN THE ORIGINAL RETURN AT RS. 97,37,28,085/- ON THE BASIS OF CERTIFICATE OF STATUTORY AUDITOR IN FO RM NO. 10CCB WAS RESTRICTED TO RS. 31,10,33,397/-. IN SUPPORT OF ABO VE POSITION, PARA 2 OF THE ASSESSMENT ORDER IS EXTRACTED HEREUNDER: 2. ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT WAS COMPLETED ON 28/12/2006 AT AN INCOME OF RS.60,75,16,480/- BY MAKING ADDITION OF RS.1,00,00,0007- ON ACCOUNT OF DISALLOW ANCE OF ADVERTISEMENT EXPENSES, RS.8,48,033/- ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, RS.24,50,893/- ON ACCOUNT OF BAD DEBTS AN D RS.27,98,1737- ON ACCOUNT OF REPAIR AND MAINTENANCE . DEDUCTION U/S. 80IC WAS ALSO RESTRICTED TO RS.31,10,33,397/-. 2. SUBSEQUENTLY, CIT-IV, NEW DELHI PASSED O RDER U/S. 264 ON 29/01/2007 AND IN PURSUANCE TO DIRECTION OF THE C1T , THE ASSESSMENT WAS REFRAMED ON 28/03/2007 AND THE CLAIM OF STATUTORY D EDUCTION U/S. 801C WAS RECOMPUTED AT RS.85,59,98,358/- AND INCOME WAS RECO MPUTED AT RS.3,57,82,200/-. (PARA 3 OF THE ASSESSMENT ORDER). 3. ON AN APPLICATION DATED 09-01-2007 FILED BY THE ASSESSEE COMPANY BEFORE THE CIT-IV, NEW DELHI FOR REVISION O F THE ASSESSMENT ORDER, THE ASSESSMENT ORDER WAS SET ASID E VIDE ORDER DTD. 29-01-2007 PASSED U/S. 264 OF THE INCOME TAX A CT. PURSUANT THERETO, 'ASSESSMENT WAS REFRAMED ON 28-03-2007 AT AN INCOME OF RS.3,57,82,200/- WHEREIN CLAIM OF DEDUCTION U/S. 80 IC WAS ALLOWED AT RS.85,59,98,358/-. 3. IT HAS ALREADY BEEN CLARIFIED THAT STATUT ORY CLAIM U/S 80IC IS BEING ALLOWED SINCE AY 2000-01 AND CLAIM IN THE YEAR UNDE R CONSIDERATION DURING THE ORIGINAL PROCEEDINGS WAS CONSIDERED AND ACCEPTE D ON THE BASIS OF PAST ACCEPTED HISTORY. 11 ITA NO.5611 & 5581/DEL/2013 4. SUBSEQUENTLY, NOTICE U/S.148 WAS ISSUED ON 25/03 /2011 ON THE BASIS OF REASONS RECORDED BY ACIT, CIRCLE 10(1), NE W DELHI, THE RELEVANT REASONS ARE EXTRACTED HEREUNDER : 25/03/2011 THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.2004 AFTER AT A NIL INCOME UNDER NORMAL PROVISIONS OF THE ACT AND A T A SUM OF RS.67,08,71,105/- U/S. 115JB OF THE ACT. AFTER COMP LETION OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASSESSED AT R S.3,57,82,200/- UNDER NORMAL PROVISIONS OF THE ACT AND RS.67,08,71,105/- U7S. 115JB OF THE ACT. DURING THE COURSE OF SEARCH & SEIZURE OPERATION CON DUCED AT THE GROUP COMPANIES OF THE ASSESSEE ON DTD. 21/01/2011 IT WAS NOTICED THAT THE ASSESSEE COMPANY FOLLOWS PROCESSING OF PAN MASALA A S PER ANNEXURE 'A'. IN THE FLOW CHART, THE ENTIRE PROCESS HAS BEEN SEGREGA TED INTO STAGE A TO STAGE H. NOT A SINGLE STAGE 7 PROCESS WHICH IS VERY CRUCI AL IN THE PREPARATION OF PAN MASALA (RAJNIGANDHA), IS PERFORMED AT GUWAHATI. KEY INGREDIENTS OF THE RAJNIGANDHA PAN MASALA ARE A S FOLLOWS:- I) CATECHU (KATHA) II) BEETLE NUT (SUPARI) III) CARDAMOM SEED (ELAICHI SEED) IV) SUGANDHI. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT FU NCTIONS PERFORMED AT GUWAHATI ARE THAT OF DRYING UP OF PROCESSED BEETLE NUT (PROCESSED SUPARI) RECEIVED FROM HEAD OFFICE, NOIDA AND PACKING. ALL T HE RAW MATERIALS, NAMELY, CATECHU, BEETLE NUT, CARDAMOM AND SUGANDHI ARE PROCURED AT HEAD OFFICE SITUATED IN NOIDA. CATCHCU (KATHA) IS PROCUR ED AND PROCESSED AT NOIDA, CARDAMOM IS PROCURED AND ITS SEEDS ARE EXTRA CTED FROM THE SHELL, BEETLE NUT (SUPARI) IS PROCURED AT NOIDA, THEN CHOP PED INTO SMALLER PIECES & PROCESSED AND OTHER MATERIALS TOO ARE PROCURED AT N OIDA. AT GUWAHATI, PROCESSED SUPARI IS DRIED IN THE OVENS, AND MIXED W ITH VARIOUS INGREDIENTS RECEIVED FROM HEAD OFFICER AT NOIDA. THIS MIXTURE I S THEN PACKED AND DISPATCHED TO DESTINATION ORDERED BY THE HEAD OFFIC E. IT APPEARS THAT ASSESSEE IS ATTRIBUTING THE ENTIRE VALUE ADDITION TO THE GUWAHATI TO CLAIM HIGHER AMOUNT OF DEDUCTION U/S. 8 0IC. BY DOING SO THE ASSESSEE IS CONTRAVENING THE PROVISIONS OF SUB-SECT ION (8) OF SECTION 80IA OF THE IT ACT, 1961 WHICH ARE RELEVANT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 80IC OF THE ACT. AS SUCH THE FINDING S OF THE SEARCH PROCEEDINGS SUGGESTS THAT EXCESS QUANTUM OF DEDUCTI ON U7S. 80IC HAVE BEEN CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. THUS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR THE A.Y, 2004-05, I AM ALSO SATISFIED THAT THE INCOME CHARGE ABLE 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 TH E ASSESSMENT WITH REGARD TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ASSTT. CIT, CIRCLE 10(1) NEW DELHI. 12 ITA NO.5611 & 5581/DEL/2013 5. SINCE THE ORIGINAL ASSESSMENT WAS COMPLE TED U/S 143(3) AND THE NOTICE U/S 148 WAS ISSUED BEYOND FOUR YEARS, THE PR OVISO TO SECTION 147 IS APPLICABLE IN THE PRESENT CASE. FURTHER, THERE IS N O ALLEGATION IN THE REASONS THAT THERE WAS ANY OMISSION OR FAILURE ON PART OF T HE ASSESSEE IN DISCLOSING TRUE AND FULL PARTICULARS OF INCOME AND AS SUCH THE REASSESSMENT PROCEEDINGS ARE NOT IN CONFORMITY WITH PROVISO TO SECTION 147. FOR READY REFERENCE, PROVISO TO SECTION 147 WHICH IS EXTRACTED HEREUNDER : PROVISO TO SECTION 147 PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION F? I OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT FOR THAT ASSESSMENT YEAR. 6. IN THE REASONS, THERE IS NO REFERENCE TO ANY FRESH TANGIBLE MATERIAL SO AS TO JUSTIFY REOPENING U/S 147 OF THE ACT. IT WILL BE APPRECIATED THAT THE ISSUE OF CLAIM OF DEDUCTION U/S 80IC WAS EXAMINED I N GREAT DETAIL AT THE TIME OF ORIGINAL ASSESSMENT AND ASSESSMENT PURSUANT TO O RDER U/S 264 AFTER EXAMINING VARIOUS REPLIES AND DETAILS FILED DURING THE COURSE OF ASSESSMENT AND AS SUCH THE IMPUGNED REASSESSMENT PROCEEDINGS A RE MERELY ON ACCOUNT OF CHANGE OF OPINION. THE CIT(A) AT PAGE 18 PARA 4. 4.3 HAS TAKEN NOTE OF VARIOUS COMMUNICATIONS AND RELEVANT DETAILS IN RELA TION TO ISSUE OF CLAIM U/S 80IC DURING ORIGINAL ASSESSMENT PROCEEDINGS : PAGE 18 PARA 4.4.3 (CIT(A)'S ORDER) LD. AR ARGUED ON THE BASIS OF FOLLOWING DOCUMENTS T HAT THE ASSESSEE HAS DISCLOSED ALL MATERIAL FACTS REGARDING DEDUCTION U/ S 80IC EARLIER PROCEEDINGS U/S 143(3)/264 OR APPELLATE PROCEEDINGS: ' FOLLOWING PLEADINGS AND EVIDENCES WOULD SHOW THAT THE ISSUE OF DEDUCTION U/S 80IC WAS EXTENSIVELY CONSIDERED IN ORIGINAL ASS ESSMENT PASSED U/S 143(3) DATED 28-12-2006 (PB 177-186 AT PB 178-182) AND IN THE ASSESSMENT ORDER PASSED U/S 143(3)/264 DATED 28.03.2007 (PB 30 0-310 AT 303-308). IT IS IMPORTANT TO SUBMIT THAT THERE WAS EVEN A REVISION ORDER U/S 264 DATED 29- 01-2007 (PB 187-198 AT 187-190) ON THIS ISSUE. 1. PB 59-62 AT 59-60 IS QUESTIONNAIRE DATED 13.01.2006 FROM LEARNED ASSESSING OFFICER ISSUED IN ORIGINAL ASSESSMENT U/S 143(3) ASKING ABOUT PROCUREMENT OF RAW MATERIAL FROM DIFFERENT UN ITS/DIVISIONS AND ABOUT DEDUCTION U/S 80IC, EXCISE DUTY. 2. PB 63-85 IS ASSESSEE'S LETTER DATED 02/02/2006 GIVI NG DETAILS OF INTER UNIT TRANSFERS AND THAT DELHI OFFICE HAS NO ROLE IN PROCUREMENT PROCESS AND DETAILED EXPLANATION ON SECTION 80IC AND ABOUT INCOME FROM 13 ITA NO.5611 & 5581/DEL/2013 ELIGIBLE AND NON-ELIGIBLE UNITS, EXCISE DUTY PAID I N GUWAHATI AND AGARTALA UNITS IN PECULIAR CIRCUMSTANCES AND ABOUT ROYALTY PAYMENT TO M/S FLOSYN FRAGRANCES (P) LTD. EXCISE NOTIFICATIONS TOGETHER WITH ANNEXURE 'A', 'B (PB 74-76,77-81, 82- 85) 3. PB 86-93 AT 86-87 IS COPY OF LETTER DATED 10-02-200 6 SUBMITTING ABOUT EXCISE DUTY REFUND IN RESPECT OF GUWAHATI UNIT AND ITS RELEVANCE FOR DEDUCTION U/S 80IC TOGETHER WITH ANNEXURE 'A'. 'B' (PB-90-91, 92- 93). 4. PB 94-12-1 IS COPY OF ASSESSEE'S REPLY DATED 22-02- 2006 FILED TO LD. AO EXPLAINING UNIT WISE SALES, NATURE OF UNIT WISE EXPENSES AND PROFIT OF VARIOUS UNITS, UNIT WISE WASTAGE TOGETHER WITH A LL ANNEXURE OF THIS LETTER 5. PB 125-133 IS LETTER DATED 09-03-2006 TOGETHER WITH ALL ITS ANNEXURES SHOWING UNIT WISE STOCK, PARTY WISE DETAILS OF JOB WORK. 6. PB 134-135 IS LETTER DATED 10-11-2006 GIVING DETAIL ED NOTE ON DEDUCTION U/S80IC 7. PB 136-138 IS LETTER DATED 20-11-2006 EXPLAINING AB OUT MOVEMENT OF RAW MATERIAL AND OTHER INPUTS FROM VARIOUS UNITS. 8. PB 139-1-141 IS LETTER DATED 27-11-2006 EXPLAINING ABOUT TRANSFERS FROM ONE UNIT TO ANOTHER. 9. PB 316 IS A TABLE PREPARED TO SHOW THAT CONTENTIONS RAISED IN THE REASON RECORDED ARE THE ONES RELATING TO WHICH SUBM ISSIONS WERE MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3), 264, 143(3)7264, 250/143(3)/264. 10. PB 921-922 COPY OF ASSESSEE'S REPLY DATED 09-03-200 6 FILED TO LD. ADDL. CIT IN ASSESSMENT PROCEEDINGS FOR AY 2004-05 SUBMITTING ABOUT THE MANUFACTURING OF PAN MASALA. 11. PB 970-971 COPY OF ASSESSEE'S REPLY DATED 13/04/200 9 TO HON'BLE CIT(A) FOR AY 2004-05 THUS, ABOVE WOULD SHOW THAT THE ISSUE OF DEDUCTION U/S 80IC, MANNER OF COMPUTATION OF DEDUCTION U/S 80IC, UNIT WISE TRA NSFERS OF MATERIAL, IMPACT OF EXCISE DUTY ON THE DEDUCTION U/S 80IC AND ROYALTY HAVING BEARING ON THE DEDUCTION U/S 80IC ALL HAVE BEEN THE SUBJECT MATTER OF ASSESSMENT PROCEEDINGS, REVISIONAL PROCEEDING, REAS SESSMENT PROCEEDING ON EARLIER OCCASION. THERE BEING NOTHING FOUND OUT DURING THE COURSE OF SEARCH WHICH COULD HAVE SHOWN ANY THI NG ADVERSE TO THE ASSESSEE OR DIFFERENT AS IS CLEAR FROM THE PLAIN RE ADING OF THE REASON RECORDED, THE IMPUGNED REASSESSMENT IS NOTHING BUT CHANGE OF OPINION ON THE SAME SET FACTS WHICH IS NOT PERMISSIBLE IN T HE EYES OF LAW IN 14 ITA NO.5611 & 5581/DEL/2013 VIEW OF THE ABOVE MENTIONED CATENA OF JUDICIAL DECI SIONS AND IN VIEW OF THE LATEST JUDICIAL DECISION FROM HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS USHA INTERNATIONAL LTD. 348 ITR 485 (DEL)(FB) AND BY HON'BLE SUPREME COURT CIT VS ICICI SECURITIES PRIMA RY DEALERSHIP LTD. 348 ITR 299 (SC). 7. FURTHER, IT IS RELEVANT AND APPROPRIATE TO MAKE REFERENCE TO LETTER DATED 13.03.2007 ISSUED BY THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT PROCEEDINGS PURSUANT TO ORDER U/S 264. AS PER THIS LETTER, THE AO HAS SPECIFICALLY MADE REFERENCE TO MODUS OPERANDI OF TH E ASSESSEE ALONG WITH IN-DEPTH NOTE ON PROVISIONS OF SECTION 80IC. THE RE LEVANT PORTION OF THE LETTER DATED 13.03.2007 IS EXTRACTED HEREUNDER FOR YOUR KIND REFERENCE: 'MODUS OPERAND! FOR PANMASALA & GUTKA SET UP PACKAGING UNITS AT BUMANI MAIDAN GWVAH ATI LABOUR ENGAGED FOR PACKAGING - 300 (LARGELY CONTRACT WORKERS) INVESTMENT IN PLANT & MACHINERY IN ALL THE UN ITS WHICH ARE AROUND 8 AT BUMANI MAIDAN, GUWAHATI -10 CRORES PROCESS ADOPTED AT GUWAHATI . * CUL SUPARI IS BROUGHT FROM NOIDA WHICH CONTRIBUTE S 80% OF RAW MATERIAL (LABOUR ENGAGED-200) * GRINDING OF CATECHU IS ALSO DONE AT NOIDA AND THE N BROUGHT TO GUWAHATI (LABOUR ENGAGED - 50) * GRINDING OF LIME IS ALSO DONE AT NOIDA AND THEN B ROUGHT TO GUWAHATI (LABOUR ENGAGED - 50) * (ALL THESE PROCESSING AND STORAGE UNITS OF SUPARI CATECHU & LIME ARE AT SECTOR 3, 4 &58, NOIDA AND JOB WORKER S ARE ALSO DS GROUP ASSOCIATE FIRMS AND COMPANIES) * PERFUMERY COMPOUND IS FROM DS LIMITED, PERFUMERY UNIT AT OKHLA INDUSTRIAL ESTATE, PHASE-ILL, NEW DELHI (L ABOUR ENGAGED- 100) * ALL THESE INGREDIENTS AFTER CUTTING/GRINDING/BLEN DING ARE BROUGHT TO GUWAHATI BY TRUCK/GOODS TRAIN. * CUT SUPARI IS DRIED IN OVENS. * ALL THESE INGREDIENTS ARE MIXED IN 'RORI' MIX ERS. * RAW TOBACCO AND KIWAM WHICH ARE ALSO SENT FROM N OIDA TO GUWAHATI ARE ADDED IN THESE INGREDIENTS, WHILE M AKING GUTKA. 15 ITA NO.5611 & 5581/DEL/2013 * PAN MASALA/GUTKA IS THEN PACKED IN LAMINATION POUCHES/BOXES BY FFS MACHINES. * PAN MASALA/GUTKA IS THEN CLEARED AND EXCISE BENEF IT OF 300 CRORES ANNUALLY AVAILED. ' MODUS OPERANDI FOR CHEWING TOBACCO PACKAGING UNITS OF PS GROUP SET UP AT ARUNDHUTI NAGAR, AGARTALA. TRIPURA IN THE NAMES OF PS LIMITED, DHARMAPAL PREM CHAND LIMITED & SATYAPAL SHIVKUMAR SET UP PACKAGING UNITS AT ARUNDHUTI NAGAR, AGARTA LA. LABOUR ENGAGED FOR PACKAGING - 200 (LARGELY CONTR ACT WORKERS) INVESTMENT IN PLANT & MACHINERY IN ALL THE UNITS WHICH ARE AROUND 3 AT AGARTALA - 3 CRORES. PROCESS ADOPTED AT AGARTALA * RAW TOBACCO IS BROUGHT FROM NOIDA -WHICH CONTRIBU TES 90% RAW MATERIAL (LABOUR ENGAGED-200 IN ALL UNITS TOGET HER) * PERFUMERY COMPOUND IS BROUGHT FROM DS LIMITED, PE RFUMERY UNIT AT OKHLA INDUSTRIAL ESTATE, PHASE-ILL, NEW DEL HI (LABOUR ENGAGED-100) * SILVER LEAVES IS BROUGHT FROM DS LIMITED SECTOR- 2, NOIDA (LABOUR ENGAGED -20) * ALL THESE INGREDIENTS ARE BROUGHT TO AGARTA LA BY TRUCK. * ALL THESE INGREDIENTS ARE MIXED IN 'RORI 'M IXERS * MANUFACTURE TOBACCO IS THEN PACKED IN LAMINATION POUCHES BY FFS MACHINES. * MANUFACTURED TOBACCO IS THEN CLEARED AND EXCISE B ENEFIT OF 200 CRORES ANNUALLY AVAILED.' 8. FROM THE ABOVE, IT BECOMES SELF-EVIDENT THAT THE ASSESSING OFFICER HAS ANALYZED AND EXAMINED THE ISSUE OF INTER UNIT T RANSFER AND MANUFACTURING AT GUWAHATI UNIT AND AGARTALA UNIT IN THE LIGHT OF PROVISIONS OF SECTION 80IC AND AS SUCH THERE IS ABSOLUTELY NO GROUND OR BASIS TO REOPEN THE COMPLETED ASSESSMENT WHICH HAS ALREADY BEEN THO ROUGHLY SCRUTINIZED UNDER SECTION 143(3), 264, 143(3) R.W.S. 264 PROCEE DINGS. 9. AT THE TIME OF HEARING, THE LD. DR WAS MAKING AL LEGATION THAT ASSESSING OFFICER DID NOT HAD ANY KNOWLEDGE OF INTE R UNIT TRANSFER OF MATERIAL AND THEREFORE IN ABSENCE OF SUCH CRUCIAL PIECE OF I NFORMATION, THE ASSESSMENT WAS FRAMED ERRONEOUSLY AND AS SUCH THE R EOPENING OF ASSESSMENT IS JUSTIFIABLE ON THIS VERY GROUND. 16 ITA NO.5611 & 5581/DEL/2013 10. IT WILL BE APPRECIATED THAT THE ABOVE ALLEGATIO N WAS MISCONCEIVED AND ON THE BASIS OF DISTORTED FACTS USED SELECTIVEL Y WITHOUT TAKING NOTE OF DETAILED INVESTIGATION CARRIED OUT DURING VARIOUS S TAGES OF PROCEEDINGS. THE ISSUE OF INTER UNIT TRANSFER AND THE JUSTIFICATION OF CLAIM U/S 80IC WAS DULY CONSIDERED AS PER DETAILS OF QUESTIONNAIRE AND VARI OUS SUBMISSIONS EXTRACTED ABOVE. 11. IN ADDITION TO CASE LAWS REFERRED TO IN O UR EARLIER SUBMISSION, REFERENCE MAY ALSO BE MADE TO THE FOLLOWING LATEST DECISION ON THE ISSUE OF REOPENING U/S 147: M/S. SWAROVSKI INDIA P. LTD, V. PCIT (DELHI HIGH CO URT) [WP(O 1772/20141 (29.09.2015) 16. IN THE PRESENT CASE, THIS IS EXACTLY WHAT HAS H APPENED AS QUERIES AND ISSUES HAVE BEEN SPECIFICALLY RAISED AND ANSWERED B Y THE ASSESSEE IN THE ORIGINAL ASSESSMENT PROCEEDINGS. THUS, EVEN THOUGH THE ASSESSING OFFICER DID NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER, IT WOULD HAVE TO BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESS ING OFFICER DID NOT FIND ANY GROUND OR REASON TO MAKE ANY ADDITION OR TO REJ ECT THE STAND OF THE ASSESSEE. CONSEQUENTLY, IT WILL HAVE TO BE PRESUMED THAT THE ASSESSING OFFICER HAD FORMED AN OPINION WHICH IS NOW SOUGHT T O BE CHANGED THROUGH THE RE-ASSESSMENT NOTICE, WHICH CANNOT BE PERMITTED . CIT V. MULTIPLEX TRADING & INDUSTRIAL CO. LTD. (DEL HI HIGH COURT) 122.09.20151 34. THUS, ALTHOUGH WE ARE IN AGREEMENT WITH THE CON TENTION ADVANCED BY THE REVENUE THAT INFORMATION RECEIVED BY THE AO REGARDI NG PASSING OF BOGUS ENTRIES IN ITS BOOKS AFTER THE CONCLUSION OF THE AS SESSMENT PROCEEDINGS COULD IN CERTAIN CIRCUMSTANCES, PROVIDE TANGIBLE MATERIAL FOR AO TO REOPEN ASSESSMENT AND ASSUME JURISDICTION, BUT, IN THE FAC TS OF THE PRESENT CASE, WE ARE UNABLE TO ACCEPT THAT IT WOULD BE OPEN FOR THE AO TO PROCEED ON THE BASIS THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR AY 2001-02. 35. IN VIEW OF THE ABOVE, .WE FIND NO INFIRMITY WI TH THE CONCLUSION OF THE CIT(A) AND THE TRIBUNAL THAT AO COULD NOT HAVE ASSUMED JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTION 147/148 OF THE ACT. MOTILAL R. TODI V. ACIT (ITAT MUMBAI) [22/09/15] (A) THUS, TAKING HELP FROM THESE JUDGMENTS, RELEVAN T PROVISIONS OF LAW, FIXING OBLIGATIONS UPON THE AO FOR MAKING MAND ATORY COMPLIANCES, IN A STEP-WISE MANNER, FOR VALID ASSUMPTION OF JURISDI CTION FOR REOPENING AND REFRAMING OF REASSESSMENT ORDER, CAN BE SUMMARIZED AS UNDER: (I) AVAILABILITY OF THE NEW TANGIBLE MATERIAL INDI CATING ESCAPED INCOME OF THE ASSESSEE, WHICH SHOULD HAVE COME INTO POSSESSION OF 17 ITA NO.5611 & 5581/DEL/2013 THE AO, AFTER THE PASSING OF ORIGINAL ASSESSMENT OR DER, WHETHER U/S 143(3) OR 143(1), (II) RECORDING OF THE 'REASONS' BY THE AO: 'REASON S' RECORDED SHOULD NOT BE BASED UPON THE CHANGE OF OPINION OF T HE ASSESSING OFFICER. 'REASONS' SHOULD BE SUCH THAT ANY PERSON O F ORDINARY PRUDENCE SHOULD BE IN A POSITION TO MAKE A BELIEF A BOUT ESCAPEMENT OF INCOME ON THE BASIS OF FACTS NARRATED AND MATERI AL REFERRED TO, IN THE 'REASONS' RECORDED. THE 'REASONS' SHOULD SHOW T HAT, THERE IS RATIONAL NEXUS AND CAUSE & EFFECT RELATIONSHIP BETW EEN THE MATERIAL SOUGHT TO BE RELIED UPON IN THE REASONS AND BELIEF SOUGHT TO BE FORMED BY THE AO ABOUT ESCAPEMENT OF INCOME. (III) IN CASE REOPENING IS SOUGHT TO BE DONE BY TH E AO AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3) T HEN REASONS CAN BE RECORDED ONLY IF THERE WAS FAILURE ON THE PART O F THE ASSESSEE IN DISCLOSURE OF MATERIAL OF FACTS, AS HAS BEEN ENVISA GED IN FIRST PROVISO TO SECTION 147. (IV) BEFORE ISSUING NOTICE U/S 148, THE AO HAS TO OBTAIN, ON THE REASONS RECORDED BY HIM, SANCTION FOR REOPENING OF THE CASE, FROM THE COMPETENT AUTHORITY AS ENVISAGED U/S 151 VIZ. A DDITIONAL COMMISSIONER OR THE COMMISSIONER OF INCOME TAX, AS THE CASE MAY BE. BEFORE GRANTING ITS SANCTION, THE SANCTIONI NG AUTHORITY IS REQUIRED TO RECORD ITS SATISFACTION BASED UPON ITS INDEPENDENT APPLICATION OF MIND, MAKING OUT A CASE THAT AS PER THE FACTS NARRATED AND MATERIAL REFERRED TO IN THE 'REASONS' RECORDED BY THE AO, A BELIEF CAN BE FORMED ABOUT ESCAPEMENT OF INCOME AND CASE SOUGHT TO BE REOPENED IS A FIT CASE FOR REOPENING U/S 147. (V) AFTER OBTAINING THE SANCTION, THE AO IS REQUIRE D TO ISSUE AND SERVE NOTICE U/S 148 UPON THE ASSESSEE, WITHIN THE TIME LIMIT AS PRESCRIBED U/S 149, TO ENABLE HIM TO ASSUME JURISDI CTION TO REOPEN THE ASSESSMENT. (VI) THE ASSESSEE IS REQUIRED TO FILE TO RETURN OF INCOME, IN RESPONSE TO NOTICE U/S 148 AND MAY REQUEST FOR THE COPY OF R EASONS. (VII) THE AO IS BOUND, AS PER LAW, TO PROVIDE A CER TIFIED AND VERBATIM COPY OF REASONS TO THE ASSESSEE. (VIII) THE ASSESSEE MAY FILE ITS OBJECTIONS BEFORE THE AO, TO THE REASONS RECORDED, IF ANY. (IX) IN PURSUANCE TO JUDGMENT OF HON'BLE SUPREME CO URT IN THE CASE OF GKN DRIVESHAFTS 259 ITR 19 (SC), THE AO IS OBLIGED TO DISPOSE OF THESE OBJECTIONS AND INTIMATE THE SAME T O THE ASSESSEE, BEFORE PROCEEDING FURTHER WITH THE REASSESSMENT PRO CEEDINGS. 18 ITA NO.5611 & 5581/DEL/2013 (X) THEREAFTER, THE AO IS OBLIGED UNDER THE LAW TO ISSUE AND SERVE NOTICE U/S 143(2) TO ENABLE HIM TO MAKE ASSESSMENT OF THE RETURN FILED BY THE ASSESSEE IN RESPONSE TO NOTICE ISSUED UNDER SECTION 148. (XI) FRAMING OF THE RE-ASSESSMENT ORDER BY THE AO U /S 147/143(3) AFTER PROVIDING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND CONSIDERING REPLIES AND EVIDENCES OF THE ASSESSEE, AND ALL OTHER APPLICABLE PROVISIONS OF THE ACT. (B) UNDER THESE FACTS AND CIRCUMSTANCES, LET US NO W EXAMINE SETTLED POSITION OF LAW ON THIS ISSUE. IT HAS BEEN HELD IN VARIOUS JUDGMENTS COMING FROM VARIOUS COURTS THAT AVAILABILITY OF FRESH TANG IBLE MATERIAL IN THE POSSESSION OF AO AT THE TIME OF RECORDING OF IMPUGN ED REASONS IS A SINE QUA NONE, BEFORE THE AO CAN RECORD REASONS FOR REOPENIN G OF THE CASE. WE BEGIN WITH THE JUDGMENT OF HON'BLE SUPREME COURT IN THE C ASE OF CIT VS. KELVINATOR INDIA LTD. 320 ITR 561 (SC), LAYING DOWN THAT FOR REOPENING OF THE ASSESSMENT, THE AO SHOULD HAVE IN ITS POSSESSIO N 'TANGIBLE MATERIAL'. THE TERM 'TANGIBLE MATERIAL' HAS BEEN UNDERSTOOD AND EX PLAINED BY VARIOUS COURTS SUBSEQUENTLY. THERE HAS BEEN UNANIMITY OF THE COURT S ON THIS ISSUE THAT IN ABSENCE OF FRESH MATERIAL INDICATING ESCAPED INCOME , THE AO CANNOT ASSUME JURISDICTION TO REOPEN ALREADY CONCLUDED ASSESSMENT . (C) IN THE PRESENT CASE, IT HAS ALREADY BEEN DISCU SSED THAT ADMITTED FACTS ARE THAT THERE WAS NO FRESH MATERIAL COMING I NTO THE POSSESSION OF THE AO, AT THE TIME OF RECORDING OF THE 'REASONS'. THES E FACTS HAVE NOT BEEN REBUTTED BY LD DR ALSO. THE CASE LAW RELIED UPON BY LD DR IN THE CASE OF DR. AMIN'S PATHOLOGY, SUPRA IS NOT APPLICABLE ON TH E ISSUE BEING DECIDED HERE. THE ISSUE THAT IN ABSENCE OF ANY FRESH MATERI AL, WHETHER AO CAN PROCEED TO RECORD REASONS, WAS NOT BEFORE HON'BLE H IGH COURT, THEREFORE HON'BLE HIGH COURT HAD DECIDED THE ISSUE OF CHANGE OF OPINION IN THAT CASE. IN THE CASE BEFORE US, AS DISCUSSED ABOVE, WE ARE N OT GOING INTO THAT ISSUE. IN OUR CONSIDERED OPINION, AT THIS STAGE, WE NEED NOT GO INTO THE OTHER ASPECT I.E. WHETHER THERE WAS CHANGE OF OPINION OR NOT. TH IS ISSUE HAS BEEN APTLY CLARIFIED BY HON'BLE HIGH COURT IN THE CASE OF MADH UKAR KHOSLA, (SUPRA), WHEREIN IT HAS BEEN HELD BY THEIR LORDSHIPS THAT EX TERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH ENABLES THE AO TO LEGITIMATELY REOPEN THE COMPLETED ASSESSMENT AND IN ABSENCE OF THIS OBJ ECTIVE 'TRIGGER', THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSM ENT. FURTHER, MOST IMPORTANTLY, IT WAS HELD BY THE HON'BLE HIGH COURT THAT IT IS AT THE NEXT STAGE WHEN THE QUESTION, WHETHER THE REOPENING OF ASSESSM ENT AMOUNTS TO 'REVIEW' OR 'CHANGE OF OPINION' ARISES. IN OTHER WO RDS, IF THERE ARE NO 'NEW TANGIBLE MATERIALS', THEN THERE WOULD BE NO 'REASON S TO BELIEVE', AND CONSEQUENTLY REOPENING WOULD BE AN IMPERMISSIBLE RE VIEW. UNDER THESE CIRCUMSTANCES THERE WOULD NOT ARISE ANY NEED TO GO THE NEXT STAGE TO EXAMINE THE NEXT QUESTION, I.E., WHETHER THERE WAS 'REVIEW' OR 'CHANGE OF OPINION'. THE CONDITION WITH RESPECT TO AVAILABILIT Y OF 'NEW TANGIBLE MATERIAL' IS STEP ANTERIOR TO THE CONDITION OF NO ' CHANGE OF OPINION' OR 'REVIEW'. 19 ITA NO.5611 & 5581/DEL/2013 PR. CIT VS. TUPPERWARE INDIA PVT. LTD (DELHI HIGH C OURT) (10/08/151) S. 147: EVEN A S. 143(1) ASSESSMENT CANNOT BE REOPE NED IN THE ABSENCE OF NEW/ TANGIBLE MATERIAL. (I) THOUGH ONLY AN ASSESSMENT U/S 143(1) AND NOT 1 43(3) WAS MADE, THE REOPENING ORDER OF THE AO ONLY REFERS TO THE RE PORT OF STATUTORY AUDITOR UNDER SECTION 44AB OF THE ACT WHICH REPORT WAS ALRE ADY ENCLOSED WITH THE RETURN FILED BY THE ASSESSEE. THEREFORE, FACTUALLY, THERE WAS NO NEW MATERIAL THAT THE AO CAME ACROSS SO AS TO HAVE 'REASONS TO B ELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT'. (II) THE DEPARTMENT'S CONTENTION THAT THE JUDGEMEN T IN CIT VS. ORIENT CRAFT LTD. (2013) 354 ITR 536 (DEL) IS CONTRARY TO THE FULL BENCH VERDICT IN CIT-VI V. USHA INTERNATIONAL LTD. (2012) 348 ITR 48 5 AND THE ISSUE SHOULD BE REFERRED TO A LARGER BENCH IS NOT ACCEPTABLE BEC AUSE THE CENTRAL ISSUE EXAMINED IN THE DECISION OF THE FULL BENCH IN USHA INTERNATIONAL LTD. WAS AS TO WHAT CONSTITUTED A 'CHANGE OF OPINION'. THE COUR T, THEREFORE, DOES NOT CONSIDER THE DECISION IN ORIENT CRAFT LTD. AS BEING CONTRARY TO THE DECISION IN USHA INTERNATIONAL LTD. IN OTHER WORDS, THERE IS NO OCCASION FOR THE COURT TO REFER TO A LARGER BENCH THE QUESTION OF THE CORR ECTNESS OF THE DECISION IN ORIENT CRAFT LTD. WHICH DECISION SQUARELY APPLIES T O THE FACTS OF THE PRESENT CASE. (ASSISTANT COMMISSIONER OF INCOME TAX V. RAJE SH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 & MADHUKAR KHOSL A V. ASSISTANT COMMISSIONER OF INCOME TAX (2013) 354 1TR 356 REFER RED). 14. THE LD. AR, SHRI R.S. SINGHVI ASSAILED THE DECI SION OF LD. CIT (A) BY STATING THAT THE LD. CIT (A) ERRED IN NOT APPRECIATING THE CONTE NTIONS RAISED BEFORE HIM IN RESPECT TO THE VERY LEGALITY OF REOPENING OF THE ORIGINAL AS SESSMENT WHICH WAS CARRIED OUT UNDER SECTION 143 (3) OF THE ACT. ACCORDING TO HIM, THER E IS NO DISPUTE ABOUT THE FACT THAT IN THE INSTANT CASE RE-OPENING IS SOUGHT TO BE DONE BY THE AO AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND SI NCE THE ORIGINAL ASSESSMENT WAS FRAMED U/S 143(3), THEN REASONS FOR REOPENING CAN B E RECORDED ONLY IF THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERI AL FACTS, AS HAS BEEN ENVISAGED IN FIRST PROVISO TO SECTION 147 OF THE ACT, AND IN THIS CASE ACCORDING TO THE LD. AR, THERE IS NO WHISPER IN THE REASONS RECORDED ABOUT WHAT MATERIAL FACT WAS NOT FULLY AND TRULY DISCLOSED AND ACCORDING TO HIM, THE MATERIAL FACTS WHICH WERE NOT DISCLOSED BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS MUST HAVE BEEN EMANATING FROM 20 ITA NO.5611 & 5581/DEL/2013 THE REASONS RECORDED. AND, ACCORDING TO LD. AR, TH E AO BEFORE RECORDING THE REASONS MUST HAVE IN HIS POSSESSION FRESH TANGIBLE MATERIAL WHICH SHOULD HAVE BEEN THE BASIS ON WHICH THE COMPLETED ORIGINAL ASSESSMENT U/S 143(3) IS SOUGHT TO BE REOPENED WHICH SHOULD BE CLEARLY SPELLED OUT IN THE REASONS RECORD ED TO REOPEN WHICH IS NOT DISCERNIBLE FROM A READING OF THE REASONS RECORDED WHICH, ACCOR DING TO THE LD. AR, THE AO HAS MISERABLY FAILED TO DO SO VITIATING THE USURPATION OF JURISDICTION BY THE AO; AND THE LD. AR POINTED OUT THAT THE LD. CIT (A) ERRED IN NOT AP PRECIATING THE FACT THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3), THE SAI D PROCEEDING WAS ALSO SUPERVISED UNDER SECTION 144A BY THE ADDL.CIT, THEREAFTER THE CIT HAS ALSO REVIEWED THE ORDER OF THE AO UNDER SECTION 264. THUS, ACCORDING TO THE L D. AR, THE ORIGINAL ASSESSMENT HAS GONE THROUGH THE HANDS OF THE AO (DCIT), ADDL. CIT AND CIT. SO, ACCORDING TO SHRI SINGHVI, THE QUESTION OF NOT DISCLOSING FULL AND TR UE FACTS DOES NOT EXIST AS THE ENTIRE FACTS WERE ALREADY AVAILABLE IN THE FILES OF THE SA ID AUTHORITIES, THEREFORE, THE QUESTION OF REOPENING AFTER FOUR YEARS IS IMPERMISSIBLE IN THE EYES OF LAW. LD. AR, SHRI SINGHVI TOOK OUR ATTENTION TO THE GROUND RAISED BY THE ASSE SSEE BEFORE THE LD. CIT (A) IN RESPECT TO NON-ISSUANCE AND RECEIPT OF 143 (2) NOTICE WHICH HAS BEEN REPELLED BY THE LD. CIT (A) BY NOT EVEN ADDRESSING OR MENTIONING ABOUT THE ISSUANCE/RECEIPT OF THE NOTICE BUT HAS REPELLED THE GROUND SIMPLY BY STATING THAT IN 1 53A PROCEEDINGS, 143 (2) NOTICE IS NOT REQUIRED AS HELD BY HONBLE DELHI HIGH COURT IN ASHOK CHADDHA VS. ITO REPORTED IN 337 ITR 399 (DEL.) WHICH, ACCORDING TO THE LD. A R, IS LEGALLY UNTENABLE BECAUSE IN THIS CASE REASSESSMENT IS NOT DONE UNDER SECTION 15 3A, SO THE REASON GIVEN BY THE CIT(A) IS INVALID THEREFORE, THE RELIANCE OF THE AS HOK CHADDA CASE (SUPRA) OF THE HONBLE HIGH COURT OF DELHI IS WRONG AND INCORRECT, WHEREAS THE SETTLED POSITION OF LAW BY THE HONBLE JURISDICTIONAL HIGH COURT AND HONBL E APEX COURT IN HOTEL BLUE MOON 321 ITR 362 (SC) IS THAT IN REOPENING PROCEEDINGS U NDER SECTION 147 / 148, ISSUANCE OF 21 ITA NO.5611 & 5581/DEL/2013 143 (2) NOTICE IS SINE QUA NON AND IS NOT A CURABLE DEFECT. THE LD. AR POINTED O UT THAT THE ISSUE WHETHER 143(2) NOTICE HAS BEEN ISSUED AND SERVED ON THE ASSESSEE WAS A QUESTION OF FACT WHICH SHOULD HAVE BEEN ADDRESSED B Y THE LD. CIT (A) AND SHOULD HAVE GIVEN FINDING ON THE SAID FACT, WHICH HAS NOT BEEN DONE BY THE LD. CIT (A) AND HE HAS KEPT SILENT ON WHETHER THE AO HAS ISSUED 143 (2) NO TICE TO THE ASSESSEE OR NOT, IS AN ILLEGAL OMISSION ON THE PART OF THE CIT(A) WHILE DE CIDING A CRUCIAL GROUND RAISED BY THE ASSESSEE ITSELF VITIATES THE IMPUGNED ORDER. THEREA FTER, THE LD. AR TOOK OUR ATTENTION TO THE SANCTION GRANTED BY COMMISSIONER AND ADDITIONAL CIT UNDER SECTION 151 OF THE ACT, WHEREIN OUR ATTENTION WAS TAKEN TO THE REASONS RECORDED AND THE SANCTION GRANTED BY THE ADDL.CIT WHEREIN HE HAS WRITTEN . I AM SATISFIED AND COMMISSIONER HAS WRITTEN THE VERY SAME WORDS YES. I AM SATISFIED. HE TOOK OUR ATTENTION TO THE FACT THAT BOTH THE AUTHORITIES HAVE GRANTED THE SANCTION ON THE VERY SAME DAY I.E, ON 28.03.2011. MR. SINGHVI POINTED OUT THAT THERE HAS BEEN NO DISCUSSION WHATSOEVER WAS NOTED IN THE SAID RECORDS BY BOTH THESE AUTHORITIES AND WONDERED AS TO HOW TWO SENIOR OFFICERS CAN DECIDE TO RE-OPEN THE ORIGINAL ASSESSM ENT COMPLETED U/S 143(3) AFTER EXPIRY OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR, WH EN THE ORIGINAL ASSESSMENT HAS GONE THROUGH THE HANDS OF DCIT, ADDITIONAL CIT U/S 144A AND CIT U/S 264 OF THE ACT, WITHOUT EVEN CARING TO ASK THE AO WHAT WAS THE MATE RIAL FACT NOT DISCLOSED BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT AND THE CIT AND ADDL. CIT DID NOT ENQUIRE AS TO WHAT WAS THE FRESH TANGIBLE MATERIAL ON WHICH THE R EASONS RECORDED IS BASED UPON TO REOPEN THE ORIGINAL ASSESSMENT DONE U/S 143(3) OF T HE ACT. SINCE IT IS NOT EMERGING FROM THE REASONS RECORDED BY THE AO, WHICH IS FOR S ANCTION BEFORE THEM, CLEARLY SHOWS THAT BOTH THE OFFICERS HAVE MECHANICALLY PUT THEIR SIGNATURES WITHOUT APPLICATION OF MIND AND THE SAID SANCTION IS NO SANCTION IN THE EY ES OF LAW, SO RESULTANTLY THE SECTION 147/148 NOTICE ITSELF IS VITIATED ON THIS COUNT ALS O. THUS, ACCORDING TO THE LD. AR, THE 22 ITA NO.5611 & 5581/DEL/2013 AFORESAID LEGAL GROUNDS RAISED BEFORE THE LD. CIT ( A) HAS NOT BEEN DEALT WITH IN ACCORDANCE WITH LAW AND WELL SETTLED PRINCIPLES OF LAW, THUS VITIATING THE IMPUGNED ORDER. IN THE LIGHT OF THE AFORESAID SUBMISSION, T HE LD. AR PRAYED THAT THE REOPENING OF THE ASSESSMENT IS LEGALLY IMPERMISSIBLE AND, THEREF ORE, THE AO LACKS JURISDICTION TO REASSESS THE ASSESSEE. THE LD AR, EMPHASIZED THAT T HERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE AO, TO JUSTIFY REOPENING, WHICH COULD HA VE BEEN THE BASIS FOR REASON TO BELIEVE , WHICH IS ABSENT IN THIS CASE, SO THE ISSUANCE OF NOTICE TO REOPEN IS HIT AS SETTLED BY APEX COURT IN A PLETHORA OF CASES. SO ACCORDING TO LD AR, THE AO, WITHOUT HAVING IN HIS HANDS FRESH TANGIBLE MATERIAL POINTING OUT OF ESCAPEMENT OF INCOME AND BY NOT SPELLING OUT IN THE REASONS RECORDED THE FACTS WHICH WERE NOT FULLY AND TRULY DISCLOSED BY THE ASSESSEE, THE ASSUMPTION OF JURISDICTION IS VOID AB-INITIO. AND SINCE THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL FACTS WHICH WERE AUDITED AS PER LAW, THE ENTIRE EXERCISE TO REOPEN CAN BE CALLED AS A REVIEW OF THE ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT, WHICH IS IMPERMISSIBLE AND WOULD AMOUNT TO CHANGE OF OPINION ON THE SAME FACTS WHICH WERE ALREADY ON RECORD. THEREFORE, HE P RAYED THAT THE ASSUMPTION OF JURISDICTION BY THE AO TO REOPEN BE HELD AS NULL AN D VOID. 15. THE LD. DR SUBMITTED THE WRITTEN SUBMISSIONS ON BEHALF OF THE REVENUE ON THE LEGAL ISSUES AS UNDER :- WRITTEN SUBMISSIONS OF REVENUE ON LEGAL ISSUES THE WRITTEN SUBMISSIONS ARE MADE ON THE FOLLOWING C ONTENTIONS RAISED BY THE APPELLANT: 1. NON ISSUE/SERVICE OF NOTICE U/S 143(2) 2. NO BASIS FOR PRIMA FACIE BELIEF BY AO THAT INCOM E HAD ESCAPED ASSESSMENT 3. REOPENING U/S 147 AMOUNTS TO ' CHANGE OF OPINION ' EACH ISSUE IS DISCUSSED BELOW: 23 ITA NO.5611 & 5581/DEL/2013 1. NON ISSUE/SERVICE OF NOTICE U/S 143(2): IN THIS REGARD FOLLOWING POINT ARE PUT FORWARD BY R EVENUE TO SUPPORT ITS CASE : A. ORDER SHEET ENTRY: > PERUSAL OF RECORDS OF A.Y. 2004-05 CLEARLY SHOW S THAT NOTICE U/S 143(2) WAS ISSUED VIDE ORDER SHEET ENTRY DTD. 24.11 . 2011 AS THERE IS AN ENTRY TO THAT EFFECT IN THE ORDER SHEET. COPY OF NO TE SHEET WAS PROVIDED TO THE HON'BLE MEMBERS DURING THE COURSE OF HEARING AN D THE ORIGINAL ORDER SHEET WAS ALSO PUT UP FOR THEIR PERUSAL. > THE IMMEDIATE ORDER SHEET NOTING THEREAFTER, I.E . ON 28.11.2011, ALSO SHOWS THAT THE DIRECTOR OF THE COMPANY, MR.ANIL AGG ARWAL AND SH.SIDDHART GOEL, GM, TAXATION, APPEARED BEFORE THE AO. THE ORDER SHEET NOTING DATED 28.11.2011 IS ALSO SIGNED BY BOT H - THE DIRECTOR AND THE GM (TAXATION). ALSO BOTH THESE NOTINGS ON ORDER SHEET ARE IN SERIATIM AND APPEAR ON THE SAME PAGE. HENCE THE FAC T THAT NOTICE U/S 143(2) HAD BEEN ISSUED WAS WRITTEN LARGE BEFORE THE M. IT WAS NEVER REFUTED BY THEM DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THEREBY IMPLYING IN THE AFFIRMATIVE THAT NOTICE WAS ISSUED AND SERVED UPON THE ASSESSEE. THEIR APPEARANCE ON 28.11.2006 IS CLEARLY INDICATIVE OF THEIR COMPLIANCE TO NOTICE U/S 143(2). > THE LD. COUNSEL OF THE ASSESSEE STATED BEFORE T HE HON'BLE BENCH THAT THE APPEARANCE ON 28.11.2011 WAS MADE TO FILE OBJEC TIONS TO NOTICE ISSUED U/S 148, AND IN RESPONSE TO NOTICE ISSUED U/ S 142(1) ON 21.11.2011, AND NOT IN RESPONSE TO NOTICE U/S 143(2 ). > THE ABOVE CONTENTION IS REBUTTED BY CIT(DR) ON THE GROUND THAT REASONS FOR REOPENING THE CASE U/S 147 WERE COMMUNI CATED TO THE ASSESSEE ON 03/06/2011 AND THE ASSESSEE CANNOT TAKE THE PLEA THAT IT CAME TO FILE OBJECTIONS ON 28.11.2011 (AFTER MORE THAN 5 MONTHS) AND THAT TOO IMMEDIATELY ON ISSUE OF NOTICE US 143(2) ON 24.11.2 011. SECONDLY THE NOTICE U/S 142(1) ISSUED ON 21.11.2011 HAD FIXED TH E DATE OF COMPLIANCE FOR 29.11.2011 AND NOT 28.11.2011 (COPY OF NOTICE A S OBTAINED FROM THE ASSESSMENT RECORDS IS ENCLOSED AS ANNEXURE- 1. B. SPECIAL AUDIT U/S 142(2A) SPECIAL AUDIT U/S 142(2A) WAS ORDERED IN THIS CASE DURING THE COURSE OF RE-ASSESSMENT PROCEEDINGS UNDER CONSIDERA TION. THE SHOW-CAUSE NOTICE TO THIS EFFECT WAS ISSUED BY THE AO, TO THE ASSESSEE ON 23.12.2011 FIXING THE CASE FOR HEARING ON 26.12.2011. IN THE SAID NOTICE ON PAGE 4 (TOP PARA) IT WAS SPEC IFICALLY INFORMED TO THE ASSESSEE THAT NOTICE U/S 143(2) HAS BEEN ISS UED TO IT. THE RELEVANT PARA READS AS UNDER- 'SUBSEQUENTLY NOTICE U/S 143(2) WAS ISSUED TO THE A SSESSEE IMMEDIATELY ON CENTRALIZATION. SH.ANIF AGARWAL, DIRECTOR OF THE COMPANY ALONG WITH 24 ITA NO.5611 & 5581/DEL/2013 SH.SIDDHART GOEL, GM, TAXATION APPEARED ON 28.11.20 11 AND FILED OBJECTIONS TO THE REOPENING PROCEEDINGS I NITIATED, VIDE THE REPLY OF EVEN DATE. .................. MEANWHILE THE HEARING CONTINUED ON 09.12.2011, 12.1 2.2011, 16.12.2011, 20.12.2011, 23.12.2011 CALLING FOR VAR IOUS DETAILS AND BOOKS OF ACCOUNTS WERE ALSO EXAMINED. THE ASSESSEE MADE COMPLIANCE TO THE NOTICES ISSUED AND FILED VOLUMINOUS DETAILS.' THE ABOVE PARA WAS READ OUT FROM THE ORIGINAL RECOR DS BEFORE THE HON'BLE MEMBERS DURING THE COURSE OF HEARING ON 27. 10.2015. THE ASSESSEE FILED A REPLY TO THE ABOVE SAID SHOW C AUSE NOTICE ON 26.12.2011 ( ANNEX ) OBJECTING TO THE SPECIAL AUDIT PROPOSED BY REVENUE. IN THE SAID REPLY, THE ASSESSEE NEVER CONT ESTED THE FACT OF NON ISSUE OR NON RECEIPT OF NOTICE U/S 143(2). IT D ID NOT EVEN CONTEST THE AO'S CONTENTION THAT ' THE ASSESSEE MAD E COMPLIANCE TO THE NOTICES ISSUED AND FILED VOLUMINOUS DETAILS.' T HE 'NOTICES ISSUED' INCLUDE NOTICE ISSUED U/S 143(2) AS ISSUANC E OF THIS NOTICE CATEGORICALLY FINDS MENTION IN THE SAME PARA. THIS CLEARLY IMPLIES THAT THE ASSESSEE HAD VERY WELL ACCEPTED THE FACT D URING ASSESSMENT PROCEEDINGS ITSELF THAT NOTICE U/S 143(2) WAS ISSUE D AND WAS RECEIVED BY IT, AND THAT IT HAD ALSO MADE COMPLIANC E TO THE SAME. AN ORDER U/S 142(2A) OF THE I.T.ACT FOR CONDUCTING SPECIAL AUDIT, WAS PASSED IN THIS CASE BY THE AO ON 29.12.2011, WH ERE AGAIN THE SAME SET OF FACTS WERE BROUGHT TO THE NOTICE OF THE ASSESSEE AT 'PAGE 4 PARA 6' OF THE SAID ORDER. THE SAME ARE BEING REP RODUCED BELOW- '6. SUBSEQUENTLY NOTICE U/S 143(2) WAS ISSUED TO TH E ASSESSEE IMMEDIATELY ON CENTRALIZATION. SH.ANIL AGARWAL, DIR ECTOR OF THE COMPANY ALONG WITH SH.SIDDHART GOEL, GM, TAXATION A PPEARED ON 28.11.2011 AND FILED OBJECTIONS TO THE REOPENING PR OCEEDINGS INITIATED VIDE THE REPLY OF EVEN DATE. ............... MEANWHILE THE HEARING CONTINUED ON 09.12.2011, 12.1 2.2011, 16.12.2011, 20.12.2011, 23.12,2011 CALLING FOR VARI OUS DETAILS AND BOOKS OF ACCOUNTS WERE ALSO EXAMINED. THE ASSESSEE MADE COMPLIANCE TO THE NOTICES ISSUED AND FILED VOLUMINOUS DETAILS.' THE ABOVE PARA WAS READ OUT FROM THE ORIGINAL RECOR DS BEFORE THE HON'BLE MEMBERS DURING THE COURSE OF HEARING ON 27. 10.2015. HENCE, AGAIN AND AGAIN THE ASSESSEE HAS BEEN INFORM ED BY THE AO DURING THE COURSE OF RE-ASSESSMENT/142(2A) PROCEEDI NGS ITSELF, THAT NOTICE U/S 143(2) HAS BEEN ISSUED TO IT AND IN ITS COMPLIANCE THE DIRECTOR AS WELL AS THE GM (TAXATION) HAVE APPEARED BEFORE THE AO. BUT THE ASSESSEE HAS NOT REFUTED OR CONTESTED T HE NON ISSUE AND NON RECEIPT OF THE SAID NOTICE. THE ASSESSEE HAS AL SO NOT CONTROVERTED THE AFFIRMATIVE STATEMENT OF THE AO TH AT 'THE ASSESSEE MADE TO THE NOTICES ISSUED AND FILED VOLUMINOUS DET AILS. 'HENCE 25 ITA NO.5611 & 5581/DEL/2013 THE ISSUE & SERVICE OF NOTICE U/S 143(2) STANDS ESTABLISHED IN THIS CASE. THE ASSESSEE HAS ACCEPTED THE ORDER PASSED U/S 142( 2A) FOR SPECIAL AUDIT DTD.29.12.2011, AND HAS R: DETAILS FR OM TIME TO TIME BEFORE THE SPECIAL AUDITORS. BY ACCEPTING THE SPECI AL AUDIT ORDER AND NOT CHALLENGING IT, THE ASSESSEE HAS ALSO ACCEP TED THE CONTENTS OF THE ORDER THAT NOTICE U/S 143(2) WAS ISSUED TO I T AND THAT IT HAD MADE COMPLIANCE TO THE NOTICES ISSUED, AND FILED VO LUMINOUS DETAILS. THE SPECIAL AUDIT IS AN INTEGRAL PART OF R E-ASSESSMENT PROCEEDINGS IN THIS CASE, AND BY ACCEPTING THE SPEC IAL AUDIT ORDER PASSED BY AO, AND PARTICIPATING IN IT BY FILING DET AILS BEFORE THE SPECIAL AUDITOR, THE ASSESSEE HAS ACCEPTED THE PROC EDURAL FORMALITIES THAT HAVE LED TO THE SPECIAL AUDIT WHIC H INCLUDES ISSUE AND SERVICE OF NOTICE U/S 143(2) WHICH HAS CATEGORI CALLY BEEN MENTIONED IN THE SHOW CAUSE NOTICE AS WELL AS SPECI AL AUDIT ORDER PASSED BY AO. IF THE ASSESSEE HAS ALLEGED THAT NOTICE U/S 143(2) WAS NOT ISSUED OR SERVED ON IT, THEN IT SHOULD HAVE CHALLENGED THE SP ECIAL AUDIT ORDER IN WRIT ON THE VERY GROUND THAT NO NOTICE U/S 143(2 ) HAS BEEN SERVED UPON IT AFTER ISSUING NOTICE U/S 147, AND TH AT THE SPECIAL AUDIT CANNOT BE UNDERTAKEN IN THE ABSENCE OF THE SA ME AS THE VERY PROCEEDINGS UNDER WHICH SPECIAL AUDIT HAS BEEN DONE WILL BE VITIATED IN THE ABSENCE OF A VALID NOTICE U/S 143(2 ). BUT THE ASSESSEE HAS NOT CHALLENGED THE SPECIAL AUDIT ORDER PASSED BY THE AO. ON THE CONTRARY IT HAS ACCEPTED THIS ORDER AND COMPLIED TO THE QUERIES RAISED BY SPECIAL AUDITORS FROM TIME TO TIM E. ANOTHER IMPORTANT POINT TO BE NOTED IS THAT THE ASSESSEE EV EN FURNISHED THE REPORT OF SPECIAL AUDITORS TO THE AO AND COMPLIED W ITH SUBSEQUENT QUERIES RAISED BY THE AO BASED ON SPECIA L AUDITOR'S REPORT. BY ACCEPTING THE SHOW CAUSE NOTICE U/S 142(2A) & OR DER U/S 142(2A), WHEREIN THERE IS CATEGORICAL MENTION OF NO TICE U/S 143(2) AND ITS COMPLIANCE, FOLLOWED BY PARTICIPATION OF TH E ASSESSEE IN SPECIAL AUDIT PROCEEDINGS AS WELL AS IN RE-ASSESSME NT PROCEEDINGS REGARDING QUERIES BASED ON SPECIAL AUDIT REPORT, TH E ASSESSEE HAS LOST ITS RIGHT TO APPEAL THAT NO NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON IT. THE ASSESSEE'S CONTENTION ON THIS I SSUE THEREFORE LEADS TO ABSOLUTE CONTRADICTION AND IS NOT PERMISSI BLE UNDER ANY LAW, MUCH LESS DERIVE ANY MILEAGE OUT OF IT. SPECIAL AUDIT IS A COSTLY AFFAIR AND THE COST IS BO RNE BY THE REVENUE. IN TERMS OF RESOURCES, THE DEPARTMENT HAS TO PAY A HEAVY PRICE FOR CONDUCTING IT. THE ASSESSEE HAS DULY PARTICIPATED I N THE SAME AND WAS SPECIFICALLY INFORMED DURING THE COURSE OF SPEC IAL AUDIT PROCEEDINGS THAT NOTICE UNDER 143(2) HAS BEEN ISSUE D TO IT. IT WAS FURTHER AFFIRMED BY THE AO IN THE ORDER PASSED U/S 142(2A) ON 26 ITA NO.5611 & 5581/DEL/2013 29.11.2011. BY NOW ALLEGING THAT NOTICE U/S 143(2) WAS NOT ISSUED /SERVED, THE ASSESSEE IS ALSO VITIATING THE PROCEED INGS U/S 142(2A) WHICH WERE NEVER CHALLENGED BY THE ASSESSEE AT ANY POINT OF TIME ON THE GROUND OF PROCEDURAL INFIRMITY. IF THE ASSES SEE HAS ACCEPTED THE SPECIAL AUDIT ORDER THE ASSESSEE HAS VERY WELL ACCEPTED THE NOTICE U/S 143(2) AS THAT CLEARLY FINDS MENTION IN THE SPECIAL AUDIT ORDER. CASE LAWS RELIED UPON : A. COMMISSIONER OF INCOME TAX VS. VISION INC., HON' BLE HIGH COURT OF DELHI, (2012) 73 DTR 0201 VIDE ORDER DTD. MAY 25 2012, HELD THAT THE TRIBUNAL FELL INTO AN ERROR IN ACCEPTING THE CO NTENTION OF THE ASSESSEE WITHOUT EXAMINING THE CRUCIAL AND RELEVANT FACT SUC H AS THE APPEARANCE OF THE ASSESSEE'S AUTHORIZED REPRESENTATIVE BEFORE THE ASSESSING OFFICER ON 15.01.2005 WHICH IS THE DATE FIXED FOR HEARING I N THE NOTICE ISSUED ON 30.12.2004. THE TRIBUNAL FURTHER ERRED IN HOLDING T HAT THE PARTICIPATION OF THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS IS OF NO CONSEQUENCE BECAUSE THE 'PROVISIONS OF SECTION 292BB CAME INTO FORCE ONLY FROM 01.04.2008. THE PARTICIPATION OF THE ASSESSEE IN T HE PROCEEDINGS FOR THE ASSESSMENT IN THE PRESENT CASE IS AN IMPORTANT FACT TO BE TAKEN NOTE OF, NOT BECAUSE OF SECTION 292BB BUT IN THE LIGHT OF TH E FACT THAT THE NOTICE DATED 30.12,2004 MENTIONED 15.01.2005 AS THE DATE O F HEARING, ON WHICH DATE THE AUTHORIZED REPRESENTATIVE HAD APPEARED AND FILED HIS POWER OF ATTORNEY BEFORE THE ASSESSING OFFICER. A LITTLE, PR OBING WAS ENOUGH TO SHOW THAT THE APPARENT WAS NOT THE REAL. IT WOULD B E AGAINST THE SPIRIT OF LAW RELATING TO INCOME TAX ASSESSMENT IF ONE WERE T O TOO READILY BE WILLING TO HOLD THAT THERE WAS NON SERVICE OR INVAL ID SERVICE OF THE NOTICE UNDER SECTION 143(2) OF THE ACT, MERELY ON PERIPHER AL ALLEGATIONS OR FACTS AND NOT LOOKING AT THE SUBSTANCE I.E. WHETHER THE N OTICE IN FACT WAS SERVED AND EVEN ACTED UPON BY WAY OF APPEARANCE ENT ERED BEFORE THE ASSESSING OFFICER. THIS HAS MADE THE IMPUGNED ORDER ERRONEOUS AND PERVERSE AS RELEVANT AND MATERIAL ASPECTS HAVE BEEN IGNORED AND NOT GIVEN CREDENCE. A PROVISION INTENDED FOR THE BENEFI T OF THE ASSESSEE AND CONCEIVED IN ACCORDANCE WITH THE RULES OF NATURAL J USTICE SHOULD NOT BE PERMITTED TO BECOME A TOOL TO WARD OFF THE LIABILIT Y TO PAY THE TAX. WE ARE NOT TO BE UNDERSTOOD AS SAYING THAT IN NO CASE CAN THE SERVICE OF NOTICE UNDER SECTION 143(2) OF THE ACT CAN BE HELD TO BE I NVALID. (PARA 17) WHENEVER A CASE IS SET UP BY THE ASSESSEE THAT THER E HAS BEEN NO VALID OR PROPER SERVICE OF THE NOTICE ISSUED UNDER SECTION 143(2) OF THE ACT, BE IT FOR THE PURPOSE OF REGULAR ASSESSMENT UN DER SECTION 143(3) OF THE ACT OR FOR THE PURPOSE OF A BLOCK ASSESSMENT UN DER CHAPTER XIV-B OR FOR THE PURPOSE OF AN ASSESSMENT UNDER SECTION 1 53A, SUCH A PLEA HAS TO EXAMINED THOROUGHLY AND IN DEPTH BY TAKING A PRA CTICAL REASONABLE VIEW OF THE MATTER, NOT INCONSISTENT WITH THE STATU TORY PROVISIONS, KEEPING IN MIND THE BASIC PRINCIPLE THAT THE LIABIL ITY TO PAY TAX WHICH IS FOUNDED ON THE CHARGING PROVISIONS OF THE STATUE, I S NOT TO BE NULLIFIED ON SPECIOUS OR UNJUSTIFIED PLEAS TAKEN BY THE ASSESSEE . 27 ITA NO.5611 & 5581/DEL/2013 (PARA 19) B. NARINDER KUMAR & ORS. VS. COMMISSIONER OF INCOME TAX -VII, HON'BLE HIGH COURT OF DELHI (2014) 369 IT R 0049 (DELHI) VIDE ORDER DTD. JULY 3 '2014, HAS HELD - '............THERE IS DISTINCTION BETWEEN PRECLUDIN G A PERSON WHO HAS NOT RAISED THE PLEA OF NON-RECEIPT OF NOTICE DURING THE ASSESSMENT PROCEEDINGS, FROM SUBSEQUENTLY RAISING SUCH PLEA, A ND A CASE WHERE THE ASSESSEE HAS NOT CONTROVERTED A STATEMENT DURING TH E ASSESSMENT PROCEEDINGS THAT IT HAD DULY RECEIVED THE NOTICE UN DER SECTION 143(2) OF THE ACT IN THE LATTER CASE, WHERE AN ASSESSEE DOES NOT CONTROVERT AN AFFIRMATIVE STATEMENT THAT IT HAD DULY RECEIVED THE NOTICE ON A PARTICULAR DATE, THE ASSESSEE WOULD BE PRECLUDED FROM CONTROVE RTING THE SAME AT A LATER STAGE AND IT WOULD NOT BE ERRONEOUS TO HOLD T HAT, AS A MATTER OF FACT, THE ASSESSEE HAD DULY RECEIVED THE NOTICE OF THE PR OCEEDINGS. THUS IN THE PRESENT CASE, THE CONCLUSION OF THE CIT THAT THE AS SESSEE HAD DULY RECEIVED THE NOTICE IN QUESTION ON 31.10,2001 CANNO T BE FAULTED. (PARA 12) IN THE ABOVE BACKGROUND IT IS CLEAR THAT NOTICE U/S 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE AND THE ASSESSEE CANNOT TA KE THE PLEA AT THE APPELLATE STAGE THAT NO NOTICE U/S 143(2) WAS ISSUE D AND SERVED ON IT. NOW COMING TO THE REMAINING TWO CONTENTIONS OF THE ASSESSEE: 2. NO BASIS FOR PRIMA FACIE BELIEF BY AO THAT IN COME HAD ESCAPED ASSESSMENT, 3. REOPENING U/S 147 AMOUNTS TO ' CHANGE OF OPIN ION' THE SUBMISSIONS IN RESPECT OF THE ABOVE CONT ENTIONS ARE MADE KEEPING IN MIND THE SETTLED PRINCIPALS/POSITIO N OF LAW LAID DOWN BY THE HON'BLE APEX COURT AND HON'BLE HIGH COURTS INCL UDING JURISDICTIONAL HIGH COURT, REGARDING REOPENING OF ASSESSMENTS U/S 147 IN CASES WHERE PROCEEDINGS U/S 143(3) HAVE BEEN CONCLUDED PRIOR TO REOPENING. THE TRITE LAW IN THIS RESPECT IS SUMMARIZED BELOW: THE AO CAN REOPEN THE ASSESSMENT IF HE HAS REASON T O BELIEVE THE ASSESSEE'S INCOME HAS ESCAPED ASSESSMENT. HOWEVER, HIS REASONS TO BELIEVE MUST NOT BE BASED ON SURMISES, CONJECTUR ES OR OCCASIONED BY CHANGE IN OPINION BUT MUST BE BASED O N SOME TANGIBLE AND CREDIBLE MATERIAL ON THE BASIS OF WHIC H A REASONABLE BELIEF COULD BE FORMED THAT INCOME OF AN ASSESSEE H AS ESCAPED ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. THE LANGUAGE OF SECTION 147 REQUIRES THE AO TO HAVE A REASON TO BELIEVE AND NOT A REASON TO SUSPECT. 28 ITA NO.5611 & 5581/DEL/2013 THE REASONS RECORDED MUST BE EXAMINED ON STANDALONE ALONE BASIS AND NOTHING CAN HE IMPORTED OR ADDED TO IT. THE COURT CANNOT GO INTO THE SUFFICIENCY OR ADEQUAC Y OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO AN ASSESSMENT, WHICH HAS BEEN CONCLUDED UNDER SECTI ON 143(3) OF THE ACT CANNOT BE REOPENED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE COND ITION AS SPECIFIED UNDER THE PROVISO TO SECTION 147, IS MET; I.E. THE INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. AS THE ABOVE POSITION OF LAW IS SETTLED BY WAY OF V ARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THAT OF HON'BLE APEX COURT AND HON'BLE JURISDICTIONAL HIGH COURT, VARIOUS JUDGMENTS SUPPOR TING THE SAME ARE NOT BEING DISCUSSED/CITED AS THAT WOULD UNNECESSARILY M AKE THE SUBMISSIONS BULKY. 2. BASIS FOR PRIMA FACIE BELIEF BY AO THAT INCOME H AD ESCAPED ASSESSMENT IT IS IMPORTANT TO REFER TO THE SATISFACTION RECORD ED BY THE AO AND THE SAME IS DISCUSSED HEREUNDER:- A. SATISFACTION OF THE ASSESSING OFFICER A COPY OF REASONS RECORDED BY THE AO U/S 147, HAS A LREADY BEEN PROVIDED TO THE HON'BLE BENCH AS PART OF PAPER-BOOK FILED BY THE ASSESSEE (PAGE 40). CONTENTIONS OF REVENUE: A PERUSAL OF THE REASONS RECORDED BY THE AO SH OWS THAT THE AO'S OPINION IS BASED UPON FINDINGS OF SEARCH AND IS NOT BORNE OUT OF SUSPICION OR IMAGINATION. REASONS RECORDED BY AO THE REASONS RECORDED BY AO ON STANDALONE BASIS ARE - DURING THE SEARCH & SEIZURE OPERATION IT WAS NOTICE D THAT THE ASSESSEE COMPANY FOLLOWS PROCESSING OF PAN MASALA A S PER ANNEXURE A . THE SAID ANNEXURE A, IS A FLOW CHART W HERE THE ENTIRE MANUFACTURING PROCESS HAS BEEN SEGREGATED INTO STAG E A TO STAGE H AND IS PART OF THE SATISFACTION NOTE. THE SAID ANNE XURE WAS RECEIVED BY THE AO FROM INVESTIGATION WING ALONG WI TH INFORMATION THAT EXCEPT AT STAGE G & H, NOT A SINGL E STAGE/PROCESS IS PERFORMED IN GUWAHATI. THE SAID ANNEXURE WAS ALS O SHOWN TO THE HON'BLE MEMBERS DURING THE COURSE OF HEARING ON 15.10.2015 29 ITA NO.5611 & 5581/DEL/2013 FROM THE ORIGINAL RECORDS AND CATEGORIZATION OF STA GES WAS EXPLAINED. ON THE BASIS OF THIS ANNEXURE, THE AO THEN MENTIONS THAT EXCEPT AT STAGE G & H, NOT A SINGLE STAGE/PROCESS WHICH IS VE RY CRUCIAL IN THE PREPARATION OF PAN MASALA (RAJNIGANDHA) IS PERFORME D IN GUWAHATI. TO SUBSTANTIATE HIS ABOVE FINDING, AND ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, THE AO ANALYSED T HE SAID ANNEXURE AND HAS DISCUSSED THE VARIOUS INGREDIENTS OF PAN MASALA WHICH INCLUDE - CATECHU (KATHA), BEETLE NUT (SUPARI ), CARDAMOM {ELAICHI SEED), SUGANDHI AND THEN THE AO HAS DISCUS SED HOW EACH RAW MATERIAL NAMED ABOVE IS PROCURED & PROCESSED BY THE HEAD OFFICE IN NOIDA, AND HAS DESCRIBED IT IN AS MANY WO RDS BY STATING THAT, - ' CARDAMOM IS PROCURED AND ITS SEEDS ARE EXTRA CTED FROM THE SHELL, - BEETLENUT (SUPARI) IS PROCURED AT NOIDA, THEN CHOPPED INTO SMALLER PIECES & PROCESSED - OTHER MATERIALS TOO ORE PROCURED AT NOIDA' > THEN THE AO GOES ON TO RECORD, THAT AT GUWAHATI, DRYING UP OF P ROCESSED SUPARI, RECEIVED FROM NOIDA, TAKES PLACE, WHICH IS THEN MIX ED WITH OTHER INGREDIENTS RECEIVED FROM NOIDA AND THEREAFTER IT I S PACKED AND READY FOR SALE. IN THE ABOVE BACKGROUND, THE AO FURTHER OBSERVED IN HIS REASONS THAT - - THE ASSESSEE IS CONTRAVENING THE PROVISIONS OF SECTION 80IA(8) OF THE I.T.ACT. - ENTIRE VALUE ADDITION TO THE PRODUCT IS BEING ATTRIBUTED TO THE GUWAHATI UNIT BY THE ASSESSEE. - THAT EXCESSIVE CLAIM OF DEDUCTION IS BEING MAD E U/S 80IC. THEREAFTER IN THE LAST PARA OF SATISFACTION NOTE TH E AO HAS GIVEN A CATEGORICAL FINDING THAT THUS THE INCOME CHARGEABL E TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y.2004-05. I AM FURTHE R SATISFIED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT WITH RE GARD TO THE ASSESSMENT YEAR UNDER CONSIDERATION'. THE REASONS RECORDED ABOVE ARE STRICTLY ON STANDALO NE BASIS AND NO INFORMATION HAS BEEN ADDED OR IMPORTED INTO IT. THE Y HAVE BEEN WRITTEN IN STAGES ONLY TO SHOW HOW THE AO FORMED THE PRIMA FACIE BELIEF ON THE 30 ITA NO.5611 & 5581/DEL/2013 BASIS OF TANGIBLE INFORMATION AVAILABLE, THAT INCOM E HAS ESCAPED ASSESSMENT. THE AO HAS STRICTLY RELIED ON ANNEXURE 'A' (COGENT/ TANGIBLE MATERIAL) WHICH IT HAD RECEIVED FROM THE INVESTIGAT ION WING. THE INVESTIGATION WING HAD CONDUCTED THE SEARCH AND HAD PHYSICALLY VERIFIED ALL THE PREMISES AT DELHI/NOIDA AND GUWAHA TI DURING SEARCH TO FIND OUT HOW RAW MATERIAL IS BEING PROCUR ED AND HOW VARIOUS PROCESSES IN MANUFACTURING OF PANAMASALA AR E BEING CARRIED OUT BY DELHI/NOIDA AS WELL AS AT GUWAHATI U NITS. IT IS ONLY ON THE BASIS OF INTRUSIVE MEANS OF SEARCH THAT THE VARIOUS STAGES OF MANUFACTURING HAVE BEEN CATEGORIZED FROM A TO H (AN NEXURE A) TO DEMONSTRATE THE CONSIDERABLE ROLE OF NOIDA/DELHI OFFICE IN THE MANUFACTURING PROCESS OF PAN MASALA. THIS INFORMATI ON WAS PASSED ON TO THE AO BY THE INVESTIGATION WING AND HAS BEEN SENSIBLY ANALYSED BY THE AO IN FORMING A PRIMA FACIE BELIEF THAT ASSESSEE IS MAKING AN EXCESSIVE CLAIM OF DEDUCTION U/S 80IC AND IS ALSO CONTRAVENING PROVISIONS OF SECTION 801A98) BY MAKIN G INTERUNIT TRANSFERS. IN VIEW OF THE ABOVE, IT IS SUBMITTED, THAT THE REA SONS RECORDED ARE AFTER DUE APPLICATION OF MIND TO THE INFORMATION RE CEIVED FROM INVESTIGATION WING WHICH HAS BEEN THOROUGHLY ANALYS ED TO FORM A PRIMA FACIE OPINION THAT INCOME HAS ESCAPED ASSESSM ENT. IN THE LAST PARA OF THE SATISFACTION NOTE THE AO HAS CATEGORICA LLY NOTED THAT ESCAPEMENT HAS OCCURRED DUE TO NON DISCLOSURE OF TR ULY AND FULLY THE MATERIAL FACTS BY THE ASSESSEE THAT WERE NECESS ARY FOR ASSESSMENT OF A.Y.2004-05. IT IS FURTHER SUBMITTED THAT THE INFORMATION RECEIV ED FROM INVESTIGATION WING IS IN TERMS OF THE PROCEDURE FOL LOWED BY ASSESSEE IN CONDUCTING ITS BUSINESS, HENCE PRIMA FA CIE IT WILL APPLY TO ALL THE ASSESSMENT YEARS DURING WHICH SUCH BUSIN ESS WAS BEING CARRIED OUT. IT IS NOT THE ASSESSEE'S CASE THAT IT WAS NOT FOLLOWING THIS PROCEDURE IN THE RELEVANT ASSESSMENT YEAR. THE INFORMATION RECEIVED CATEGORICALLY REFLECTS ON ROLE OF DELHI / NOIDA UNIT IN THE MANUFACTURING PROCESS, WHEREAS THE ASSESSEE HAS BEE N SHOWING THAT ENTIRE MANUFACTURING IS BEING DONE IN GUWAHATI UNIT AND THEREBY CONTRAVENING THE PROVISIONS OF 801A(8) AS W ELL AS MAKING AN EXCESSIVE CLAIM OF DEDUCTION U/S 80IC. ALL THESE FACTS ARE WELL INCORPORATED IN THE REASONS RECORDED BY THE AO WHER EIN HE RECORDS THAT ' THE ASSESSEE IS CONTRAVENING THE PROVISIONS OF SECTION 80IA (8') AND 'THAT ENTIRE VALUE ADDITION TO THE PRODUCT IS BEING ATTRIBUTED TO THE GUWAHATI UNIT BY THE ASSESSEE'. H ENCE ON STANDALONE BASIS THE REASONS RECORDED SATISFY THE T EST OF PRIMA FACIE BELIEF OF THE AO. WITHOUT PREJUDICE TO THE ABOVE, THE ROLE OF DELHI/N OIDA UNITS IS FURTHER SUPPORTED BY TWO OF THE VERY HIGHLY PLACED EMPLOYEES OF THE ASSESSEE WHO, DURING THE COURSE OF SEARCH, IN T HEIR STATEMENTS 31 ITA NO.5611 & 5581/DEL/2013 ON OATH U/S 131 OF THE IT ACT, IN VERY CATEGORICAL TERMS, CONFIRMED THAT THE MANUFACTURING OF PAN MASALA INVOLVES PROCU RING AND PROCESSING OF RAW MATERIAL AT DELHI UNITS AND THAT GUWAHATI UNIT HAS LIMITED ROLE IN MANUFACTURING OF PAN MASALA. TH ESE STATEMENTS WERE ALSO BEFORE THE AO AT THE TIME OF RECORDING TH E REASONS AND WERE ALSO BROUGHT TO THE KNOWLEDGE OF HON'BLE MEMBE RS DURING THE COURSE OF HEARING AND COPIES OF THE SAME WERE A LSO FURNISHED. IN VIEW OF THE ABOVE DISCUSSION THE AO HAS SATISFIE D THE PRIMARY CRITERIA OF HAVING A PRIMA FACIE BELIEF THAT INCOME HAS ESCA PED ASSESSMENT IN THIS ASSESSMENT YEAR AND HAS ALSO ESTABLISH THE LIVE LIN K BETWEEN THE BELIEF AND THE TANGIBLE MATERIAL AVAILABLE BEFORE HIM. . B. SATISFACTION OF COMMISSIONER OF INCOME TAX U/S 151 OF THE ACT : THE ASSESSEE HAS ALLEGED THAT THE SATISFACTION OF T HE LD. COMMISSIONER WHILE GIVING APPROVAL U/S 151 IS WITHOUT APPLICATIO N OF MIND. IN THIS REGARD REFERENCE IS BEING MADE TO HON'BLE SUPREME C OURT'S JUDGEMENT IN THE CASE OF S. NARAYANAPPA & ORS. VS COMMISSIONER O F INCOME TAX, WHEREIN THEIR LORSHIP'S HAVE HELD THAT ' THERE IS NO REQUIREMENT IN ANY OF THE PROVISIONS OF THE ACT OR ANY SECTION LAYING DOWN AS A CONDITION FOR THE INITIATION OF THE PROCE EDINGS THAT THE REASONS WHICH INDUCED THE CIT TO ACCORD SANCTION TO PROCEED UNDER S. 34 MUST ALSO HE COMMUNICATED TO THE ASSESSEE.' THE SAID ORD ER HAS ENDORSED THE VIEW OF THE HON'BLE MADRAS HIGH COURT IN THE CASE O F THE PRESIDENCY TALKIES LTD. VS. FIRST ADDL ITO. BOTH TH E CASE LAWS ARE REPRODUCED BELOW: S.NARAYANAPPA & ORS. VS. COMMISSIONER OF INCOME TAX SUPREME COURT OF INDIA, (1967) 63 ITR 0219, SECTION S 147, 147(A) 'IT WAS ALSO CONTENDED FOR THE APPELLANT THAT THE I TO SHOULD HAVE COMMUNICATED TO HIM THE REASONS WHICH LED HIM TO IN ITIATE THE PROCEEDINGS UNDER S. 34 OF THE ACT. IT WAS STATED T HAT A REQUEST TO THIS EFFECT WAS MADE BY THE APPELLANT TO THE ITO, BUT TH E ITO DECLINED TO DISCLOSE THE REASONS, IN OUR OPINION, THE ARGUMENT OF THE APPELLANT ON THIS POINT IS MISCONCEIVED. THE PROCEEDINGS FOR ASSESSME NT OR ASSESSMENT UNDER S. 34(L)(A) OF THE IT ACT START WITH THE ISSU E OF A NOTICE AND IT IS ONLY AFTER THE SERVICE OF NOTICE THAT THE ASSESSEE, WHOSE INCOME IS SOUGHT TO BE ASSESSED OR REASSESSED, BECOMES A PARTY TO PR OCEEDINGS. THE EARLIER STAGE OF THE PROCEEDING FOR RECORDING THE REASONS O F THE ITO AND FOR OBTAINING THE SANCTION OF THE CIT ARE ADMINISTRATIV E IN CHARACTER AND ARE NOT QUASI-JUDICIAL. THE SCHEME (OF S. 34 OF THE ACT IS THAT, IF THE CONDITIONS OF THE MAIN SECTION ARE SATISFIED, A NOT ICE HAS TO BE ISSUED TO THE ASSESSEE CONTAINING ALL OR ANY OF THE REQUIREME NTS WHICH MAY BE INCLUDED IN A NOTICE UNDER SUB S. (2) OF S. 22. BUT BEFORE ISSUING THE NOTICE, THE PROVISO REQUIRES THAT THE OFFICER SHOUL D RECORD HIS REASONS FOR INITIATING ACTION UNDER S. 34 AND OBTAIN THE SANCTI ON OF THE CIT WHO MUST BE SATISFIED THAT THE ACTION UNDER S. 34 WAS JUSTIF IED. THERE IS NO 32 ITA NO.5611 & 5581/DEL/2013 REQUIREMENT IN ANY OF THE PROVISIONS OF THE ACT OR ANY SECTION LAYING DOWN AS A CONDITION FOR THE INITIATION OF THE PROCE EDINGS THAT THE REASONS WHICH INDUCED THE CIT TO ACCORD SANCTION TO PROCEED UNDER S. 34 MUST ALSO BE COMMUNICATED TO THE ASSESSEE. IN THE PRESID ENCY TALKIES LTD. VS. FIRST ADDL. ITO (1954) 25 ITR 447 (MAD): TC51R.597 THE MADRAS HIGH COURT HAS EXPRESSED A SIMILAR VIEW AND WE CONSIDER THAT THAT VIEW IS CORRECT. WE ACCORDINGLY REJECT THE ARGUMENT OF THE APPELLANT ON THIS ASPECT OF THE CASE.' THE PRESIDENCY TALKIES LTD, VS. FIRST ADDL. ITO HIGH COURT OF MADRAS, JAN 22, 1954, (1954) 25 ITR 0 447, SECTIONS 147,151(1), ART. 226 HEAD NOTE REASSESSMENTNOTICECOMMUNICATION OF REASONS INDUCI NG THE CIT TO ACCORD SANCTIONADEQUACY OF REASONPERIOD OF REASSE SSMENTIT IS NOT NECESSARY THAT REASONS WHICH INDUCED CIT TO GRA NT SANCTION FOR REASSESSMENT SHOULD BE COMMUNICATEDADEQUACY OF SUC H REASONS IS NOT A MATTER OF CONSIDERATION BY THE COURTIT IS NO T NECESSARY TO STATE IN THE NOTICE ITSELF AT THE INITIAL STAGE THE PERIOD F OR WHICH REASSESSMENT IS SOUGHT HELD '............. THERE IS NO REQUIREMENT IN ANY OF TH E PROVISIONS OF THE ACT OR ANY SECTION LAYING DOWN AS A CONDITION FOR THE INIT IATION OF THE PROCEEDINGS THAT THE REASONS WHICH INDUCED THE CIT TO ACCORD SANCTION TO PROCEED UNDER S. 34 MUST ALSO BE COMMUNICATED TO THE ASSESSEE. THE REQUIREMENT REGARDING THE COMMUNICATION OF THE REAS ONS TO THE CIT IS, IN OUR OPINION, INTENDED TO SAFEGUARD THE INTERESTS OF THE ASSESSEE AGAINST ANY HASTY ACTION ON THE PART OF THE ITO UNDER S. 34 OR AN ACTION WITHOUT ANY JUSTIFICATION. IT IS NOT INTENDED BY THE PROVIS O THAT THE REASONS SHOULD BE COMMUNICATED TO THE ASSESSEE. THE SATISFACTION M ENTIONED IS THE SATISFACTION OF THE CIT AND THE ADEQUACY OF THE REA SONS IS NOT A MATTER FOR CONSIDERATION OF THE COURT, AND IT IS NOT OPEN TO THE ASSESSEE TO AGITATE THE QUESTION, THAT THE REASONS WERE INADEQU ATE TO SANCTION THE INITIATION OF THE PROCEEDINGS UNDER S. 34 BY THE CI T.' IN THE CASE OF THE ASSESSEE, THE LD. COMMISSIONER H AS DULY ACCORDED HIS APPROVAL BY STATING THAT 'I AM SATISFIED'. HE HAS N OT USED WORDS SUCH AS 'YES' OR ' I AGREE'. AN ADMINISTRATIVE COMMISSIONER HAS CONSIDERABLE EXPERIENCE BEHIND HIM AND CAN EFFICIENTLY ANALYSE T HE SATISFACTION NOTE PUT UP BY THE AO ALONG WITH TANGIBLE MATERIAL PLACE BEFORE HIM. HENCE IT CANNOT BE SAID THAT HE DID NOT APPLY HIS MIND BEFOR E ACCORDING APPROVAL. MOREOVER THE ADEQUACY OF THE REASONS FOR ARRIVING A T THE SATISFACTION BY THE COMMISSIONER CANNOT BE QUESTIONED BY THE COURTS AS HELD ABOVE THE HON'BLE MADRAS HIGH COURT WHICH WAS APPROVED BY THE HON'BLE APEX COURT. 33 ITA NO.5611 & 5581/DEL/2013 3. REOPENING U/S 147 AMOUNTS TO ' CHANGE OF OPINION' THIS REGARD IT IS IMPORTANT TO GO THROUGH THE ASSES SMENT ORDERS PASSED PRIOR TO REOPENING OF CASE UNDER CONSIDERATION IN O RDER TO CONSIDER WHETHER THERE WAS ANY CHANGE OF OPINION OR NOT. REL EVANT ORDERS ARE DISCUSSED HEREUNDER :- 1. ORDER U/S 143(3): ORIGINALLY THE CASE WAS ASSESSED U/S 143(3) VIDE OR DER DATED 28.12.2006 GIVEN BELOW: IMPORTANT ASPECTS ARE A. FORM 10CCB: THE ASSESSEE WAS CLAIMING DEDUCTION U/S 80IC IN RES PECT OF GUWAHATI UNIT. AS PART OF STATUTORY REQUIREMENT, THE ASSESSEE FIL ED PRESCRIBED FORM NO. 10CCB IN RESPECT OF ALL SUCH UNITS CLAIMIN G DEDUCTION U/S 80IB/80IC. COLUMN 20 OF FORM 10CCB REQUIRED THE ASSESSEE TO GI VE TRANSACTIONS OF THE UNDERTAKING (CLAIMING DEDUCTION ) WITH A RELATED CONCERN OF THE ASSESSEE OR ANOTHER UNDERTAKING OF T HE ASSESSEE. HOWEVER, IN RESPONSE TO COLUMN 20, THE ASSESSEE REP ORTED ONLY THE TRANSACTIONS WITH THE RELATED CONCERN, AND THE TRAN SACTIONS WITH OTHER UNITS/UNDERTAKINGS OF THE ASSESSEE WERE NOT R EPORTED ( READ DELIBERATELY OMITTED). THE RELEVANT REPORTS IN FORM 10CCB HAVE BEEN FILED BY THE ASSESSEE IN THE PAPERBOOK FROM PAGES 91 TO 165. THE SE REPORTS HAVE BEEN FILED SHED-WISE FOR GUWAHATI UNIT FROM PA GE 91 TO 125. ANNEXURE TO ALL THESE REPORTS SHOW THAT ONLY TRANSA CTIONS WITH RELATED CONCERN HAVE BEEN SHOWN. FORM 10CCB CONSTITUTED PART OF AUDITED ACCOUNTS OF THE ASSESSEE. INFERENCE DRAWN : THE ASSESSEE DELIBERATELY DID NOT DISCLOSE THE TRANSACTIONS OF DELHI/NOIDA UNIT WITH GUWAHATI UNIT IN FORM 10CCB AND THEREFORE THE ASSESSEE FAILED TO FULLY AND TRULY DI SCLOSE THE MATERIAL FACTS BEFORE THE AO. HENCE AN IMPORTANT PIECE OF INFORMAT ION WHICH HAD A DIRECT BEARING IN THIS CASE WAS SUPPRESSED IN THE A UDITED ACCOUNTS WHICH WERE PART OF THE RETURN OF INCOME. B. QUESTIONNAIRES ISSUED BY AO: THE AO ISSUED THE 1ST QUESTIONNAIRE ON 13.01.2006, CALLING FOR FOLLOWING DETAILS: 34 ITA NO.5611 & 5581/DEL/2013 ' 1. ............... WHEREFROM EACH OF THE UNI T/DIVISION PROCURES THE DIFFERENT RAW MATERIALS BEING USED BY IT AND WHAT I S THE ROLE OF DELHI OFFICE IN MAKING PROCUREMENT OF RAW MATERIAL. ..............' (REFER TO PAPER BOOK PAGE 166): IN RESPONSE TO THE SAME ASSESSEE FILED A REPLY DTD. 2ND FEBRUARY 2006 ( PG.170 TO 180 OF PAPERBOOK) STATING AS UNDER - 'AS REGARDS THE PROCUREMENT OF VARIOUS RAW MATERIAL S AND OTHER INPUTS BEING USED IN VARIOUS FINISHED PRODUCTS OF T HE COMPANY, WE SUBMIT THAT THESE ARE PROCURED FROM VARIOUS SUPPLIE RS LOCATED ACROSS THE COUNTRY. THIS IS ALSO TO CONFIRM THAT OU R DELHI OFFICE HAS NO ROLE TO PLAY IN PROCUREMENT PROCESS. ' (TOP PARA , PAGE 171 OF PAPER BOOK) AGAIN VIDE ORDER SHEET ENTRY DTD.16.11.2006 (ANNEX 2), AT POINT 3 , THE ASSESSEE WAS ASKED -'16.11.2006 1.......... 2.......... 3. DETAILS AND NOTE ON MOVEMENT OF RAW MATERIAL - WHETHER IT IS SENT DIRECT TO THE UNIT FROM THE SUPPLIER OR ROUTED THROUGH HEAD OFFICE. ADJ. TO 20.11.2006.' THE ASSESSEE FILED ITS REPLY VIDE LETTER DTD. NOVEM BER 20, 2006 ( PG.243 OF PAPER BOOK), STATING AS UNDER - '{A} AS REGARDS THE MOVEMENT OF RAW MATERIAL AND OT HER INPUTS ARE CONCERNED, WE WISH TO STATE AND CONFIRM YOU, TH AT AGAINST THE PURCHASE ORDERS RAISED FOR AND BY VARIOUS INDUSTRIA L UNDERTAKINGS I.E. UNIT LOCATED IN VARIOUS PART OF THE COUNTRY OF THE ASSESSEE, THE MATERIAL IS DIRECTLY SUPPLIED TO THE UNIT BY THE SU PPLIER AND NO SUCH INPUTS IS BEING MOVED THROUGH THE CORPORATE OFFICE OF THE ASSESSEE COMPANY LOCATED IN NOIDA (UP)' IT WILL NOT BE OUT OF PLACE TO MENTION THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED A REP LY DTD.02.02.2006 (PAGE 170 -187 OF PAPER BOOK) ENCLOS ING THEREWITH A CHART WHEREIN, IT HAD SHOWN THE ENTIRE MANUFACTUR ING PROCESS OF PAN MASALA AND CHEWING TOBACCO. IT IS PERTINENT TO MENTION THAT VIDE THE SAME LETTER THE ASSESSEE ALSO FURNISHED A CHART SHOWING THAT PAN MASALA WAS BEING MANUFACTURED AT ITS VARIO US UNITS SPREAD ACROSS INDIA IN NOIDA, SOLAN, AGARTALA & GUWAHATI. IN THIS BACKGROUND, AND ASSESSEE'S CATEGORICAL DENIAL DISCU SSED ABOVE ' THAT OUR DELHI OFFICE HAS NO ROLE TO PLAY IN PROCUR EMENT PROCESS, 'AND THAT' THE MATERIAL IS DIRECTLY SUPPLIED TO THE UNIT BY THE SUPPLIER AND NO SUCH INPUTS IS BEING MOVED THROUGH THE CORPORATE OFFICE OF THE ASSESSEE COMPANY LOCATED IN NOIDA (UP )' THE AO, IN GOOD FAITH BELIEVED THAT EACH MANUFACTURING UNIT IS FOLLOWING THE 35 ITA NO.5611 & 5581/DEL/2013 PROCESS BY ITSELF. BY NO STRETCH OF IMAGINATION COU LD THE AO HAVE KNOWN THAT SOME OF THE STAGES OF PROCESSING/MANUFAC TURING FOR GUWAHATI UNIT ARE BEING CARRIED OUT IN NOIDA/DELHI. THE HONBLE HIGH COURT OF GUJARAT IN THE CASE OF YOGENDRAKUMAR GUPTA VS. LNCOME TAX OFFICER, MAY 6, 2014 (2014) 36 6 ITR 0186 (GUJ) HAS OBSERVED THAT 'THAT AT THE TIME OF SCRUTINY ASSESSMENT, A SPECIFIC QUERY WAS RAISED WITH REGARD TO UNSECURED LOANS AND ADVANCES RECEIVED FROM THE SAID COMPANY N AMELY, BASANT MARKETING PVT. LTD. BASED AT KOLKATA. THESE BEING THE TRANSACTIONS THROUGH THE CHEQUES AND DRAFTS, THERE WOULD ARISE NO QUESTION OF THE ASSESSING OFFICER NOT ACCEPTING SUC H VERSION OF THE ASSESSEE AND NOT TREATING THEM AS GENUINE LOANS AND ADVANCES.' IT WAS ONLY AFTER SEARCH, WHEN ON PHYSICAL VERIFICA TION OF THE PREMISES THE INVESTIGATION WING FOUND OUT THAT THE RAW MATERIAL FOR GUWAHATI UNIT IS BEING PROCURED BY DELHI/NOIDA UNIT AND IS BEING PARTIALLV PROCESSED AND THEN SENT TO GUWAHATI. HENC E THE ASSESSEE DELIBERATELY SUPPRESSED THE FACTS DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS BY RESORTING TO LIES WHICH W ERE UNVEILED IN SEARCH AND WERE ALSO ADMITTED BY THE ASSESSEE IN TH E COURSE OF PROCEEDINGS U/S 147 WHICH ARE UNDER CONSIDERATION. ALL THE OTHER REPLIES FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO DO NOT UTTER A WORD ABO UT THE PROCUREMENT AND PROCESSING OF RAW MATERIAL BY THE A SSESSEE FROM DELHI/NOIDA UNIT FOR SENDING TO GUWAHATI UNIT. THE REPLIES FILED BY THE ASSESSEE DURING THE COURSE OF ORIGINAL ASSESSMENT ARE PLACED AT PAGES 170 TO 256 OF PAPER BOOK FILED BY THE ASSESSEE AND THE HON'BLE BENCH WAS TAKEN THROUG H EACH AND EVERY REPLY DURING THE COURSE OF HEARING. SINCE THE ABOVE REPLIES OF THE ASSESSEE WERE ALSO F OUND TO BE IN CONFORMITY WITH FORM 10CCB WHICH WAS PART OF AUDITE D ACCOUNTS, HENCE THE AO IN ALL GOOD FAITH, AND IN THE ABSENCE OF ANY CONTRARY MATERIAL ON RECORD, ACCEPTED THE REPLY OF THE ASSES SEE TO THAT EXTENT IN THE ORIGINAL ASSESSMENT PROCEEDINGS AND THE CASE PROCEEDED ON OTHER ASPECTS OF SECTION 80IC. THE OTHER ASPECTS OF SECTION 80IC WHICH WERE THEN C ONSIDERED IN ORIGINAL ASSESSMENT PROCEEDINGS INCLUDED 'CLAIM OF 80IC DEDUCTION ON INTEREST INCOME, CAPITAL GAINS, EXCISE REFUND & MISCELLANEOUS INCOME'( ASSESSMENT ORDER PAGE 2), AM OUNTING TO RS.66,26,94,688/-. ONLY ON THESE LIMITED ASPECTS TH E MATTER WAS EXAMINED U/S 144A BY ADDL.CIT ALSO, AND VIDE LETTER DATED 22.12.2006, HE DIRECTED THAT THE INCOME SHOWN UNDER THE ABOVE HEADS IS NOT DERIVED FROM BUSINESS OF THE INDUSTRIA L UNDERTAKING AND THEREFORE, THE DEDUCTION U/S 801C IS NOT ADMISS IBLE ON THIS INCOME. ACCORDINGLY, THE AO DISALLOWED DEDUCTION U/ S 80IC TO THE 36 ITA NO.5611 & 5581/DEL/2013 EXTENT OF RS.66,26,94,688/-(PLEASE REFER TO PAGE 6 OF PAPER BOOK FILED BY ASSESSEE). HENCE THE ISSUE OF PROCUREMENT AND PROCESSING OF RA W MATERIAL AT DELHI/NOIDA UNITS BEFORE SENDING THEM TO GUWAHATI, WAS NEVER EXAMINED BY THE AO DUE TO BLATANT SUPPRESSION OF FA CTS BY THE ASSESSEE. INFERENCE DRAWN : THE REPLIES OF THE ASSESSEE DTD. 06.03.2006 & 20.11.2006 AMOUNTED TO BLATANT LIES AND SUPPRESSION OF FACTS BY THE ASSESSEE AND THEREFORE THE ASSESSEE FA ILED TO FULLY AND TRULY DISCLOSE THE MATERIAL FACTS BEFORE THE AO. HE NCE AN IMPORTANT PIECE OF INFORMATION WHICH HAD A DIRECT BEARING IN THIS C ASE/ISSUE WAS SUPPRESSED BY THE ASSESSEE DURING THE COURSE OF ORI GINAL ASSESSMENT PROCEEDINGS. THE HON'BLE SUPREME COURT IN THE CASE OF PHUL CHAND BAJRANG LAL 203 ITR 456 , HAS HELD AS UNDER: '...ONE HAS TO LOOK TO THE PURPOSE AND INTENT OF TH E PROVISIONS. ONE OF THE PURPOSES OF SECTION 147 APPEARS TO BE TO ENS URE THAT A PARTY CANNOT GET AWAY BY WILLFULLY MAKING A FALSE OR UNTR UE STATEMENT AT THE TIME OF ORIGINAL ASSESSMENT AND WHEN THAT FALSI TY COMES TO NOTICE TO TURN AROUND AND SAY YOU ACCEPTED MY LIE, NOW YOUR HANDS ARE TIED AND YOU CAN DO NOTHING'. IT WOULD, B E TRAVESTY OF JUSTICE TO ALLOW THE ASSESSEE THAT LATITUDE.' THE RATIO OF ABOVE CASE LAW IS SQUARELY APPLICABLE IN THE CASE OF THE ASSESSEE. 2. ORDER U/S 264: ORDER U/S 264 WAS PASSED BY THE LD.CIT ON 29.01.200 7 (PAPERBOOK PAGE 11-22) IMPORTANT ASPECTS ARE DISCUSSED HEREUNDER: THE ASSESSEE FILED A PETITION U/S 264, BEFORE THE C OMMISSIONER OF INCOME TAX, ON THE LIMITED ISSUE OF DISALLOWANCES M ADE W.R.T. SECTION 80IC IN THE ORDER U/S 143(3), AND CERTAIN O THER ISSUES NOT CONNECTED WITH DEDUCTION U/S 80IC IN THE SAME ORDER . THE ID.CIT, VIDE ORDER DATED 29.01.2007, ONLY EXAMI NED THE LIMITED ISSUES RAISED AND SET ASIDE THE ORIGINAL AS SESSMENT ORDER WITH DIRECTIONS TO RE-EXAMINE THE SAME ISSUES AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. INFERENCE DRAWN : DURING PROCEEDINGS U/S 264, THE I SSUE OF PROCUREMENT BY DELHI/NOIDA OFFICE AND PROCESSING OF RAW MATERIA L BEFORE SENDING IT TO GUWAHATI WAS NEVER EXAMINED AT AIL BY THE LD.CIT AND DEDUCTION U/S 80IC REMAINED CONFINED TO LIMITED ISSUE OF CERT AIN INCOMES NOT TO BE INCLUDED FOR THE * OF DEDUCTION U/S 80IC AS CONTEST ED IN THE APPLICATION. 37 ITA NO.5611 & 5581/DEL/2013 3. ORDER U/S 143(3) R/W SEC. 264 THE ABOVE ORDER WAS PASSED ON 28.03.2007. IMPORTANT ASPECTS ARE DISCUSSED HEREUNDER: ON RECEIVING THE ORDER U/S 264, PROCEEDINGS WERE AG AIN INITIATED U/S 143(3). REPLIES WERE FILED BY THE ASSESSEE ON VARIOUS DATES , WHICH ARE PART OF PAPERBOOK FILED BY THE APPELLANT (PAGES 257 TO 2 79). THE HONBLE BENCH WAS TAKEN THROUGH ALL THESE REPLIES D URING THE COURSE OF HEARING AND IT WAS SPECIFICALLY POINTED O UT THAT IN NONE OF THESE REPLIES FILED BY THE ASSESSEE WAS IT DISCL OSED THAT RAW MATERIAL IS BEING PROCURED/PROCESSED BY DELHI/NOIDA OFFICE BEFORE SENDING IT TO GUWAHATI UNIT. DURING THE COURSE OF HEARING ON 27.10.2007, THE LD. COUNSEL FOR THE ASSESSEE FILED A LETTER DATED.13.03.2007, ALLEG EDLY ISSUED BY THE AO, WHEREIN SEVERAL PAGES WERE ENCLOSED IN THE FORM OF NOTES CALLING FOR PARAWISE COMMENTS OF THE ASSESSEE. THE RELEVANT REPLY DTD.15.03.2007 TO THIS LETTER IS ENCLOSED AS ANNEX 3 AS IT IS NOT PART OF THE PAPERBOOK FILED BY THE ASSESSEE.. A CLOSE PERUSAL OF THE LETTER DTD.13.03.2007 (SUPRA ), ISSUED BY THE AO, SHOWS, THAT IN THE NOTE ATTACHED TO THE SAID LE TTER, THE ASSESSEE WAS ASKED TO EXPLAIN THE TAX HOLIDAY DEDUCTION, JUSTIFI CATION FOR PAYMENT OF MINIMUM ALTERNATE TAX, AND APPLICABILITY OF TAX HOL IDAY ON EXCISE CONCESSION. ALONG WITH THIS, THE PROCUREMENT AND PR OCESSING OF RAW MATERIAL BY DELHI/NOIDA UNITS WAS ALSO BROUGHT TO T HE NOTICE OF THE ASSESSEE VIDE THIS LETTER DTD. 13.03.2007. AND THE ASSESSEE WAS REQUIRED TO FURNISH ITS REPLY AND DETAILS IN RESPONSE TO THE SA ME. HOWEVER, IN RESPONSE TO THE ABOVE LETTER, THE ASSESSEE FILED RE PLY ON 15.03.2007 BUT CONFINED ITS REPLY TO ONLY TAX HOLIDAY DEDUCTION (P AGE 1-3 OF THE REPLY), PAYMENT OF MINIMUM ALTERNATE TAX ( PAGE 3-4 OF THE REPLY) AND APPLICABILITY OF TAX HOLIDAY ON EXCISE CONCESSION ( PAGE 4-5 OF THE REPLY). THE ASSESSEE CONSPICUOUSLY CHOSE TO REMAIN SILENT ON ALL OTHER ASPECTS OF THE LETTER ISSUED BY THE AO PARTICULARLY WITH REFERENCE TO PROCUREMENT AND PROCESSING DONE IN NOIDA/DELHI UNIT S PRIOR TO SENDING RAW MATERIAL TO GUWAHATI FOR MIXING, AND PACKING. T HE ASSESSEE ALSO FILED ANOTHER LETTER ON 15.03.2007 (PLACED AT PAPER BOOK PAGE 275) BUT THAT TOO IS SILENT ON THE RELEVANT ISSUE RAISED BY THE AO VIDE LETTER DTD. 13.03.2007. IT IS PERTINENT TO NOTE THAT THE ASSESS MENT WAS SHORTLY CONCLUDED ON 28.03.2007 AND VARIOUS REPLIES WERE FI LED BY THE ASSESSEE ON 17.03.2007, 23.03.2007,26.03.2007 & 28.03.2007, BUT IN NONE OF THESE LETTERS THE ASSESSEE FILED ANY DETAILS OR REP LY IN RESPECT OF THE COMMENTS/DETAILS REGARDING PROCUREMENT AND PROCESSI NG OF RAW MATERIAL BY DELHI/NOIDA UNITS AS CALLED FOR VIDE ALLEGED LET TER OF AO DTD.13.03.2007. INTERESTINGLY, NONE OF THESE LETTER S ( POST 15.03.2007) ARE PART OF PAPERBOOK FILED BY THE ASSESSEE. 38 ITA NO.5611 & 5581/DEL/2013 DURING THE HEARING BEFORE THE HON'BLE BENCH THE ASS ESSEE CONTENDED THAT THE ENTIRE ISSUE OF 80IC WITH RESPECT TO PROCURING AND PROCESSING OF RAW MATERIAL BY DELHI/NOIDA UNITS AND ITS SUBSEQUENT TR ANSFER TO GUWAHATI UNIT HAS BEEN EXAMINED IN EARLIER ASSESSMENT PROCEE DINGS BUT IT COULD NOT POINT OUT A SINGLE REPLY WHEREIN SUCH DETAILS W ERE DIVULGED BEFORE THE AO IN ANY OF THE ASSESSMENTS OR 264 PROCEEDINGS . HENCE DURING ASSESSMENT PROCEEDINGS U/S 143(3), AND ASSESSMENT PROCEEDINGS U/S 143(3) R/W SEC.264, THE ASSESSEE FA ILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS DESPITE BEING CATE GORICALLY ASKED TO DO SO, AND IN THE COURSE OF ASSESSMENT PROCEEDINGS IT RESO RTED TO LIES IN ORDER TO SUPPRESS THE FACTS AND MISGUIDE THE AO, WHICH WOULD HAVE OTHERWISE HELPED AO TO FORM AN OPINION ON THE ISSUE OF ROLE P LAYED BY THE DELHI/NOIDA UNITS IN PROCURING AND PROCESSING RAW M ATERIAL BEFORE SENDING IT TO THE GUWAHATI UNIT PARTICULARL Y WITH REFERENCE TO SECTION 80IA(8) AND EXCESSIVE DEDUCTION U/S 80IC. I N THE ABSENCE OF ANY DETAILS FILED BY THE ASSESSEE DURING THE ORIGINAL A SSESSMENT AND ASSESSMENT PROCEEDINGS R/W SEC. 264, ASSESSMENTS WE RE MADE WERE MADE WITHOUT FORMING ANY OPINION ON THIS ISSUE. IF THERE WAS NO OPINION THEN HOW CAN THERE BE A CHANGE OF OPINION SUBSEQUENTLY ? IN PROCEEDINGS BEFORE LD.CIT U/S 264, THE RELEVANT ISSUE NEVER CAME UP FOR CONSIDERATION AS THE APPLICATION WAS FI LED ON LIMITED ISSUES AND ONLY THOSE ISSUES WERE EXAMINED BY THE ID.CIT. AGAIN, WHEN THERE WAS NO OPINION THEN HOW CAN THERE BE A CHANGE OF OP INION SUBSEQUENTLY?? HENCE THE CONTENTION OF THE ASSESSEE THAT ALL MATER IAL FACTS WERE DISCLOSED DURING THE ORIGINAL ASSESSMENT PROCEEDING S, DURING PROCEEDINGS U/S 264 AND DURING PROCEEDINGS U/S 143( 3) R/W SEC.264 DO NOT HOLD GROUND IN THE IN VIEW OF THE SUBMISSIONS A BOVE. CONCLUSION OF SUBMISSIONS IN VIEW OF THE DETAILED SUBMISSIONS ABOVE, ALL THE CONDITIONS REQUIRED FOR INITIATING PROCEEDINGS U/S 147 HAVE BEEN FULFILLED IN THIS CASE AND HAVE BEEN APTLY DEMONSTRATED ABOVE. THE SAME ARE SUMMED UP IN LINE WITH THE SETTLED POSITION OF LAW: THE AO HAS RIGHTLY REOPENED THE ASSESSMENT AS HE HA D REASON TO BELIEVE THAT THE ASSESSEE'S INCOME HAD ESCAPED ASSE SSMENT. HIS REASONS TO BELIEVE ARE NOT BASED ON SURMISES, CONJE CTURES OR OCCASIONED BY CHANGE IN OPINION BUT ARE BASED ON TA NGIBLE AND CREDIBLE MATERIAL RECEIVED FROM THE INVESTIGATION W ING AFTER A SEARCH WAS CONDUCTED IN THIS CASE. THE TANGIBLE MAT ERIAL WAS 'ANNEXURE A' PREPARED BY THE INVESTIGATION WING AFT ER PHYSICALLY VERIFYING (AS IS DONE IN SEARCHES) THE VARIOUS PREM ISES OF THE ASSESSEE AND IDENTIFYING EACH STAGE OF PROCURING AN D PROCESSING OF RAW MATERIAL WITH REFERENCE TO THE PLACE WHERE SUCH ACTIVITY WAS BEING CARRIED OUT. THIS HAD A DIRECT BEARING ON DED UCTION U/S 80IA(8) AND EXCESSIVE DEDUCTION U/S 80IC WHICH FIND S A SPECIAL 39 ITA NO.5611 & 5581/DEL/2013 MENTION IN THE SATISFACTION NOTE RECORDED BY AO. HE NCE THE CONDITION OF HAVING TANGIBLE MATERIAL OBTAINED SUBS EQUENT TO EARLIER ASSESSMENTS, STANDS FULFILLED IN THIS CASE AFTER SENSIBLY ANALYSING THE TANGIBLE MATERIAL AVAI LABLE WITH HIM, THE AO HAS FORMED REASONABLE BELIEF THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT. THIS CAN BE SEEN FROM THE S TEP BY STEP DISCUSSION OF SATISFACTION NOTE MADE IN EARLIER PAR AS IN DETAIL ON STANDALONE BASIS. THE REASONS RECORDED BY THE AO HAVE A LIVE LINK WIT H THE FORMATION OF THE BELIEF AS THE INFORMATION RECEIVED BY THE AO IN ANNEXURE A CLEARLY SHOWS THAT PROCURING AND PROCESS ING OF RAW MATERIAL BY DELHI/NOIDA UNIT LED TO THE BELIEF THAT THE ASSESSEE WAS ATTRIBUTING THE ENTIRE VALUE ADDITION TO THE PRODUC T TO THE GUWAHATI UNIT RESULTING IN EXCESSIVE CLAIM OF DEDUCTION U/S 80IC AND CONTRAVENTION OF PROVISION OF SECTION 80IA(8). REFE RENCE IS AGAIN MADE TO STEP BY STEP DISCUSSION OF SATISFACTION NOT E MADE IN EARLIER PARAS IN DETAIL ON STANDALONE BASIS. BASED ON ABOVE THE AO HAD A REASON TO BELIEVE AND N OT A REASON TO SUSPECT. THE ASSESSEE NEITHER CONTESTED NOR ESTABLISHED THAT THERE IN FACT EXISTED NO BELIEF OR THAT THE BELIEF WAS NOT A BONA FIDE ONE OR WAS BASED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMA TION. THE REASONS RECORDED HAVE BEEN EXAMINED ON STANDALO NE ALONE BASIS AND NOTHING HAS BEEN IMPORTED OR ADDED TO IT. THE STATEMENTS OF KEY PERSONS HAVE BEEN RELIED UPON IN ADDITION TO THE REASONS RECORDED ON STANDALONE BASIS AND WITHOUT PREJUDICE TO THE EXAMINATION OF THE SATISFACTION NOTE ON THE STANDAL ONE BASIS. IT IS SETTLED LAW THAT THE COURT CANNOT GO INTO THE SUFFICIENCY OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPI NION FOR THAT OF THE ITO. IT HAS BEEN DEMONSTRATED THAT AO HAD PRIMA FACIE REASONS TO BELIEVE AND THE SUFFICIENCY OF THE REASONS CANNO T BE QUESTIONED AT THIS STAGE. THE CONDITION, THAT AN ASSESSMENT, WHICH HAS BEEN C ONCLUDED UNDER SECTION 143(3) OF THE ACT CAN BE REOPENED AFT ER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY WHEN THE INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, HAS BE EN AMPLY SATISFIED AFTER DISCUSSING EACH AND EVERY ORDER PAS SED U/S 143(3), ORDER U/S 264 AND ORDER U/S 143(3) R/W SEC.264, WHE RE THE ASSESSEE HAS RESORTED TO LIES TO SUPPRESS THE TRUE FACTS AND HAS NOT SUBMITTED ANY DETAILS IN RESPECT OF PROCUREMENT AND PROCESSIN G OF RAW MATERIAL BY DELHI/NOIDA UNIT DESPITE REPEATED OPPOR TUNITIES GIVEN 40 ITA NO.5611 & 5581/DEL/2013 FOR THIS PURPOSE. 'THE PROVISO TO S. 147 ENVISAGES ACTION IN THE ORDINARY COURSE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THAT LIMITATION DOES NOT, HOWEVER, APPLY TO CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT, INTER ALIA, OF THE FAILURE OF THE ASSES SEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS.' (CONSOLIDATED PHOTO & FINVEST LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX, JAN 17, 2006, (2006) 281 ITR 0394 (DEL) THE APEX COURT ALSO, WHILE ANALYZING WHAT AMOUNTS TO 'FULL' AND 'TRUE' FACTS IN THE CASE OF SRI KRISHNA PRIVATE LIMITED V. INCOME TAX OFFICER & ORS., REPORTED IN 2 21 ITR 538 HAS HELD THAT - 'THE POWER CONFERRED UPON THE INCOME TAX OF FICER BY SECTIONS 147 AND 148 IS THUS NOT A N UNBRIDLED ONE. IT IS HEDGED IN WITH SEVERAL SAFEGUARDS CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR ABUSE OF THIS POWER BY THE ASSESSING OFFICERS. THE IDEA WAS TO SA VE THE ASSESSEE FROM HARASSMENT RESULTING FROM MECHANICAL REOPENING OF A SSESSMENTS BUT THIS PROTECTION AVAILS ONLY TO THOSE ASSESSES WHO DISCLO SE ALL MATERIAL FACTS TRULY AND FULLY.' IN KANTAMANI VENKATA NARAYANA & SONS VS. ADDL. ITO (1967) 63 ITR 638 (SC), THE APEX COURT HELD THAT - 'IT IS THE DUTY OF THE ASSESSEE TO BRING TO THE NOT ICE OF THE ITO PARTICULAR ITEMS IN THE BOOKS OF ACCOUNT OR PORTIONS OF DOCUME NTS WHICH ARE RELEVANT. EVEN IF IT BE ASSUMED THAT FROM THE BOOKS PRODUCED, THE ITO, IF HE HAD BEEN CIRCUMSPECT, COULD HAVE FOUND OUT THE T RUTH, THE ITO MAY NOT ON THAT ACCOUNT BE PRECLUDED FROM EXERCISING TH E POWER TO ASSESS INCOME WHICH HAD ESCAPED ASSESSMENT.' TO THE SAME EFFECT IS THE DECISION OF THE SUPREME C OURT IN MALEGAON ELECTRICITY CO. (P) LTD. VS. CIT (1970) 78 ITR 466 (SC) WHERE THE COURT OBSERVED : 'IT IS TRUE THAT IF THE ITO HAD MADE SOME INVESTIGA TION, PARTICULARLY IF HE HAD LOOKED INTO THE PREVIOUS ASSESSMENT RECORDS, HE WOULD HAVE BEEN ABLE TO FIND OUT WHAT THE WRITTEN DOWN VALUE OF THE ASSETS SOLD WAS AND CONSEQUENTLY HE WOULD HAVE BEEN ABLE TO FIND OUT TH E PRICE IN EXCESS OF THEIR WRITTEN DOWN VALUE REALISED BY THE ASSESSEE. IT CAN BE SAID THAT THE ITO IF HE HAD BEEN DILIGENT COULD HAVE GOT ALL THE NECESSARY INFORMATION FROM HIS RECORDS. BUT THAT IS NOT THE SAME THING AS SAYING THAT THE ASSESSEE HAD PLACED BEFORE THE ITO TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT. THE LAW CA STS A DUTY ON THE ASSESSEE TO 'DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR'. THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF YOGEN DRAKUMAR GUPTA VS. INCOME TAX OFFICER, MAY 6, 2014 (2014) 366 ITR 0186 (GUJ) HAS HELD THAT 41 ITA NO.5611 & 5581/DEL/2013 WHAT NEEDS TO BE EMPHASIZED IS THAT THE OBLIGATION ON THE ASSESSEE TO DISCLOSE THE MATERIAL OR WHAT ARE CALLED, PRIMARY F ACTS-A MERE DISCLOSURE BUT A DISCLOSURE WHICH IS FULL AND TRUE. A FALS E DISCLOSURE IS NOT A TRUE SURE. THE DISCLOSURE MUST NOT ONLY BE TRUE BUT MUST BE 'FULLY AND TRULY', A FALSE ASSERTION, OR STATEMENT, OF MATERIAL FACT, THEREFORE, ATTRACTS THE JURISDICTION OF THE INCOME TAX OFFICER UNDER SECTIO N 34/147.' IN THE SAME ORDER THE HON'BLE COURT HAS FURTHER HEL D THAT IT NOT FURNISH A REASONABLE GROUND FOR THE INCOME TAX OF FICER TO BELIEVE THAT ON ACCOUNT OF THE FAILURE - INDEED NOT A MERE FAILU RE BUT A POSITIVE DESIGN TO MISLEAD OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS, FULLY AND TRULY, NECESSARY FOR THE ASSESSMENT FOR THAT YEAR, INCOME HAD ESCAPED ASSESSMENT? WE ARE OF THE FIRM OPINION THAT IT DOES . IT IS NECESSARY TO REITERATE THAT WE ARE NOW AT THE STAGE OF THE VALID ITY OF THE NOTICE UNDER SECTION 148/147, THE ENQUIRY AT THIS STAGE OF THE O NLY TO SEE WHETHER THERE ARE REASONABLE GROUNDS FOR THE INCOME TAX OFF ICER TO BELIEVE AND NOT WHETHER OMISSION/FAILURE AND THE ESCAPEMENT OF INCOME IS ESTABLISHED. IT IS NECESSARY TO KEEP THIS DISTINCTI ON IN MIND.' IN VIEW OF THE DISCUSSIONS ABOVE IT IS PRAYED THAT THE CASE MAY BE DECIDED AFTER CONSIDERING THE SUBMISSIONS ABOVE. 16. ON THE OTHER HAND, LD. CIT DR, MRS. NANDITA KAN CHAN VEHEMENTLY OPPOSED THE CONTENTIONS OF THE LD. AR AND SUBMITTED THAT A SEAR CH AND SEIZURE TOOK PLACE IN THE ASSESSEES PREMISES AT NOIDA, GUWAHATI AND AGARTALA . FROM THE SEARCH CONDUCTED ON 21.01.2011 AND IN THE COURSE OF SEARCH OF THE DS GR OUP SITUATED IN THE NORTH EASTERN STATE, NAMELY, GUWAHATI AND AGARTALA, CERTAIN FACTS EMERGED THAT WOULD SUGGEST THAT ASSESSEE CLAIMED DEDUCTION UNDER CHAPTER VIA WAS GR OSSLY INFLATED. ACCORDING TO THE LD. DR, FINDING OF THE SEARCH PROCEEDINGS SUGGESTS THAT FUNCTIONS PERFORMED AT GUWAHATI ARE THAT OF DRYING UP OF PROCESSED BEETLE NUT (PROCESSED SUPARI) RECEIVED FROM HEAD OFFICE, NOIDA AND ALL THE RAW MATERIALS, NAMEL Y, CATECHU, BEETLE NUT, CARDAMOM AND SUGAHIARE PROCURED AND PROCESSED AT NOIDA. CAR DAMOM IS PROCURED AND ITS SEEDS ARE EXTRACTED FROM THE SHELL. BEETLE NUT (SUPARI) IS ALSO PROCURED AT NOIDA AND THEN CHOPPED INTO SMALLER PIECES AND PROCESSED. ACCORDI NG TO HER, VARIOUS OTHER INGREDIENTS ARE ALSO RECEIVED FROM HEAD OFFICE AT NOIDA AND THI S MIXTURE IS THEN PACKED AND DISPATCHED TO DESTINATION ORDERED BY HEAD OFFICE. FROM WHERE IT TRANSPIRED THAT THE 42 ITA NO.5611 & 5581/DEL/2013 ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTION UNDER SECT ION 80IB/ 80IC OF THE ACT BY ATTRIBUTING ENTIRE VALUE ADDITION OF GUWAHATI UNIT IF THE ELIGIBLE UNIT THEREBY CONTRAVENING THE PROVISIONS OF SECTION 80IA (8) OF THE ACT, BY NOT TRANSFERRING THE GOODS AND SERVICES HELD FOR THE PURPOSE OF THE ELIG IBLE UNITS TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE AND VICE VERSA AT THE MA RKET VALUE OF SUCH GOODS AND IN THE PROCESS SHOWING MORE THAN NORMAL PROFITS IN THE ELI GIBLE UNDERTAKINGS. THE AO HAD REOPENED THE ASSESSMENT THE REASONS WERE FURNISHED TO THE ASSESSEE AND OBJECTION RAISED BY THE ASSESSEE HAD BEEN REPELLED BY THE AO WITH A SPEAKING ORDER. LD. DR SUBMITTED THAT THE LD. CIT (A) HAS TAKEN NOTE OF THE FACT THA T THE FORM10CCB FILED ALONG WITH THE RETURN OF INCOME HAS NOT BEEN PROPERLY FILLED AND T HE GOODS AND SERVICES TRANSFERRED FROM NON-ELIGIBLE UNITS TO ELIGIBLE UNITS HAD NOT B EEN DISCLOSED IN THESE RESPECTIVE COLUMN OF FORM NO.10CCB IN ENTIRETY. THESE DECLARA TION OF MANUFACTURING GOODS / SERVICES HAD DIRECT NEXUS OF MANUFACTURING PROCESS AT VARIOUS UNITS OF THE ASSESSEE COMPANY. ACCORDING TO HER, THE LD. CIT (A) HAS TAK EN NOTE OF THE FACT THAT IN COLUMN 20 OF THE AUDIT REPORT OF 10CCB ARE NOT DISCLOSING INTER UNIT TRANSFERS TO ELIGIBLE UNITS. SO, THE LD. DR SUBMITTED THAT THE ASSESSEE FAILED T O DISCLOSE FULL FACTS BEFORE THE AO DURING THE ORIGINAL ASSESSMENT. SO, THE REOPENING OF ASSESSMENT WAS LEGAL. 17. THE LD. DR COUNTERED THE ARGUMENTS OF THE LD. A R IN RESPECT OF NON-ISSUANCE OF THE 143(2) NOTICE BY BRINGING TO OUR ATTENTION THE FACT THAT VIDE ORDER SHEET ENTRY DATED 24.11.2011 WHEREIN THE AO HAS WRITTEN THAT THE 143( 2) NOTICE HAS BEEN ISSUED AND THEREAFTER, SHE TOOK OUR ATTENTION TO THE ENTRY ON 28.11.2011 AND POINTED OUT THAT THE ASSESSEE ALONG WITH THE AR HAS ATTENDED THE PROCEED INGS BEFORE THE AO AND FILED THE OBJECTION TO THE REOPENING. THEREFORE, ACCORDING T O THE LD. DR, THE ASSESSEE MIGHT HAVE RECEIVED THE COPY OF THE 143(2) NOTICE AND THEREAFT ER HAD APPEARED BEFORE THE AO ON 28.11.2011. AT THAT STAGE, THE LD. CIT DR SOUGHT T IME TO GO THROUGH THE ENTIRE RECORD TO 43 ITA NO.5611 & 5581/DEL/2013 SEE WHETHER A COPY OF 143(2) NOTICE CAN BE FOUND IN THE RECORDS. SO, THE BENCH VIDE ORDER DATED 15.10.2015 DIRECTED THE DEPARTMENT TO S UBMIT THE PROOF OF ISSUANCE AND SERVICE OF THE NOTICE DULY SERVED; AND IF POSSIBLE TO THE CLAIM OF THE DEPARTMENT THAT THE NOTICE HAVE BEEN ISSUED MAY BE SUPPORTED WITH AFFID AVIT OF THE AO; AND THE MATTER WAS ADJOURNED TO 26.10.2015 WHICH WAS AGAIN ADJOURNED T O 27.10.2015 WHEREIN THE LD. CIT DR FAIRLY CONCEDED BEFORE THE BENCH THAT SHE COULD NOT TRACE/FIND A COPY OF THE 143(2) NOTICE IN THE RECORDS AND DID NOT FILE ANY AFFIDAVI T TO SUPPORT THE ISSUANCE, EVEN SERVICE OF NOTICE ETC. HOWEVER, SHE PLACED BEFORE US A COP Y OF THE ORDER SHEET DATED 24.11.2011 AND POINTED OUT THAT THE AO HAS RECORDED THAT HE HAD ISSUED 143(2) NOTICE AND SHE TOOK OUR ATTENTION TO THE NEXT ENTRY WHICH IS DATED 28.11.2011 AND CONTENDED THAT THE DIRECTOR OF THE COMPANY, MR.ANIL AGGARWAL AND SH.SIDDHART GOEL, GM, TAXATION, APPEARED BEFORE THE AO PURSUANT TO THE SA ID NOTICE UNDER SECTION 143(2) AND FILED OBJECTION REGARDING REOPENING OF THE ASSESSME NT. SHE POINTED OUT THAT THE RECORDS SUGGEST THAT THE REASONS FOR REOPENING WAS GIVEN TO THE ASSESSEE ON 24.04.2011 AND WONDERED AS TO HOW THE ASSESSEE HAS TAKEN UP SUCH A LONG TIME I.E, MORE THAN SEVEN MONTHS TO FILE THE OBJECTIONS AND, ACCORDING TO HER , THE DIRECTOR AND GM (TAXATION) OF THE ASSESSEE COMPANY HAS APPEARED PURSUANT TO THE 1 43(2) NOTICE ONLY. THE LD. CIT DR TOOK OUR ATTENTION TO THE FACT THAT SPECIAL AUDIT W AS ORDERED AGAINST THE ASSESSEE AND IN THAT, IT WAS CLEARLY MENTIONED THAT 143(2) NOTICE H AS BEEN ISSUED AND SERVED ON THE ASSESSEE. SHE ALSO POINTED OUT THAT THE ASSESSEE H AD VEHEMENTLY OPPOSED THE SPECIAL AUDIT BY FILING LETTER DATED 26.12.2011, HOWEVER, T HERE IS NO WHISPER OF NON-RECEIPT OF 143(2) NOTICE IN THE SAID OBJECTIONS RAISED BEFORE THE AO. SO, ACCORDING TO THE LD. CIT DR, NOW AFTER PARTICIPATING IN THE REASSESSMENT PRO CEEDINGS, THE ASSESSEE CANNOT TURN BACK AND SAY THAT IT HAD NOT RECEIVED THE COPY OF T HE 143(2) NOTICE. 44 ITA NO.5611 & 5581/DEL/2013 18. THEREAFTER, THE LD. CIT DR TOOK OUR ATTENTION T O SECTION 292BB AND CONTENDED THAT THE SAID SECTION HAS BEEN INTRODUCED BY FINANC E ACT, 2008 W.E.F. 01.04.12008 AND ALL PENDING PROCEEDINGS INCLUDING THE REOPENING AND REASSESSMENT IN THIS CASE WAS ADMITTEDLY AFTER 01.04.2008, SO SECTION 292BB IS FU LLY APPLICABLE IN THE CASE IN HAND AND THEREFORE, SINCE THE AO IN THE ORDER SHEET ENTR Y DATED 24.11.2011 HAS CLEARLY STATED THAT HE HAS ISSUED THE SAID NOTICE, THE ASSESSEE AF TER PARTICIPATING IN THE SAID PROCEEDINGS CANNOT RAISE IT IN APPELLATE PROCEEDINGS WITHOUT RA ISING THE SAME BEFORE THE COMPLETION OF THE REASSESSMENT PROCEEDINGS AND FOR BUTTRESSING HER SAID CONTENTION, SHE REFERRED TO THE DECISIONS OF HONBLE KERALA HIGH COURT REPORTED IN 82 CCH 307 (KERALA) DATED 13.06.2012 AND HONBLE PUNJAB & HARYANA HIGH COURT DATED 12.07.2011 REPORTED IN 16 DTR 395 (P&H) AND 59 DTR 289 (P&H) ORDER DATED 03.0 5.2011. BY REFERRING TO THESE DECISIONS, SHE CONTENDED THAT ADMITTEDLY NOTICE UND ER SECTION 148 WAS ISSUED ON 29.03.2011 AND THE REASSESSMENT ORDER WAS PASSED ON 22.06.2012, THEREFORE, SINCE SECTION 292BB WAS INTRODUCED BY FINANCE ACT, 2008 W .E.F. 01.04.2008 THE PROVISION APPLIES IN FULL VIGOUR AND AS HELD BY THE HONBLE K ERALA HIGH COURT AND HONBLE PUNJAB & HARYANA HIGH COURT, THE ASSESSEE IS ESTOPP ED FROM RAISING THIS PLEA BEFORE THE APPELLATE AUTHORITIES WITHOUT RAISING THE SAME BEFORE THE AO. IN THE LIGHT OF THE AFORESAID, THE LD. CIT DR PLEADED THAT THE LEGAL GR OUNDS RAISED BY THE ASSESSEE AGAINST THE REOPENING OF THE REASSESSMENT IS NOT TENABLE AN D WAS RIGHTLY NOT ACCEPTED BY THE LD. CIT (A). THEREFORE, SHE DOES NOT WANT US TO INTERF ERE IN THE ORDER PASSED BY THE LD. CIT (A) REGARDING THESE GROUNDS. 19. THE LD. AR SHRI SINGHVI, IN REJOINDER, TOOK OUR ATTENTION TO THE ORDER SHEET ENTRY DATED 24.11.2011 AND TOOK OUR ATTENTION TO THE FACT THAT THERE IS NO MENTION OF THE MODE OF DISPATCH WHETHER BY SPEED POST / REGISTERED POST / BY NOTICE SERVER AND NON- PRODUCTION OF THE DISPATCH REGISTER ACCORDING TO HI M CLEARLY INDICATES THE FACT THAT THE 45 ITA NO.5611 & 5581/DEL/2013 NOTICE UNDER SECTION 143(2) HAS NOT BEEN ISSUED AND THAT THE ADMISSION BEFORE THE BENCH BY THE LD. CIT DR THAT SHE COULD NOT FIND A C OPY OF THE SAME IN THE RECORDS AND ALSO THE LD. CIT (A)S SILENCE REGARDING THIS MIXED QUESTION OF FACT AND LAW, CLEARLY SHOWS THAT THE NOTICE UNDER SECTION 143(2) HAS NOT BEEN ISSUED AT ALL AND THEREFORE, THE QUESTION OF SERVING THE SAME ON THE ASSESSEE DOES N OT ARISE. THE LD. AR ALSO POINTED OUT THAT IN SPITE OF THE DIRECTION BY THE BENCH TO THE DEPARTMENT TO FILE AN AFFIDAVIT OF THE AO IN RESPECT TO ISSUANCE OF NOTICE AND PROOF O F SERVING OF NOTICE, THE SAME HAS NOT BEEN COMPLIED WITH BY THE AO FOR REASONS BEST KNOWN TO THEM. IN THE LIGHT OF THE SAID FACTS, THE LD.AR CONTENTED THAT AN ADVERSE INFERENC E MAY BE DRAWN AGAINST THE DEPARTMENT ON THIS ISSUE. 20. LD. AR ALSO VEHEMENTLY CONTENDED AGAINST THE PR ESUMPTION THEORY BROUGHT BY THE CIT DR IN THE COURSE OF ARGUMENT IN RESPECT TO ISSUANCE AND SERVING OF NOTICE UNDER SECTION 143 (2) BY CITING THAT THE AR AND ASSESSEE APPEARED BEFORE THE AO ON 28.11.2011 WAS PURSUANT TO THE RECEIPT OF NOTICE UN DER SECTION 143 (2) CANNOT BE COUNTENANCED BECAUSE IT IS CLEARLY WRITTEN IN THE O RDER SHEET ENTRY THAT THE SAID AR APPEARED ON 28.11.2011 FOR FILING THE OBJECTIONS AG AINST REOPENING. THE LD. AR ALSO STATED THAT THE MENTIONING OF ISSUANCE OF NOTICE UN DER SECTION 143(2) IN THE NOTICE BEFORE SPECIAL AUDIT CANNOT HAVE ANY RELEVANCE BECA USE EVEN THE SPECIAL AUDIT COULD NOT BRING OUT ANY ADVERSE MATERIALS AGAINST THE ASSESSE E. ACCORDING TO HIM, MERELY BY STATING THAT NOTICE HAS BEEN ISSUED IN A SHOW CAUSE NOTICE THAT TOO FOR SPECIAL AUDIT CANNOT DETERMINE THE FACT WHETHER 143 (2) NOTICE HA S BEEN ISSUED OR COPY OF WHICH SHOULD HAVE BEEN FOUND IN THE RECORDS OF THE DEPART MENT. IN THE ABSENCE OF THE SAME OR IN THE ABSENCE OF THE DISPATCH REGISTER MENTIONING ABOUT THE MODE OF DISPATCH ETC. LEAVES NO DOUBT IN THE MIND OF ANY PRUDENT PERSON T HAT SAID NOTICE HAS NOT BEEN ISSUED AT ALL. THE LD. AR CITED THE CASE OF ACIT VS. HOTE L BLUE MOON (2010) 321 ITR 362 46 ITA NO.5611 & 5581/DEL/2013 (SC) AND CONTENDED THAT NOW, THE ISSUE WHETHER 143 (2) NOTICE IS MANDATORY OR NOT IS NO LONGER RES INTEGRA. THE HONBLE JURISDICTIONAL HIG H COURT IN CIT VS. LUNAR DIAMONDS LTD. (2006) 281 ITR 1 (DEL.) HAS ALSO REITERATED THAT THE NOTICE U/S 143(2) IS MANDATORY IN 147/148 PROCEEDINGS AND IS NOT A CURAB LE DEFECT, WHICH WAS FOLLOWED BY HONBLE DELHI HIGH COURT IN CIT VS. VARDHMAN ESTATE P LIMITED - (2006) 287 ITR 368 (DEL.). 21. COMING TO THE CONTENTION OF THE LD. DR ABOUT TH E APPLICABILITY OF SECTION 292BB IN THE INSTANT REASSESSMENT, THE LD. AR POINT ED OUT THAT THIS ISSUE IS NO LONGER RES INTEGRA BECAUSE THE HONBLE JURISDICTIONAL HIGH COU RT (DELHI) HAS UPHELD THE DECISION OF SPECIAL BENCH DECISION IN KUBER TOBACCO PRODUCT PVT LTD 117 ITD 273 WHEREIN IT WAS HELD THAT THE SAID SECTION 292BB IS APPLICABLE ONLY FOR THE ASSESSMENT YEAR 2008- 09 ONWARDS AND SINCE THERE IS NO DISPUTE THAT THE R ELEVANT ASSESSMENT YEAR BEFORE US IS 2004-05, THE REVENUE CANNOT TAKE THE AID OF SECTION 292BB TO COVER THIS DEFECT WHICH IS INCURABLE AS HELD BY THE HONBLE SUPREME COURT IN T HE CASE OF HOTEL BLUE MOON (SUPRA). THEREFORE, SINCE THE HONBLE JURISDICTION AL HIGH COURT DECISION IN THIS ASPECT IS VERY CLEAR SO THE TRIBUNAL IS BOUND BY IT AND CA NNOT GO BEYOND THE SAME. HE ALSO BROUGHT TO OUR ATTENTION TO PAPER BOOK PAGE 166 WHI CH IS THE QUESTIONNAIRE RAISED DURING THE ORIGINAL ASSESSMENT DATED 13.01.2006 WHE REIN EXTENSIVE QUESTIONS REGARDING ACTIVITIES UNDERTAKEN BY UNITS AT VARIOUS PARTS OF THE COUNTRY INCLUDING THAT OF THE ROLE OF DELHI OFFICE WAS ASKED AND ALSO TOOK OUR ATTENTION TO PAGES 12 & 13 OF THE LETTER DATED 13.03.2007 AND ALSO STATED THAT NO INCRIMINATING MA TERIAL WAS FOUND DURING THE SEARCH AND SEIZURE. HE TOOK OUR ATTENTION TO THE FACT THA T STATEMENT GIVEN BY SHRI PRITAM SINGH DURING THE SEARCH CANNOT BE RELIED UPON FOR THE ASS ESSMENT YEAR IN QUESTION BECAUSE THE SAID EMPLOYEE WAS NOT IN THE SERVICES OF THE ASSESS EE AT THAT RELEVANT YEAR AND HE HAS JOINED THE SERVICES OF THE ASSESSEE ONLY IN 05.01.2 009, THEREFORE, THE STATEMENT GIVEN BY 47 ITA NO.5611 & 5581/DEL/2013 HIM CANNOT BE A BASIS FOR WHAT HAPPENED IN ASSESSME NT YEAR 2004-05. MR. SINGHVI POINTED OUT THAT THE PRODUCTS ARE EXCISABLE PRODUCT S, THE EXCISE DUTY IS DULY PAID AND IT IS ALL SUPPORTED BY THE EXCISE RECORDS. HE ALSO TO OK OUR ATTENTION TO PAGES 372 TO 379 OF THE PAPER BOOK (LETTER DATED 06.12.2006) AND TOOK O UR ATTENTION TO PAGE 375 WHEREIN ASSESSEE WROTE TO THE ADDL. COMMISSIONER WHO HAS AS KED QUESTIONS VIDE LETTER DATED 27.11.2006 UNDER SECTION 144A ABOUT POINT NO.II WHE REIN, THE ASSESSEE HAD CONFIRMED TO THE ADDL.CIT THAT FINISHED UNBRANDED GOODS WERE TRANSFERRED FROM ONE UNIT/BRANCH TO ANOTHER UNIT/BRANCH IN THE COURSE OF LOCAL MOVEMENT AS WELL AS INTER STATE TRANSFERS, WHICH HAS BEEN REFLECTED IN THE P&L ACCOUNT UNDER T HE HEAD INTER-UNIT TRANSFERS AND EXPLAINED THAT GROSS SALES HAVE BEEN REDUCED BY INT ER-UNIT TRANSFERS AND ALSO STATED THAT SINCE THE TRANSACTION FALLS IN THE NATURE OF T RANSFER FOR CAPTIVE CONSUMPTIONS, HENCE THE TRANSFERS HAVE BEEN RECORDED IN THE BOOKS OF AC COUNT ON COST TO COST BASIS AND NO NOTIONAL PROFIT IS BEING GENERATED AT TRANSFERRING BRANCH AND ALSO BROUGHT TO OUR ATTENTION THE FACT THAT THE CLAIM UNDER SECTION 80I B AND 80IC HAS BEEN CLAIMED BY THE ASSESSEE FOR THE FIRST TIME IN ASSESSMENT EAR 2000- 01 AND THE FACTS ARE PARI MATERIA FROM THAT ASSESSMENT YEAR ONWARDS, THEREFORE, ALL THE MA TERIALS WERE ON RECORD, SO NOW THE REASSESSMENT CANVASSED BY THE AO CAN ONLY BE CALLED AS A CHANGE OF OPINION . NO NEW FACTS HAS EMERGED AFTER THE SEARCH, THEREFORE, THE REASONS RECORDED BY THE AO WITHOUT EVEN ELABORATING ON WHAT MATERIAL HE HAS LAID HIS H ANDS ON AFRESH FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS ERRONEOUSLY COME TO AN OPINION, THAT THERE IS AN ESCAPEMENT OF INCOME AND THE ASSESSEE HAS NOT DISCL OSED TRUE AND FULL FACTS DURING THE ORIGINAL ASSESSMENT, WHICH IS PER SE WRONG AND NOT BORNE OUT OF ANY EVIDENCE AND SO AO LACKED JURISDICTION TO REOPEN THE ASSESSMENT. S O, THEREFORE, THE REASSESSMENT ORDER IS NULL AND VOID IN THE EYES OF LAW. NOT ONLY THAT SECTION 151 OF THE ACT WAS MECHANICALLY DONE WITHOUT APPLICATION OF MIND WHICH HAS BEEN FROWNED BY THE HONBLE 48 ITA NO.5611 & 5581/DEL/2013 APEX COURT AND HONBLE JURISDICTIONAL HIGH COURT, T HEREFORE, THE ENTIRE PROCEEDINGS ARE VOID AB INITIO. ACCORDING TO HIM, THE LD. CIT (A) HAS NOT APPRECIATED THE SAID FACTS AND, THEREFORE, HAS ERRED IN TURNING DOWN THESE GROUNDS. THEREFORE, HE PRAYED THAT THE IMPUGNED ORDER MAY BE QUASHED. 22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. FIRSTLY, WE HAVE TO DECIDE THE SHORT QUESTION WHETHER OR NOT, ON THE BA SIS OF THE REASONS RECORDED BY AO, REASSESSMENT PROCEEDINGS CAN BE LAWFULLY INITIATED; SECONDLY, WE HAVE TO EXAMINE WHETHER SANCTION GRANTED UNDER SECTION 151 BY THE ADDL. COMMISSIONER OF INCOME-TAX AND COMMISSIONER OF INCOME-TAX IS VALID IN THE EYES OF LAW; THIRDLY, WHETHER NON- ISSUANCE OF SECTION 143(2) NOTICE IS FATAL TO THE I MPUGNED REASSESSMENT; AND FOURTHLY, WHETHER SECTION 292 BB PROVISION CAN COME TO THE RE SCUE OF REVENUE IN RESPECT TO NON- ISSUANCE OF NOTICE UNDER SECTION 143 (2) ; AND FIFT HLY CAN THE WHOLE EXERCISE BY THE AO BE TERMED AS A REVIEW OF THE ORIGINAL ASSESSMENT COMPLETED BY THE PREDE CESSOR AO UNDER SECTION 143(3) OF THE ACT AND CAN BE TERMED A S CHANGE OF OPINION'. 23. BEFORE WE ADVERT TO THE FACTS IN THIS CASE, LET US LOOK INTO THE WELL SETTLED PRINCIPLES REGARDING REOPENING OF ASSESSMENT COMPLE TED U/S 143 (3) OF THE ACT. 24. IT IS WELL SETTLED IN LAW THAT REASONS, AS RECO RDED FOR REOPENING THE REASSESSMENT, ARE TO BE EXAMINED ON A STANDALONE BASIS. NOTHING C AN BE ADDED TO THE REASONS SO RECORDED, NOR ANYTHING CAN BE DELETED FROM THE REAS ONS SO RECORDED. THE HONBLE BOMBAY HIGH COURT, IN THE CASE OF HINDUSTAN LEVER L TD. VS. R.B. WADKAR [(2004) 268 ITR 332], HAS, INTER ALIA, OBSERVED THAT '.IT IS NEEDLESS TO MENTION THAT T HE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORD ED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDITIONS CAN BE MADE T O THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT REC ORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY H IM. HE HAS TO SPEAK THROUGH THE 49 ITA NO.5611 & 5581/DEL/2013 REASONS.' THEIR LORDSHIPS ADDED THAT 'THE REASONS R ECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR REASO NS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE.'. THEREFORE, THE REAS ONS ARE TO BE EXAMINED ONLY ON THE BASIS OF THE REASONS AS RECORDED. 25. THE NEXT IMPORTANT POINT IS THAT EVEN THOUGH RE ASONS, AS RECORDED, MAY NOT NECESSARILY PROVE ESCAPEMENT OF INCOME AT THE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO AN INCOME ESCAPING ASSESS MENT AND NOT MERELY NEED OF AN INQUIRY WHICH MAY RESULT IN DETECTION OF AN INCOME ESCAPING ASSESSMENT. UNDOUBTEDLY, AT THE STAGE OF RECORDING THE REASONS FOR REOPENING THE ASSESSMENT, ALL THAT IS NECESSARY IS THE FORMATION OF PRIMA FACIE BELIEF THAT AN INCOME HAS ESCAPED THE ASSESSMENT AN D IT IS NOT NECESSARY THAT THE FACT OF INCOME HAVING ESC APED ASSESSMENT IS PROVED TO THE HILT. WHAT IS, HOWEVER, NECESSARY IS THAT THERE MUST BE S OMETHING WHICH INDICATES, EVEN IF NOT ESTABLISHES, THE ESCAPEMENT OF INCOME FROM ASSE SSMENT. IT IS ONLY ON THIS BASIS THAT THE ASSESSING OFFICER CAN FORM THE BELIEF THAT AN I NCOME HAS ESCAPED ASSESSMENT. MERELY BECAUSE SOME FURTHER INVESTIGATIONS HAVE NOT BEEN CARRIED OUT, WHICH, IF MADE, COULD HAVE LED TO DETECTION TO AN INCOME ESCAPING A SSESSMENT, CANNOT BE REASON ENOUGH TO HOLD THE VIEW THAT INCOME HAS ESCAPED ASSESSMENT . IT IS ALSO IMPORTANT TO BEAR IN MIND THE SUBTLE BUT IMPORTANT DISTINCTION BETWEEN F ACTORS WHICH INDICATE AN INCOME ESCAPING THE ASSESSMENTS AND THE FACTORS WHICH INDI CATE A LEGITIMATE SUSPICION ABOUT INCOME ESCAPING THE ASSESSMENT. THE FORMER CATEGORY CONSISTS OF THE FACTS WHICH, IF ESTABLISHED TO BE CORRECT, WILL HAVE A CAUSE AND EF FECT RELATIONSHIP WITH THE INCOME ESCAPING THE ASSESSMENT. THE LATTER CATEGORY CONSIS TS OF THE FACTS, WHICH, IF ESTABLISHED TO BE CORRECT, COULD LEGITIMATELY LEAD TO FURTHER I NQUIRIES WHICH MAY LEAD TO DETECTION OF AN INCOME WHICH HAS ESCAPED ASSESSMENT. THERE HAS T O BE SOME KIND OF A CAUSE AND EFFECT RELATIONSHIP BETWEEN REASONS RECORDED AND TH E INCOME ESCAPING ASSESSMENT. 50 ITA NO.5611 & 5581/DEL/2013 WHILE DEALING WITH THIS ASPECT OF THE MATTER, IT IS USEFUL TO BEAR IN MIND THE OBSERVATIONS MADE BY HONBLE SUPREME COURT IN THE C ASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 ITR 437] THAT, THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEARING O N THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FO RMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUA CY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO B EAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR D ISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. 26. IN CIT VS. KELVINATOR OF INDIA LTD. REPORTED IN 320 ITR 561, THE FULL BENCH OF HONBLE JURISDICTIONAL HIGH COURT HELD AS UNDER :- IT IS A WELL SETTLED PRINCIPLE OF INTERPRETATION OF STATUTE THAT THE ENTIRE STATUTE SHOULD BE READ AS A WHOLE AND THE SAME HAS TO BE CONSIDERED THEREAFTER CHAPTER BY CHAPTER AND THEN SECTION BY S ECTION AND ULTIMATELY WORD BY WORD. IT IS NOT IN DISPUTE THAT THE ASSESSI NG OFFICER DOES NOT HAVE ANY JURISDICTION TO REVIEW HIS OWN ORDER. HIS JURISDICTION IS CONFINED ONLY TO RECTIFICATION OF MISTAKES AS CONTA INED IN SECTION 154 OF THE ACT. THE POWER OF RECTIFICATION OF MISTAKE CONF ERRED UPON THE INCOME-TAX OFFICER IS CIRCUMSCRIBED BY THE PROVISIO NS OF SECTION 154 OF THE ACT. THE SAID POWER CAN BE EXERCISED WHEN THE M ISTAKE IS APPARENT. EVEN A MISTAKE CANNOT BE RECTIFIED WHERE IT MAY BE A MERE POSSIBLE VIEW OR WHERE THE ISSUES ARE DEBATABLE. EVEN THE IN COME-TAX APPELLATE TRIBUNAL HAS LIMITED JURISDICTION UNDER SECTION 254 (2) OF THE ACT. THUS WHEN THE ASSESSING OFFICER OR TRIBUNAL HAS CONSIDER ED THE MATTER IN DETAIL AND THE VIEW TAKEN IS A POSSIBLE VIEW THE OR DER CANNOT BE CHANGED BY WAY OF EXERCISING THE JURISDICTION OF RECTIFICAT ION OF MISTAKE. 51 ITA NO.5611 & 5581/DEL/2013 IT IS A WELL SETTLED PRINCIPLE OF LAW THAT WHAT CAN NOT BE DONE DIRECTLY CANNOT BE DONE INDIRECTLY. IF THE INCOME-T AX OFFICER DOES NOT POSSESS THE POWER OF REVIEW, HE CANNOT BE PERMITTED TO ACHIEVE THE SAID OBJECT BY TAKING RECOURSE TO INITIATING A PROCEEDIN G OF REASSESSMENT OR BY WAY OF RECTIFICATION OF MISTAKE. IN A CASE OF TH IS NATURE THE REVENUE IS NOT WITHOUT REMEDY. SECTION 263 OF THE ACT EMPOW ERS THE COMMISSIONER TO REVIEW AN ORDER WHICH IS PREJUDICIA L TO THE REVENUE. IN BAWA ABHAI SINGH'S CASE [2002] 253 ITR 83 (DELHI ), A DIVISION BENCH OF THIS COURT OF WHICH ONE OF US (D. K. JAIN J.) IS A MEMBER, CLEARLY HELD (PAGE 88) : 'THE CRUCIAL EXPRESSION IS 'REASON TO BELIEVE'. THE EXPRESSION PREDICATES THAT THE ASSESSING OFFICER MUST HOLD A B ELIEF . . . BY THE EXISTENCE OF REASONS FOR HOLDING SUCH A BELIEF. IN OTHER WORDS, IT CONTEMPLATES EXISTENCE OF REASONS ON WHICH THE BELI EF IS FOUNDED AND NOT MERELY A BELIEF IN THE EXISTENCE OF REASONS IND UCING THE BELIEF. SUCH A BELIEF MAY NOT BE BASED MERELY ON REASONS BUT IT MUST BE FOUNDED ON INFORMATION. AS WAS OBSERVED IN GANGA SARAN AND SON S P. LTD. V. ITO [1981] 130 ITR 1 (SC), THE EXPRESSION 'REASON TO BE LIEVE' IS STRONGER THAN THE EXPRESSION 'IS SATISFIED'. THE BELIEF ENTE RTAINED BY THE ASSESSING OFFICER SHOULD NOT BE IRRATIONAL AND ARBI TRARY. TO PUT IT DIFFERENTLY, IT MUST BE REASONABLE AND MUST BE BASE D ON REASONS WHICH ARE MATERIAL. IN S.NARAYANAPPA V. CIT [1967] 63 ITR 219, IT WAS NOTED BY THE APEX COURT THAT THE EXPRESSION 'REASON TO BE LIEVE' IN SECTION 147 DOES NOT MEAN PURELY A SUBJECTIVE SATISFACTION ON T HE PART OF THE ASSESSING OFFICER, THE BELIEF MUST BE HELD IN GOOD FAITH ; IT CANNOT BE MERELY A PRETENCE. IT IS OPEN TO THE COURT TO EXAMI NE WHETHER THE REASONS FOR THE BELIEF HAVE A RATIONAL NEXUS OR A R ELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR I RRELEVANT FOR THE PURPOSE OF THE SECTION. TO THAT LIMITED EXTENT, THE ACTION OF THE ASSESSING OFFICER IN INITIATING PROCEEDINGS UNDER S ECTION 147 CAN BE CHALLENGED IN A COURT OF LAW.' IT WAS FURTHER HELD THAT, WE ARE THEREFORE OF THE OPINION THAT SECTION 147 O F THE ACT DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASS ESSING OFFICER TO INITIATE REASSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPI NION. IT WAS FURTHER OBSERVED AS UNDER :- WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY TO THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REAS ONS HAVE NOT BEEN RECORDED AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDING UNDE R SECTION 147 OF THE ACT. THE SAID SUBMISSION IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB-SECTION (1) OF SECTIO N 143 OR SUB-SECTION 52 ITA NO.5611 & 5581/DEL/2013 (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSM ENT IS PASSED IN TERMS OF THE SAID SUB-SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLIC ATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EV IDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD THAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APP LICATION OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITHOUT ANYTHING FURTHER, THE SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EXERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 27. IT IS NECESSARY TO EXAMINE WHETHER THERE WAS AN Y REASON TO BELIEVE TO HAVE HAD SUCH AN EXERCISE. THE TERM REASON TO BELIEVE CANNOT BE CONSIDERED OR EVALUATED IN A WATER TIGHT COMPARTMENT AND SCOPE AND APPLICAB ILITY MAY VARY FROM CASE TO CASE, DEPENDING UPON THE FACTS AND CIRCUMSTANCES. THE PO WER UNDER SECTIONS 147 / 148 COMES INTO EXISTENCE IF HE HAD REASON TO BELIEVE TH AT INCOME HAS ESCAPED ASSESSMENT. FORMATION OF REASON TO BELIEVE THAT INCOME ESCAPED ASSESSMENT HAS TO BE THAT OF A PRUDENT PERSON. THE REASONS FOR SUCH BELIEF HAVE T O BE RECORDED IN WRITING ON THE BASIS OF MATERIAL IN THE POSSESSION OF AO. WHILE THE WOR DS REASON TO BELIEVE ARE WIDE IN THEIR IMPORT, IT CANNOT INCLUDE A MERE SUSPICION OR IPSE DIXIT OF THE AO. THE BELIEF OF THE AO SHOULD LEAD HIM TO FORM AN HONEST AND REASON ABLE OPINION BASED ON REASONABLE GROUNDS. (ITO VS. LAKHMANI MEWAL DAS 103 ITR 437 AT 448 (SC) AND NAVINCHANDRA MOHANLAL PARIK VS. VS. WTO 124 ITR 68). THE REAS ONABILITY OF THE GROUNDS WHICH LED TO THE FORMATION OF BELIEF WARRANTING REOPENING IS TESTED FROM THE POINT OF VIEW WHETHER OR NOT THEY ARE GERMANE TO THE FORMATION OF BELIEF THAT INCOME ESCAPED ASSESSMENT AND AFTER 4 YEARS, AN ADDITIONAL SAFEGUA RD OR CONDITION THAT ESCAPEMENT OF INCOME WAS DUE TO FAULT OF THE ASSESSEE, IN NOT FUL LY AND TRULY DISCLOSING THE MATERIAL FACTS AT THE TIME OF ORIGINAL ASSESSMENT. THE HONB LE SUPREME COURT ENDORSING THE FULL BENCH DECISION OF THE HONBLE DELHI HIGH COURT IN C IT VS. KELVINATOR OF INDIA LTD. 53 ITA NO.5611 & 5581/DEL/2013 256 ITR 1 HELD IN ITS ORDER REPORTED IN 320 ITR 561 , ..THAT ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERI AL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REA SONS MUST HAVE LINK WITH THE FORMATION OF BELIEF. THEREFORE, IF THE FRESH TANGIBLE MATERIAL WHICH TH E AO HAS IN HIS POSSESSION IS RELEVANT TO HAVE NEXUS TO THE FORMATI ON OF BELIEF THEN, OF COURSE, THE AO WOULD HAVE THE NECESSARY JURISDICTION TO TAKE ACTIO N UNDER THE ACT. WHAT IS REQUIRED TO BE EXAMINED IS NOT THE ADEQUACY OR SUFFICIENCY OF T HE GROUNDS BUT THE EXISTENCE OF BELIEF. IN OUR VIEW, ALL THAT ONE HAS TO EXAMINE I S THAT WHETHER THERE WAS SOME MATERIAL WHICH, GAVE RISE TO PRIMA FACIE VIEW IF THAT INCOME HAS ESCAPED ASSESSMENT AND THE BELIEF WAS FORMED IN GOOD FAITH OR WAS IT MERE PRET ENCE FOR INITIATING ACTION U/S 147/148 OF THE ACT. 28. NOW LET US LOOK INTO THE FACTS PERTAINING TO TH E ASSESSEE COMPANY FOR AY 2004- 05 TO EXAMINE THE LEGAL GROUNDS RAISED BY THE ASSES SEE WHICH WE HAVE STATED IN PARA 16 (SUPRA). I. FOR THE AY 2004-05, THE ASSESSEE FILED RETURN OF INCOME ON 30.10.2004 ALONG WITH AUDIT REPORT U/S 44AB. II. THE AO HAD ISSUED SCRUTINY NOTE U/S 143(2) DATE D 15.07.2005, AND NOTICE U/S 142(1) AND QUESTION REGARDING INTER UNIT SALES WAS RAISED BY LETTER DATED 13.01.2006, WHEREIN, THE FOLLOWING QUESTION WAS RAISED :- FURNISH DETAILED NOTE ON BUSINESS ACTIVITIES CARRI ED OUT FROM EACH OF THE DIVISION/UNIT/OFFICE OF THE COMPANY MENTIONING COMP LETE MAILING ADDRESS OF EACH ONE OF THE BUSINESS PREMISES. WITH REFEREN CE TO EACH OF THE UNIT/DIVISION FURNISH DETAILED NOTE ON ITEMS MANUFA CTURED/TRADED BY IT ALONGWITH DETAILS OF MANUFACTURING PROCESSES INVOLV ED. WHEREFROM EACH OF THE UNIT/DIVISION PROCURES THE DIFFERENT RAW MAT ERIALS BEING USED BY IT AND WHAT IS THE ROLE PLAYED BY DELHI OFFICE IN MAKI NG PROCUREMENTS OF RAW 54 ITA NO.5611 & 5581/DEL/2013 MATERIAL. WHERE BOOKS OF ACCOUNTS OF EACH OF THE M ANUFACTURING UNIT AND DIVISION OF THE COMPANY ARE BEING MAINTAINED. III. IN REPLY TO THE AFORESAID QUESTION, THE ASSESS EE COMPANY REPLIED AS BELOW :- IN REPLY, IT IS SUBMITTED THAT THE COMPANY IS ENGA GED IN THE MANUFACTURING AND DISTRIBUTION OF PAN MASALA, PAN MASALA CONTAINI NG TOBACCO, CHEWING TOBACCO, SPICES AND SALT, MOUTH FRESHENER ETC. WHIC H ARE BEING MANUFACTURED IN ITS MANUFACTURING UNITS LOCATED AT NOIDA, GUWAHATI, BAROTIWALA, DELHI AND AGARTALA MAINLY. THE DETAILS OF PRODUCT MANUFACTURED BY EACH UNIT NO IDA, IN VARIOUS SECTORS, SOLAN IN HIMACHAL PRADESH, AGARTALA IN TRIPURA, GUWAHATI IN ASSAM, RAISON, KULLU AND OKHLA INDUSTRIAL ESTATE IS FURNISHED AS ANNEXURE A. LI ST OF WAREHOUSES/DISTRIBUTION CENTRE LOCATED AT NOIDA, LUCKNOW, PATPARGANJ, LASUDIA (IND ORE) (M.P.), JAIPUR, AHMEDABAD, RAIPUR, RANCHI, HALDWANI, PATNA, BHIWANDI, GHUSRI ( HOWRAH), BANGALORE, COIMBATORE AND ALUVA (KERALA) IS DISCLOSED IN PAGE 183 OF PAPE R BOOK. AS REGARDS THE PROCUREMENT OF VARIOUS RAW MATERIALS AND OTHER INPUTS BEING USED IN VARIOUS FINISHED PRODUCTS OF THE COMPANY, W E SUBMIT THAT THESE ARE PROCURED FROM VARIOUS SUPPLIERS LOCATED ACROSS THE COUNTRY. THIS IS ALSO TO CONFIRM THAT OUR DELHI OFFICE HAS NO ROLE TO PLAY IN PROCUREMENT PROCESS. ' (TOP PARA, PAGE 171 OF PAPER BOOK) IV. ASSESSEE'S LETTER DATED 02.02.2006 GIVING DETAI LS OF INTER UNIT TRANSFERS AND THAT DELHI OFFICE HAS NO ROLE IN PROCUREMENT PROCESS AND DETAILED EXPLANATION ON SECTION 80IC AND ABOUT INCOME FROM ELIGIBLE AND NON-ELIGIBL E UNITS, EXCISE DUTY PAID IN GUWAHATI AND AGARTALA UNITS IN PECULIAR CIRCUMSTANC ES AND ABOUT ROYALTY PAYMENT TO M/S FLOSYN FRAGRANCES (P) LTD. EXCISE NOTIFICATIONS TOGETHER WITH ANNEXURE 'A' & 'B. COPY OF LETTER DATED 10.02.2006 SUBMITTING ABOUT EX CISE DUTY REFUND IN RESPECT OF GUWAHATI UNIT AND ITS RELEVANCE FOR DEDUCTION U/S 8 0IC TOGETHER WITH ANNEXURE 'A & B'. 55 ITA NO.5611 & 5581/DEL/2013 COPY OF ASSESSEE'S REPLY DATED 22.02.2006 FILED TO LD. AO EXPLAINING UNIT WISE SALES, NATURE OF UNIT WISE EXPENSES AND PROFIT OF V ARIOUS UNITS, UNIT WISE WASTAGE TOGETHER WITH ALL ANNEXURE OF THIS LETTER ASSESSEES LETTER DATED 09.03.2006 TOGETHER WITH AL L ITS ANNEXURES SHOWING UNIT WISE STOCK, PARTY WISE DETAILS OF JOB WORK. LETTER DATED 10.11.2006 GIVING DETAILED NOTE ON DED UCTION U/S80IC V. VIDE ORDER SHEET ENTRY DATED 16.11.2006 AT POINT NO.3, THE ASSESSEE WAS ASKED DETAILS AND NOTE ON MOVEMENT OF RAW MATERIAL - WHET HER IT IS SENT DIRECT TO THE UNIT FROM THE SUPPLIER OR ROUTED THROUGH HEAD OFFICE. THE AS SESSEE FILED ITS REPLY VIDE LETTER DATED NOVEMBER 20, 2006 ( PG.243 OF PAPER BOOK), STATING AS UNDER - '(A) AS REGARDS THE MOVEMENT OF RAW MATERIAL AND OT HER INPUTS ARE CONCERNED, WE WISH TO STATE AND CONFIRM YOU, THAT A GAINST THE PURCHASE ORDERS RAISED FOR AND BY VARIOUS INDUSTRIAL UNDERTA KINGS I.E. UNIT LOCATED IN VARIOUS PART OF THE COUNTRY OF THE ASSESSEE, THE MATERIAL IS DIRECTLY SUPPLIED TO THE UNIT BY THE SUPPLIER AND NO SUCH IN PUTS IS BEING MOVED THROUGH THE CORPORATE OFFICE OF THE ASSESSEE COMPAN Y LOCATED IN NOIDA (UP)' VI. THEREAFTER, ON 27.11.2006, THE ASSESSEE COMPANY ON QUERIES RAISED BY AO ON 20.11.2006 REPLIED TO THE SPECIFIC QUERY AS TO THE INTER-UNIT TRANSFER OF GOODS SPECIFICALLY REPLIED THAT WHILE CONFIRMING INTER-UN IT TRANSFER OF UNBRANDED GOODS REPLIED THAT NO NOTIONAL PROFIT IS GENERATED/ACCRUE D AT TRANSFEROR BRANCH, WHICH IS REPRODUCED BELOW (PAGE 247 OF PAPER BOOK) :- WE CONFIRM IN REPLY TO YOUR QUERY THAT OUR FINISHE D UNBRANDED GOODS ARE TRANSFERRED FROM ONE UNIT/BRANCH TO ANOTHER UNIT/BR ANCH IN THE COURSE OF LOCAL MOVEMENT AS WELL AS INTER STATE TRANSFERS, W HICH HAS BEEN REFLECTED ON THE FACE OF THE PROFIT AND LOSS ACCOUNT. SINCE T HE TRANSACTION AFORESAID FALLS IN THE NATURE OF TRANSFER FOR CAPTIVE CONSUMP TION, HENCE NO NOTIONAL PROFITS IS BEING GENERATED /ACCRUED AT TRANSFEROR B RANCH. THE GOODS WHICH 56 ITA NO.5611 & 5581/DEL/2013 MAY BE SUBJECT TO TRANSFER IN THE AFORESAID NATURE, INCLUDES PAN MASALA AND FLAVORED TO BACCO IN UNBRANDED FORM. AS REGARD TO THE MIXING PROCESS AND PERSON RESPONSI BLE ARE CONCERNED FOR THE SAME PROCESS, WE WISH TO CLARIFY THAT NORMALLY THE MIXING PROCESS OF ALL INPUTS VIZ PERFUMERY COMPOUNDS, RAW MATERIAL TO FORMULATE THE FINAL OUTCOME IS BEING CARRIED OUT BY THE SALARIED EMPLOY EES OF THE COMPANY. MD IS NOT DIRECTLY INVOLVED IN MIXING OF THE INPUTS TO BRING THE FINAL OUTCOME SOLD BY US VIZ. PAN MASALA, GUTKHA, AND TOB ACCO ETC. VII. ON 27.11.2006. THE ADDITIONAL COMMISSIONER IN EXERCISE OF HER POWER OF HER POWER OF SUPERVISING U/S 144A OF THE ACT, THE ACTIO N OF AO AND TO GUIDE HIM FOR PROPER ASSESSMENT AND ISSUED NOTICE TO THE ASSESSEE, INVIT ING ANY OBJECTION, IF ANY, IN HER PROPOSED SUPERVISION OF THE ASSESSMENT AND ASKED TH IS QUESTION :- FROM P & L A/C IT WAS OBSERVED THAT OUT OF THE GRO SS SALES WERE REDUCED BY INTER-UNIT SALES OF RS. 80.27 CRORES. CLARIFY WH AT IS THE PROFIT DISCLOSED AND TREATMENT GIVEN TO THESE SALES IN THE BOOKS OF ACCOUNTS. VIII. ON 28.12.2006, THE AO PASSED THE ASSESSMENT O RDER U/S 143(3). IX. THEREAFTER, THE COMMISSIONER U/S 264 PASSED ORD ER ON 29.01.2007 AS REPRODUCED BELOW :- TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND CIRC UMSTANCE OF THE CASE, IT IS CONSIDERED FAIR AND REASONABLE TO SET-ASIDE THE IMP UGNED ASSESSMENT AND RESTORE THE MATTER BACK TO THE FILE OF ASSESSING OF FICER FOR FRESH ENQUIRY, EXAMINATION AND ADJUDICATION. THE ASSESSING OFFICER IS DIRECTED TO MAKE THE FRESH ASSESSMENT AS PER LAW KEEPING IN VIEW THE OBSERVATIONS MADE IN THE PRECEDING PARAGRAPHS AND AFTER GIVING REASONABL E OPPORTUNITY TO THE ASSESSEE COMPANY OF BEING HEARD. IN THE FRESH ASSES SMENT ORDER, THE ASSESSING OFFICER SHALL RECORD HIS CATEGORICAL FIND INGS ON EACH AND EVERY ISSUE WHICH SHOULD BE BASED ON THE MATERIAL AND EVI DENCE BROUGHT ON RECORDS. IN ORDER TO ENSURE JUSTICE AND FAIR PLAY T O BOTH THE SIDES, REVENUE AS WELL AS THE ASSESSEE COMPANY X. THEREAFTER, THE ASSESSEE FILED REVISION APPLICAT ION U/S 264 BEFORE THE CIT AND THE AO VIDE LETTER DATED 13.03.2007 HAS ELABORATELY NAR RATED THE MODUS OPERANDI OF THE ASSESSEE COMPANY AS GIVEN BELOW :- 57 ITA NO.5611 & 5581/DEL/2013 'MODUS OPERAND! FOR PANMASALA & GUTKA SET UP PACKAGING UNITS AT BUMANI MAIDAN GWVAH ATI LABOUR ENGAGED FOR PACKAGING - 300 (LARGELY CONTRACT WORKERS) INVESTMENT IN PLANT & MACHINERY IN ALL THE UN ITS WHICH ARE AROUND 8 AT BUMANI MAIDAN, GUWAHATI -10 CRORES PROCESS ADOPTED AT GUWAHATI . * CUL SUPARI IS BROUGHT FROM NOIDA WHICH CONTRIBUTE S 80% OF RAW MATERIAL (LABOUR ENGAGED-200) * GRINDING OF CATECHU IS ALSO DONE AT NOIDA AND THE N BROUGHT TO GUWAHATI (LABOUR ENGAGED - 50) * GRINDING OF LIME IS ALSO DONE AT NOIDA AND THEN B ROUGHT TO GUWAHATI (LABOUR ENGAGED - 50) * (ALL THESE PROCESSING AND STORAGE UNITS OF SUPARI CATECHU & LIME ARE AT SECTOR 3, 4 &58, NOIDA AND JOB WORKER S ARE ALSO DS GROUP ASSOCIATE FIRMS AND COMPANIES) * PERFUMERY COMPOUND IS FROM DS LIMITED, PERFUMERY UNIT AT OKHLA INDUSTRIAL ESTATE, PHASE-ILL, NEW DELHI (L ABOUR ENGAGED- 100) * ALL THESE INGREDIENTS AFTER CUTTING/GRINDING/BLEN DING ARE BROUGHT TO GUWAHATI BY TRUCK/GOODS TRAIN. * CUT SUPARI IS DRIED IN OVENS. * ALL THESE INGREDIENTS ARE MIXED IN 'RORI' MIX ERS. * RAW TOBACCO AND KIWAM WHICH ARE ALSO SENT FROM N OIDA TO GUWAHATI ARE ADDED IN THESE INGREDIENTS, WHILE M AKING GUTKA. * PAN MASALA/GUTKA IS THEN PACKED IN LAMINATION POUCHES/BOXES BY FFS MACHINES. * PAN MASALA/GUTKA IS THEN CLEARED AND EXCISE BENEF IT OF 300 CRORES ANNUALLY AVAILED. ' MODUS OPERANDI FOR CHEWING TOBACCO PACKAGING UNITS OF PS GROUP SET UP AT ARUNDHUTI NAGAR, AGARTALA. TRIPURA IN THE NAMES OF PS LIMITED, DHARMAPAL PREM CHAND LIMITED & SATYAPAL SHIVKUMAR SET UP PACKAGING UNITS AT ARUNDHUTI NAGAR, AGARTA LA. LABOUR ENGAGED FOR PACKAGING - 200 (LARGELY CONTR ACT WORKERS) 58 ITA NO.5611 & 5581/DEL/2013 INVESTMENT IN PLANT & MACHINERY IN ALL THE UNITS WHICH ARE AROUND 3 AT AGARTALA - 3 CRORES. PROCESS ADOPTED AT AGARTALA * RAW TOBACCO IS BROUGHT FROM NOIDA -WHICH CONTRIBU TES 90% RAW MATERIAL (LABOUR ENGAGED-200 IN ALL UNITS TOGET HER) * PERFUMERY COMPOUND IS BROUGHT FROM DS LIMITED, PE RFUMERY UNIT AT OKHLA INDUSTRIAL ESTATE, PHASE-ILL, NEW DEL HI (LABOUR ENGAGED-100) * SILVER LEAVES IS BROUGHT FROM DS LIMITED SECTOR- 2, NOIDA (LABOUR ENGAGED -20) * ALL THESE INGREDIENTS ARE BROUGHT TO AGARTA LA BY TRUCK. * ALL THESE INGREDIENTS ARE MIXED IN 'RORI 'M IXERS * MANUFACTURE TOBACCO IS THEN PACKED IN LAMINATION POUCHES BY FFS MACHINES. * MANUFACTURED TOBACCO IS THEN CLEARED AND EXCISE B ENEFIT OF 200 CRORES ANNUALLY AVAILED.' 8. FROM THE ABOVE, IT BECOMES SELF-EVIDENT THAT THE ASSESSING OFFICER HAS ANALYZED AND EXAMINED THE ISSUE OF INTER UNIT T RANSFER AND MANUFACTURING AT GUWAHATI UNIT AND AGARTALA UNIT IN THE LIGHT OF PROVISIONS OF SECTION 80IC XI. ON 28.03.2007, THE AO PASSED THE DE-NOVO ASSESS MENT AS PER THE DIRECTION OF THE COMMISSIONER. XII. THEREAFTER, THE ORIGINAL ASSESSMENT OF THE REL EVANT ASSESSMENT YEAR 2004-05 WAS BEFORE THE CIT(A) WHO DISPOSED OFF THE APPEAL ON 17 .04.2009. XIII. THEREAFTER, WE TAKE NOTE THAT ON 21.01.2011, A SEARCH WAS CARRIED OUT AT THE D.S. GROUP OF COMPANIES U/S 132 OF THE ACT AND VIDE IMPU GNED NOTICE DATED 29.03.2011 U/S 147/148 TO REOPEN THE ASSESSMENT FOR AY 2004-05 WAS ISSUED. XIV. THE SANCTION U/S 151 TO REOPEN THE ORIGINAL AS SESSMENT U/S 143(3) AFTER 4 YEARS WAS GRANTED BY THE COMMISSIONER AND ADDL.CIT ON 28. 03.2011 WHICH IS AS UNDER :- 59 ITA NO.5611 & 5581/DEL/2013 'FORM FOR RECORDING THE REASONS FOR INITIATING PROC EEDINGS U/S 148 AND FOR OBTAINING THE APPROVAL OF THE COMMISSIONER OF INCOM E TAX / CENTRAL BOARD OF DIRECT TAXES. 1. NAME AND ADDRESS OF THE ASSESSEE M/S DHARMPAL SA TYAPAL LTD. 1711, S P MUKHERJEE MARG NEW DELHI. 2. PERMANENT ACCOUNT NO. AAACD0132H 3. STATUS COMPANY 4. DISTRICT / CIRCLE / RANGE CIRCLE 10 (1), NEW DELHI. 5. ASSTT YEAR IN RESPECT OF WHICH IT IS PROPOSED TO ISSUED NOTICE U/S 148 2004-05 6. THE QUANTUM OF INCOME WHICH HAS ESCAPED ASSESSMENT RS.85,59,98,358/- 7. WHETHER THE PROVISIONS OF SECTION SECTION 147(C) OF IT ACT 147 (A), 147(B) OR 147(C) APPLICABLE OR ALL THE PROVISION TO THE SECTION ARE APPLICABLE 8. WHETHER THE ASSESSMENT IS PROPOSED NO TO BE MADE FOR THE FIRST TIME. IF THE REPLY IS IN THE AFFIRMATIVE PLEASE STATE: 9. IF THE ANSWER TO ITEM NO.8 IS THE NEGATIVE, PLEASE STATE ---- (A) THE INCOME ORIGINALLY ASSESSED RS.3,57,82,200 / U/S 143(3) DT 28.03.2007 (B) WHETHER IS A CASE OF UNDER UNDER ASSESSMENT DUE TO ASSESSMENT AT TOO LOW A RATE ASSESS- EXCESSIVE RE LIEF OF SECTION MENT WHICH HAS BEEN MADE THE 80IC OF THE ACT. SUBJECT OF EXCESSIVE RELIEF OR ALLOWING OF EXCESSIVE LOSS OR DEPRECIATION 10. WHETHER THE PROVISIONS OF SEC. NO 150(1) ARE APPLICABLE. IF THE REPLY IS IN AFFIRMATIVE, THE RELEVANT FACTS MAY BE STATED AGAINST ITEM NO.11 AND IT MAY ALSO BE BROUGHT OUT THAT THE PROVISIONS OF SEC.150(2) WOULD NOT STAND IN THE WAY OF INITIATING PROCEEDINGS U/S 147. 11. REASONS FOR THE BELIEF THAT INCOME AS PER ANNEX URE DATED : NAME : (J.K. CHANDNANI) ENCL.: ANNEX.A DESIGNATION : ACIT, CIRCLE 10 (1) NEW DELHI 12. WHETHER THE ADDL. COMMISSIONER I AM SATISFIED. IS SATISFIED ON THE REASONS RECORDED 60 ITA NO.5611 & 5581/DEL/2013 BY THE ADDL.CIT THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE U/S 148. SD/- 28.03.2011 (DR. MAMTA KOCHAR) ADDL. COMMISSIONER OF INCOME-TAX RANGE-10, NEW DELHI 13. WHETHER THE COMMISSIONER/ CHIEF YES, I AM SATISFIED. COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY THE ADDL. CIT THAT IT IS A FIT CASE FOR THE ISSUE OF NOTICE U/S 148. SD/- 28.03.2011 (A.K. TEWARY) COMMISSIONER OF INCOME TAX-IV NEW DELHI ANNEXURE A THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.20 04 AFTER AT A NIL INCOME UNDER NORMAL PROVISIONS OF THE ACT AND AT A SUM OF RS.67,08,71,105/- U/S. 115JB OF THE ACT. AFTER COMPLETION OF ASSESSMENT PR OCEEDINGS, THE ASSESSEE COMPANY WAS ASSESSED AT RS.3,57,82,200/- UNDER NORM AL PROVISIONS OF THE ACT AND RS.67,08,71,105/- U7S. 115JB OF THE ACT. DU RING THE COURSE OF SEARCH & SEIZURE OPERATION CONDUCED AT THE GROUP CO MPANIES OF THE ASSESSEE ON DTD. 21/01/2011 IT WAS NOTICED THAT THE ASSESSEE COMPANY FOLLOWS PROCESSING OF PAN MASALA AS PER ANNEXURE 'A'. IN TH E FLOW CHART, THE ENTIRE PROCESS HAS BEEN SEGREGATED INTO STAGE A TO STAGE H . NOT A SINGLE STAGE 7 PROCESS WHICH IS VERY CRUCIAL IN THE PREPARATION OF PAN MASALA (RAJNIGANDHA), IS PERFORMED AT GUWAHATI. KEY INGREDIENTS OF THE RAJNIGANDHA PAN MASALA ARE A S FOLLOWS:- I) CATECHU (KATHA) II) BEETLE NUT (SUPARI) III) CARDAMOM SEED (ELAICHI SEED) IV) SUGANDHI. DURING THE COURSE OF SEARCH, IT WAS NOTICED THAT FU NCTIONS PERFORMED AT GUWAHATI ARE THAT OF DRYING UP OF PROCESSED BEETLE NUT (PROCESSED SUPARI) RECEIVED FROM HEAD OFFICE, NOIDA AND PACKING. ALL T HE RAW MATERIALS, NAMELY, CATECHU, BEETLE NUT, CARDAMOM AND SUGANDHI ARE PROCURED AT HEAD OFFICE SITUATED IN NOIDA. CATCHCU (KATHA) IS PROCUR ED AND PROCESSED AT NOIDA, CARDAMOM IS PROCURED AND ITS SEEDS ARE EXTRA CTED FROM THE SHELL, BEETLE NUT (SUPARI) IS PROCURED AT NOIDA, THEN CHOP PED INTO SMALLER PIECES & PROCESSED AND OTHER MATERIALS TOO ARE PROCURED AT N OIDA. AT GUWAHATI, PROCESSED SUPARI IS DRIED IN THE OVENS, AND MIXED W ITH VARIOUS INGREDIENTS RECEIVED FROM HEAD OFFICER AT NOIDA. THIS MIXTURE I S THEN PACKED AND DISPATCHED TO DESTINATION ORDERED BY THE HEAD OFFIC E. IT APPEARS THAT ASSESSEE IS ATTRIBUTING THE ENTIRE VALUE ADDITION TO THE GUWAHATI TO CLAIM HIGHER AMOUNT OF DEDUCTION U/S. 8 0IC. BY DOING SO THE ASSESSEE IS CONTRAVENING THE PROVISIONS OF SUB-SECT ION (8) OF SECTION 80IA OF 61 ITA NO.5611 & 5581/DEL/2013 THE IT ACT, 1961 WHICH ARE RELEVANT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S. 80IC OF THE ACT. AS SUCH THE FINDING S OF THE SEARCH PROCEEDINGS SUGGESTS THAT EXCESS QUANTUM OF DEDUCTI ON U7S. 80IC HAVE BEEN CLAIMED BY THE ASSESSEE IN HIS RETURN OF INCOME. THUS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR THE A.Y, 2004-05, I AM ALSO SATISFIED THAT THE INCOME CHARGE ABLE 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 TH E ASSESSMENT WITH REGARD TO THE ASSESSMENT YEAR UNDER CONSIDERATION. ASSTT. CIT, CIRCLE 10(1) NEW DELHI. 29. REFERRING TO THE AFORESAID REASONS RECORDED BY AO, BEFORE US, THE LD. AR, MR. SINGHVI POINTED OUT THAT THE CIT (A) HAS NOT PROPER LY APPRECIATED THE ARGUMENTS BEFORE HIM THAT THE AO WAS NOT HAVING IN HIS POSSESSION AN Y TANGIBLE EVIDENCES WHILE ISSUING NOTICES U/S 148 AND TOOK OUR ATTENTION TO P AGE 27 OF THE CIT (A)S ORDER WHEREIN THE SAID ARGUMENT OF THE LD. AR HAS BEEN CONSIDERED BY HIM AND DEALT CASUALLY BY STATING SOME PRACTICE FOLLOWED BY THE DDIT (INV.) A FTER SEARCH WITHOUT DEALING WITH THE MERITS OF THE CONTENTION RAISED BY THE AR, WHICH AC CORDING TO MR. SINGHVI PER-SE MAKES THE ORDER OF THE CIT (A) ERRONEOUS AND PERVER SE. IN ORDER TO BUTTRESS THAT THERE WAS NO EVIDENCE I.E. NO TANGIBLE MATERIAL BEFORE TH E AO TO INITIATE REOPENING AS REQUIRED FOR REOPENING AS HELD BY THE HONBLE SUPRE ME COURT IN CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), MR. SINGHVI TOOK OUR ATTENTION TO THE LETTER WRITTEN BY THE AO ON 01.12.2011 TO DDIT (INV.) TO FURNISH ANY MATERIAL R ELEVANT TO AY 2004-05 AS SUGGESTED BY LETTER DATED 24.03.2011 OF DDIT (INV.) ON THE BA SIS OF WHICH THE CASE WAS REOPENED. THE LD. CIT (A) HAS REPRODUCED THE LETTER OF AO DAT ED 01.12.2011 TO DDIT (INV.) AS UNDER :- IN THE ABOVE REFERRED LETTER, IT HAS BEEN MENTION ED THAT VARIOUS FACTS EMERGING FROM SEARCH PROCEEDINGS SUGGESTED THAT THE CLAIM OF DEDUCTION UNDER CHAPTER VIA OF THE ACT MADE BY THE ASSESSEE C OMPANY WAS GROSSLY INCORRECT. ON THE STRENGTH OF EVIDENCES COLLECTED DURING THE COURSE OF 62 ITA NO.5611 & 5581/DEL/2013 SEARCH AND SEIZURE PROCEEDINGS, INITIATING ACTION U /S 148 OF THE ACT FOR THE ASSESSMENT YEAR 2004-05 WAS ALSO RECOMMENDED. AFTER SATISFYING HIMSELF, THAT THE INCOME FOR THE R ELEVANT ASSESSMENT YEAR HAS ESCAPED ASSESSMENT, THE DCIT CIRCLE 10(1) NEW D ELHI HAS DULY INITIATED REASSESSMENT PROCEEDINGS FOR THE SAID ASS ESSMENT YEAR. PURSUANT TO THE NOTICE UNDER SECTION 148 OF THE ACT, REASSES SMENT OF TOTAL INCOME THE ASSESSEE COMPANY IS TO BE MADE BEFORE 31.12.2011. IN THE CIRCUMSTANCES, IT IS REQUESTED THAT COPIES OF ALL THE MATERIALS CO LLECTED DURING THE COURSE OF SEARCH WHICH IS RELEVANT FOR THE ASSESSMENT YEAR 2004-05, OR HAS A BEARING ON THE PENDING REASSESSMENT PROCEEDINGS OR WOULD BE USEFUL IN THE EXERCISE OF POWERS BY THE ASSESSING OFFICER UND ER SECTION 80IA(8) OF THE ACT, MAY KINDLY BE PROVIDED TO THIS OFFICER URG ENTLY. LD. CIT (A), AFTER PERUSING THE LETTER, HELD AS UND ER :- A PERUSAL OF THE ABOVE IT REVEALS THAT THE ASSESS ING OFFICER WAS SATISFIED ON THE BASIS OF INFORMATION PROVIDED VIDE LETTER OF DDIT DT. 24.3.2011 FOR ESCAPEMENT OF INCOME. VIDE THIS LETTER THE ASSESSI NG OFFICER HAS CALLED FOR COPY OF ALL EVIDENCES GATHERED DURING SEARCH. I HAVE PERUSED LETTER OF ADIT (INV.) DT. 24.3.2011. IN THAT LETTER, ADIT (I NV.) HAS INFORMED THE ASSESSING OFFICER THE FINDING OF SEARCH FOR DEDUCTI ON U/S 80IC AND REQUESTED ASSESSING OFFICER TO SEE THE RELEVANT DOC UMENTS TO SATISFY HIMSELF. NO DOCUMENT WAS SENT ALONGWITH THE LETTER . IT IS USUAL PRACTICE THAT ADIT/DDIT (INV.) CONDUCING SEARCHES GATHER EVI DENCES AND SENDS COMPLETE EVIDENCES ON THE CONCLUSION OF SEARCH AND FINALIZATION OF APPRAISAL REPORT. IN VIEW OF THE ABOVE, IT CANNOT BE CONCLUDED THAT THE ASSESSING OFFICER WAS NOT HAVING SUFFICIENT INFORMA TION AT THE TIME OF INITIALING ACTION U/S 147 FOR FORMING REASON FOR ES CAPEMENT OF INCOME. THE ASSESSING OFFICER CAN SATISFY HIMSELF AFTER PER USAL OF DOCUMENTS. DOCUMENTS NEED NOT BE HIS CUSTODY. 30. A READING OF CIT (A) FINDINGS AND AOS LETTER D ATED 01.12.2011 TO DIT (INV.) A MONTH BEFORE LIMITATION TO COMPLETE RE-ASSESSMENT I .E. 31.12.2011, WHICH THE AO HIMSELF STATES, WE DISCERN THE FOLLOWING FACTS :- 31. FACTS EMERGING FROM A PERUSAL OF THE AO LETTER TO DIT (INV.) :- (I) ADIT (INV) HAD FORWARDED A LETTER DATED 24.03.2011 TO THE AO ABOUT FACTS OF SEARCH CONDUCTED ON 21 ST JANUARY 2011 AND ABOUT THE CLAIM OF DEDUCTION U/S 80 IC WAS GROSSLY INCORRECT. 63 ITA NO.5611 & 5581/DEL/2013 (II) ADIT (INV) RECOMMENDED INITIATION OF ACTION U/S 148 OF THE ACT FOR THE AY 2004-05. (III) THE AO ASKS FOR COPIES OF ALL MATERIALS COLLECTED D URING THE SEARCH, WHICH IS RELEVANT FOR AY 2004-05 OR HAS A BEARING ON THE PEN DING RE-ASSESSMENT PROCEEDING OR WOULD BE USEFUL IN THE EXERCISE OF PO WER BY THE AO U/S 80IA (8) OF THE ACT. FACTS EMERGING FROM THE FINDING OF CIT(A), AFTER HE HAD PERUSED THE LETTER OF ADIT(INV) DATED 24.03.2011, WHICH ACCORDING TO DR, WAS THE BASIS OF RE-OPENING. BUT HERE WE WOULD LIKE TO POINT OUT THAT IN THE REASONS RECORDED, THERE IS NO WHISPER ABOUT SUCH A LETTER FROM ADIT (INV) AND WE ARE AWARE THAT THE REASONS RECORDED TO RE-OPEN HAS TO BE SEEN ON A STANDALONE BASIS, HOWEVER, WE W OULD LIKE TO EXAMINE WHETHER THERE WAS ANY TANGIBLE MATERIAL WHICH WAS PROVIDED BY THE ADIT (INV) TO AO, WHICH WAS THE TRIGGER TO REOPEN ON 25.03.2011, THE VERY NEXT DAY OF RECEIPT OF THE LETTER. (I) THE CIT(A) HAS GONE THROUGH THE LETTER OF ADIT (INV ) DATED 24.03.2011. (II) IN THE SAID LETTER, THE ADIT (INV) HAS INFORMED THE AO, THE FINDING OF SEARCH FOR DEDUCTION U/S 80IC. (III) ADIT (INV) FURTHER REQUESTED THE AO TO SEE THE RELE VANT DOCUMENTS TO SATISFY HIMSELF BEFORE REOPENING. (IV) CIT(A) AFTER GOING THROUGH THE ADIT (INV) DATED 24. 03.2011 HAS GIVEN A FINDING THAT NO DOCUMENT WAS SENT ALONG WITH THE LETTER. (V) THEN CIT (A) OBSERVES THAT IT IS A USUAL PRACTICE T HAT ADIT/DDIT (INV) CONDUCTING SEARCHES GATHER EVIDENCES AND SENDS COMP LETE EVIDENCES ON THE CONCLUSION AND FINALIZATION OF APPRAISAL REPORT. 64 ITA NO.5611 & 5581/DEL/2013 (VI) IN THE LIGHT OF THE ABOVE, CIT(A) WAS OF THE OPINIO N THAT IT CANNOT BE CONCLUDED THAT AO WAS NOT HAVING SUFFICIENT INFORMA TION AT THE TIME OF INITIATING ACTION U/S 147 FOR FORMING REASON FOR ES CAPEMENT OF INCOME. 32. A CONJOINT READING OF THE AFORESAID LETTERS I.E . 24.03.2011 OF ADIT (INV) TO AO WHICH AS PER THE DR WAS THE BASIS OF REOPEN AND THE LETTER DATED 01.12.20011 OF AO TO DDIT (IV) AND THE CIT(A) CONCLUSION WE FIND THAT : (I) VIDE LETTER DATED 24.03.2011, THE ADIT(INV) HAS STA TED ABOUT THE SEARCH CONDUCTED ON ASSESSEE ON 20.01.2011 AND ABOUT DEDUC TION U/S 80IC. (II) FURTHER ADIT (INV) ASKED THE AO TO GO THROUGH THE R ELEVANT DOCUMENTS AND SATISFY HIMSELF BEFORE RE-OPENING U/S 148 OF THE AC T. (III) HOWEVER, THE CIT(A) FAIRLY STATES THAT NO DOCUMENT WAS SENT ALONG WITH THE LETTER. (IV) ADIT (INV) RECOMMENDED AO TO INITIATE REOPENING PRO CEEDING U/S 148. (V) THEREAFTER WITHIN A DAYS TIME, I.E. ON 25.03.2011, THE AO IS SATISFIED THAT THERE IS A REASON TO BELIEVE THAT THERE IS ESCAPEME NT OF INCOME. (VI) VIDE LETTER DATED 01.12.2011, THE AO IS FRANTICALLY ASKING ADIT (INV) TO PROVIDE HIM MATERIALS RELEVANT FOR AY 2004-05 UNEAR THED DURING COURSE OF SEARCH OR ANY MATERIAL WHICH IS USEFUL OR HAVING A BEARING ON SECTION 80IA (8) OF THE ACT FOR RE-ASSESSMENT. FROM AN ANALYSIS OF THE AFORESAID FACTS, IT CLEARLY EMERGES THAT ADIT (INV.) VIDE LETTER DATED 24.03.2011 STATED ABOUT THE SEARCH CONDUCTED AT ASSESSEES PREMISES ON 21.01.2011 AND ABOUT DEDUCTION U/S 80IC, WHICH IS P ERTAINING TO AY 2011-12. THE ADIT (INV.) REQUESTED THE AO TO GO THROUGH THE RELE VANT MATERIAL TO SATISFY HIMSELF BEFORE RE-OPENING U/S 148 OF THE ACT. WHAT WAS THE MATERIAL THE ADIT (INV.) WAS REFERRING TO VIDE ITS LETTER DATED 24.03.2011, OBVI OUSLY IT IS NOT ANY MATERIAL WHICH THE 65 ITA NO.5611 & 5581/DEL/2013 ADIT (INV.) HAS SENT ALONG WITH LETTER, BECAUSE, CI T(A) HAS ASSERTED THAT THERE WAS NO DOCUMENTS FORWARDED WITH THE SAID LETTER. SO, WHEN WE READ THE LETTER OF AO DATED 01.12.2011, WE FIND THAT THE AO IS FRANTICALLY ASKI NG THE DDIT (INV.) TO PROVIDE MATERIALS UNEARTHED DURING AY 2004-05 OR HAS ANY BE ARING ON THE PENDING RE- ASSESSMENT PROCEEDING OR WOULD BE USEFUL IN THE EXE RCISE OF POWER BY AO U/S 80IA (8) OF THE ACT; WHICH CLEARLY SHOWS THAT AO EVEN ON 01. 12.2011 WAS NOT HAVING ANY TANGIBLE MATERIAL BEFORE HIM FOR AY 2004-05 SUGGEST ING ESCAPEMENT OF INCOME. SO WITHOUT FORWARDING ANY FRESH DOCUMENTS ALONG WITH T HE LETTER DATED 24.03.2011 ADIT (INV.) AND BY ASKING AO TO SATISFY HIMSELF AFTER GO ING THROUGH RELEVANT MATERIAL IS NOTHING BUT ASKING THE AO TO GO THROUGH THE OLD REC ORDS OF THE ORIGINAL ASSESSMENT. SO WE FIND FORCE IN THE ARGUMENT OF LD. AR, SHRI SINGH VI THAT THERE WAS NO NEW TANGIBLE MATERIAL WITH THE AO FROM THE HANDS OF ADIT (INV.) VIDE LETTER DATED 24.03.2011, WHICH IS NECESSARY AS HELD BY THE HONBLE SUPREME C OURT IN CIT V. KELVINATOR (SUPRA) IN THE HANDS OF THE AO, TO COME TO THE CONCLUSION T HAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. 33. IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES DIS CUSSED ABOVE, WE CAN SEE THAT ONLY BASED ON THE RECOMMENDATION OF THE ADIT (INV.) DA TED 24.03.2011, THE AO HAS INITIATED REPORT FOR SANCTION U/S 151 AND ISSUED NO TICE, WHICH IS NOTHING BUT BORROWED BELIEF. IT HAS BEEN HELD BY THE HONBLE SUPREME C OURT IN ANIRUDHSINHJI KARANSINHJI JADEJA & ANR. VS. STATE OF GUJARAT (1995) 5 SCC 3 02, THAT IF A STATUTORY AUTHORITY HAS BEEN VESTED WITH JURISDICTION, HE HAS TO EXERCISE I T ACCORDING TO ITS OWN DISCRETION. IF DISCRETION IS EXERCISED UNDER THE DIRECTION OR IN C OMPLIANCE WITH SOME HIGHER AUTHORITYS INSTRUCTIONS, THEN IT WILL BE A CASE OF FAILURE TO EXERCISE DISCRETION ALL TOGETHER. IT HAS TO BE KEPT IN MIND THAT SATISFAC TION RECORDED SHOULD BE INDEPENDENT AND NOT BORROWED OR DICTATED SATISFACTION. THU S, WE FIND THERE WAS NO FRESH 66 ITA NO.5611 & 5581/DEL/2013 TANGIBLE MATERIAL FOR THE AY 2004-05 WITH THE AO AN D HE HAS SIMPLY ISSUED NOTICE ON BORROWED BELIEF OF ADIT (INV.). 34. IN THE LIGHT OF THE ABOVE, WE HOLD THAT THERE W AS NO FRESH TANGIBLE MATERIAL FORWARDED BY THE ADIT (INV.) VIDE LETTER DATED 24.0 3.2011 WHICH WAS THE FOUNDATION ON WHICH THE AO HAS MADE UP HIS MIND ON 25.03.2011, TO REOPEN THE ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT WHICH WAS SUPERVISE D BY ADDITIONAL COMMISSIONER U/S 144A AND THEREAFTER THE COMMISSIONER EXERCISING HIS REVISIONAL POWER U/S 264 OF THE ACT. ALSO, WE FIND FORCE IN THE CONTENTION OF THE LD. AR THAT THERE WAS NO EVIDENCE IN THE HANDS OF THE AO WHILE HE TOOK THE SANCTION OF C OMMISSIONER U/S 151(2) TO REOPEN THE ORIGINAL ASSESSMENT COMPLETED U/S 143(3) AFTER 4 YEARS. THE PROCESS OF MANUFACTURE OF THE PAN MASALA WAS ALREADY ON RECORD DURING THE ORIGINAL ASSESSMENT AND SIMPLY BY SAYING THAT MANUFACTURING PROCESS FROM STAGE A TO H DID NOT TAKE PLACE AT THE ELIGIBLE UNIT WITHOUT A SHRED OF EVIDENCE TO SUPPOR T THE SAID INFORMATION CANNOT BE TERMED AS A NEW TANGIBLE MATERIAL AND LINK TO BASE A REASON TO BELIEVE ESCAPEMENT OF INCOME. THEREFORE, THE ENTIRE REOPENING IS VITIATE D ON THIS COUNT. 35. THE WELL SETTLED LAW IS THAT BEFORE REOPENING A N ASSESSMENT UNDER SECTION 147 OF THE ACT OR, IN OTHER WORDS, BEFORE USURPING THE JUR ISDICTION TO REOPEN, THE AO HAS TO PASS THE FRESH TANGIBLE MATERIAL FILTER IN HIS R EASONS TO BELIEVE WHICH CAN UNCOVER THE UNDISCLOSED INCOME PERTAINING TO THE ASSESSMENT YEA R OF THE ASSESSEE WHICH AO PROPOSES TO REOPEN, WITHOUT PASSING THROUGH THE SAI D FILTER WHICH SHOULD EMERGE FROM THE REASONS RECORDED TO REOPEN, WILL OUST THE JURIS DICTION OF THE AO AND THUS IT IS A SETTLED LAW THAT FRESH TANGIBLE MATERIAL AS SAID BE FORE CONSTITUTE THE JURISDICTIONAL FACT WHICH IS SINE-QUA NON TO EMPOWER THE AO TO REOPEN THE ASSESSMENT. IN TH E ABSENCE OF 67 ITA NO.5611 & 5581/DEL/2013 THE SAID JURISDICTIONAL FACT RENDERS THE REOPENING CORAM NON JUDICE AND THE REASSESSMENT NULL IN THE EYES OF LAW. 36. NOW LET US EXAMINE THE REASONS RECORDED BY THE AO DATED 25.03.2011 ON A STANDALONE BASIS, WE TAKE NOTE THAT ALL THAT THE RE ASONS RECORDED FOR REOPENING INDICATE IS THAT SEARCH CONDUCTED ON 21.01.2011 AT D.S. GROU P COMPANIES AND THE PROCESSING OF PAN MASALA IS GIVEN IN ANNEXURE A, WHICH IS FLOW- CHART OF MANUFACTURING STAGE BY STAGE I.E. A TO H AND ONLY G & H STAGES ARE HAPPENI NG AT GAUHATI UNIT. THESE STAGES WE FIND HAVE BEEN FILED BY THE ASSESSEE VIDE REPLY DAT ED 02.02.2006 (PAGE 170 OF PAPER BOOK) BY FILING DETAILED FLOW-CHART (PAGE 184 TO 18 8 OF PAPER BOOK) BEFORE THE AO DURING THE ORIGINAL ASSESSMENT WHICH CANNOT BE TERM ED AS FRESH TANGIBLE MATERIAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. (WE WILL DEAL WITH THIS STAGE A TO H IN DETAIL LATER ON IN OUR ORDER, WHEN WE DEAL WITH THE PROVIS O TO SECTION 147 I.E. TRUE AND FULL DISCLOSURE BY ASSESSEE DURING ORIGINAL ASSESSMENT.) THE REASONS RECORDED FOR REOPENING THE ASSESSMENT DO NOT MAKE OUT A CASE THAT THE ASSE SSEE HAD SUPPRESSED ANY MATERIAL FACTOR OR MISGUIDED THE AO DURING ORIGINAL ASSESSME NT COMPLETED U/S 143(3). AS WE DO NOT HAVE THE LIBERTY TO EXAMINE THESE REASONS ON TH E BASIS OF ANY OTHER MATERIAL OR FACT, OTHER THAN THE FACTS SET OUT IN THE REASONS SO RECO RDED, IT IS NOT OPEN TO US TO DEAL WITH ANY OTHER MATERIAL WHEN WE EXAMINE THE REASONS ON A STANDALONE BASIS TO LOOK IN TO THE QUESTION AS TO WHETHER THE INCOME HAS ESCAPED ASSES SMENT. THE ASSESSING OFFICER HAS OPINED THAT INCOME HAS ESCAPED ASSESSMENT OF INCOME BECAUSE THERE IS VIOLATION OF 80IA (8) AND ASSESSEE HAS CLAIMED EXCESS DEDUCTION U/S 80IC BUT THEN SUCH AN OPINION PROCEEDS WITHOUT GOING THROUGH THE ORIGINAL ASSESSM ENT PROCEEDINGS COMPLETED U/S 143(3)/144A AND 264 OF THE ACT AND OVERLOOKS THE FA CT THAT THE ASSESSEE HAD REPLIED TO THE QUERIES RAISED AND ALL MATERIAL FACTS NECESSARY FOR THE ORIGINAL ASSESSMENT WAS ON RECORD. OF COURSE, IT MAY BE DESIRABLE, FROM THE PO INT OF VIEW OF REVENUE AUTHORITIES, TO 68 ITA NO.5611 & 5581/DEL/2013 EXAMINE THE MATTER IN DETAIL, BUT THEN REASSESSMENT PROCEEDINGS CANNOT BE RESORTED TO ONLY TO EXAMINE THE FACTS OF A CASE, NO MATTER HOW DESIRABLE THAT BE, UNLESS THERE IS A REASON TO BELIEVE, RATHER THAN SUSPECT, THAT AN INC OME HAS ESCAPED ASSESSMENT. 37. THE LD. DR CONTENDED THAT THE REASONS RECORDED CAN BE VIEWED STRICTLY ON STANDALONE BASIS AND NO INFORMATION HAS BEEN ADDED OR IMPORTED INTO IT. ACCORDING TO LD. DR, THEY HAVE BEEN WRITTEN IN STAGES ONLY TO SH OW HOW THE AO FORMED THE PRIMA FACIE BELIEF ON THE BASIS OF TANGIBLE INFORMATION A VAILABLE, THAT INCOME HAS ESCAPED ASSESSMENT. WE ARE HOWEVER NOT IMPRESSED BY THE SA ID ARGUMENT OF THE LD. DR BECAUSE THE LD. AR BROUGHT TO OUR NOTICE THAT THE FLOW CHAR T WHICH THE AO IS RELYING WAS PART OF THE ORIGINAL ASSESSMENT & TOOK OUR ATTENTION TO PAG ES 184 TO 188 OF PB, WHEREIN THE ENTIRE CHART AS SHOWN BY THE LD. DR IS FOUND DITTO WHICH WAS INFACT PRODUCED BEFORE THE AO DURING THE ORIGINAL ASSESSMENT AND UNIT-WISE BALANCE SHEET WAS FILED BY THE ASSESSEE AND THE ASSESSEE ON 27.11.2006 HAS CLEARLY REPLIED ABOUT THE TRANSFER OF MATERIALS FORM UNIT/BRANCH IN COURSE OF LOCAL MOVEM ENT AND INTER-STATE TRANSFERS WHICH HAS BEEN DULY REFLECTED IN THE PROFIT & LOSS ACCOUN T. WHAT THE AO HAS DONE WHILE RECORDING THE REASONS TO REOPEN WAS TO SIMPLY AFFIX ALPHABETS A TO H OVER THE MANUFACTURING PROCESS SHOWN IN THE FLOW-CHART BY TH E ASSESSEE DURING THE ORIGINAL ASSESSMENT AND THERE IS NOTHING NEW OR THE AO CAN C LAIM TO BE FRESH INFORMATION BEFORE HIM. WE FIND THAT THE FLOW CHART WHICH AO H ARPS UPON TO BUILD HIS CASE IS THE VERY SAME OLD FLOW CHART PRODUCED BY THE ASSESSEE D URING THE ORIGINAL ASSESSMENT. THIS IN OUR HUMBLE OPINION, CANNOT BE TERMED AS FRESH TA NGIBLE MATERIAL. MORE OVER THE LD. AR, TOOK OUR ATTENTION TO THE LETTER OF AO DATED 13 .03.2007 (REPRODUCED SUPRA) AT THE TIME OF ASSESSMENT PROCEEDINGS PURSUANT TO ORDER OF COMMISSIONER (CIT) ADMN. U/S 264 OF THE ACT. WE FIND THAT AS PER THIS LETTER THE AO HAS SPECIFICALLY SPELLED OUT THE 69 ITA NO.5611 & 5581/DEL/2013 MODUS OPERANDI ADOPTED BY THE ASSESSEE ALONG WITH I N DEPTH NOTE ON PROVISION OF SECTION 80IC WHICH WE HAVE REPRODUCED ABOVE. 38. HERE WE WOULD LIKE TO POINT OUT THAT THE LD. DR VEHEMENTLY ARGUED THAT THE STATEMENT RECORDED DURING THE SEARCH UNDER SECTION 132 OF SHRI PRITAM SINGH CHARAK, THE TERRITORIAL HEAD CLEARLY BRINGS OUT THE FACT TH AT ONLY STAGE G & H OUT OF STAGES A TO H ARE PERFORMED AT GUWAHATI UNIT OF THE AS SESSEE GROUP. THIS ARGUMENT OF THE LD. CIT DR CANNOT BE ACCEPTED FOR TWO REASONS, FIRS TLY THAT SHRI PRITAM SINGH CHARAK WAS APPOINTED IN ASSESSEE COMPANY AS TERRITORIAL HE AD IN GUWAHATI W.E.F. 05.01.2009 AND HE WAS NOT EMPLOYED WITH THE ASSESSEE COMPANY I N THE FY 2003-04 I.E. RELEVANT ASSESSMENT YEAR BEFORE US. THEREFORE, HIS STATEMEN T MADE IF ANY CAN ONLY BE SUGGESTING OF CERTAIN FACTS FROM THE YEAR OF HIS ASSUMING THE OFFICE AS TERRITORIAL HEAD FROM THAT DAY ONWARDS; AND SECONDLY, THIS FACT IS NOT EMERGIN G FROM THE REASONS RECORDED AND WE HAVE TO LOOK AT THE REASONS RECORDED AT A STANDALON E BASIS WITHOUT ADDING OR OMITTING ANYTHING FROM IT, AS HELD BY HONBLE BOMBAY HIGH CO URT IN HINDUSTAN LEVER LIMITED (SUPRA). THE AO IN HIS REASON HAS NOT INDICATED A NY TANGIBLE MATERIAL SUGGESTING ESCAPEMENT OF INCOME OTHER THAN STATING THE FUNCTIO NS OF VARIOUS UNITS UNDER THE ASSESSEE COMPANY BY WAY OF A FLOW CHART WHICH WE FI ND THAT THE ASSESSEE HAD HIMSELF HAS DISCLOSED AND SUBMITTED, SO BY AGAIN MENTIONING OF A SIMILAR CHART (EXCEPT FOR TERMING THE STAGES TO A TO H) WHICH WAS PRODUCED BY THE ASSESSEE DURING THE ORIGINAL ASSESSMENT PROCEEDINGS UNDER SECTION 143 (3) (PAGES 184 TO 187 OF PAPER BOOK) WHICH WE HAVE ALREADY HELD THAT CANNOT BE TERMED AS FRESH TANGIBLE MATERIAL AND THE REVENUE COULD NOT POINT OUT ANY NEW FACTS WHICH HAD COME I NTO THE NOTICE OF THE AO FOR REOPENING THE ORIGINAL ASSESSMENT THAT TOO COMPLETE D U/S 143 WHICH WAS UNDER THE SUPERVISION OF ADDL. COMMISSIONER U/S 144 OF THE AC T AND THEN LATER BY THE COMMISSIONER U/S 264 OF THE ACT. SO THE ORIGINAL A SSESSMENT CAN BE REOPENED ONLY IF 70 ITA NO.5611 & 5581/DEL/2013 THERE IS ANY NEW TANGIBLE MATERIAL WHICH COMES IN HIS HANDS WHICH COULD HAVE A RATIONAL CONNECTION OR NEXUS WHICH COULD HAVE A REL EVANT BEARING ON THE FORMATION OF THE BELIEF, AS LAID DOWN BY THE HONBLE SUPREME COU RT IN THE CASE OF ITO VS LAKHMANI MEWAL DAS [(1976) 103 ITR 437] THAT, THE REASONS FOR THE FORMATION OF THE BELIEF MUST HAVE RATIONAL CONNECTION WITH OR RELEVANT BEAR ING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FO RMATION OF THIS BELIEF THAT THERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IT IS NO DOUBT TRUE THAT THE COURT CANNOT GO INTO SUFFICIENCY OR ADEQUA CY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING ASSESSMENT. AT THE SAME TIME WE HAVE TO B EAR IN MIND THAT IT IS NOT ANY AND EVERY MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR D ISTANT, REMOTE AND FARFETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSESSMENT. AS AFORESAID, THE STAGE A TO H (CHART) AND STATED IN THE REASONS RECORDED FIND PLACE IN PAGES 184 TO 187 OF PAPER BOOK WHICH FORM PART OF THE ORIGINAL ASSESSMENT PROCEEDINGS BEFORE THE AO AND C OMMISSIONER. FURTHER RELIANCE CAN BE PLACED ON THE DETAILED JUDGMENT IN THE CASE OF MADHUKAR KHOSLA VS. ACIT 367 ITR 165 (DELHI) WHEREIN IT HAS BEEN HELD BY THE HON BLE JURISDICTIONAL HIGH COURT THAT THE REOPENING IS NOT PERMITTED UNDER THE LAW UNLESS IT IS BASED ON FRESH TANGIBLE MATERIAL AND THAT IF THE REASONS TO BELIEVE ARE NOT BASED ON NEW, TANGIBLE MATERIALS, THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. IT HA S BEEN FURTHER OBSERVED THAT : THE FOUNDATION OF THE AOS JURISDICTION AND THE RAISON DETRE OF A REASSESSMENT NOTICE ARE THE REASONS TO BELIEVE. NOW THIS SHOULD HAVE A RE LATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERIALS ON THE RECORD. SUCH 71 ITA NO.5611 & 5581/DEL/2013 EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, O R THE KEY WHICH ENABLES THE AUTHORITY TO LEGITIMATELY RE-OPEN THE COMPLETED ASSESSMENT. IN A BSENCE OF THIS OBJECTIVE TRIGGER, THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE RE-OPENING OF ASSESS MENT AMOUNTS TO REVIEW OR CHANGE OF OPINION ARISES. IN OTHER WORDS, IF THER E ARE NO REASONS TO BELIEVE BASED ON NEW, TANGIBLE MATERIALS, THEN THE REOPENING AMOUN TS TO AN IMPERMISSIBLE REVIEW. HERE, IN THE INSTANT CASE BEFORE US, THERE IS NOTHI NG TO SHOW WHAT TRIGGERED THE ISSUANCE OF NOTICE OF REASSESSMENT NO INFORMATION OR NEW F ACTS WHICH LED THE AO TO BELIEVE THAT FULL DISCLOSURE HAD NOT BEEN MADE (KELVINATOR OF INDIA LTD [(2010)320 ITR 561 (SC)] AND ORIENT CRAFT LTD [(2003)354 ITR 536 (DELH I)] FOLLOWED, USHA INTERNATIONAL [(2012)348 ITR 485 (DEL) (FB)] REFERRED). IN THE P RESENT CASE, FROM A PERUSAL OF THE REASONS GIVEN BY THE AO TO REOPEN, IT IS CLEARLY DI SCERNABLE THAT THERE WAS NO NEW MATERIAL WHICH HAS COME TO THE HANDS OF THE AO IN R ESPECT TO THE AY 2004-05 BEFORE HIM. THE AO IN HIS REASONS HAS NOT DISCUSSED ANY M ATERIAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. WHATEVER HAS BEEN STATED IS O F CERTAIN FACTS WHICH HAVE BEEN DISCOVERED DURING SEARCH OPERATION IN JANUARY 2011 I.E. IN AY 2011-12. FROM THE REASONS RECORDED, WE DO NOT FIND A SHRED OF NEW MAT ERIAL WHICH CAN BE HELD MATERIAL WHICH CONSTITUTES THE DRIVER OR THE KEY WHICH ENABL ES THE AO TO LEGITIMATELY REOPEN THE COMPLETED ASSESSMENT AND IN ABSENCE OF THIS OBJECTI VE TRIGGER, THE AO DOES NOT POSSESS JURISDICTION TO REOPEN THE ASSESSMENT, AS H ELD BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MADHUKAR KHOSLA (SUPRA). FURTH ER, MOST IMPORTANTLY, IT WAS HELD BY THE HONBLE HIGH COURT THAT IT IS AT THE NEXT ST AGE WHEN THE QUESTION, WHETHER THE REOPENING OF ASSESSMENT AMOUNTS TO REVIEW OR CHA NGE OF OPINION ARISES. IN OTHER WORDS, IF THERE ARE NO NEW TANGIBLE MATERIALS, TH EN THERE WOULD BE NO REASONS TO BELIEVE, AND CONSEQUENTLY REOPENING WOULD BE AN IM PERMISSIBLE REVIEW. IT SHOULD BE 72 ITA NO.5611 & 5581/DEL/2013 KEPT IN MIND THAT THE CONDITION WITH RESPECT TO AVA ILABILITY OF NEW TANGIBLE MATERIAL IS A STEP ANTERIOR TO THE CONDITION OF NO CHANGE OF O PINION OR REVIEW. 39. HOWEVER, WE WOULD LIKE TO EXAMINE OTHER LEGAL G ROUNDS FOR COMPLETENESS. THE NEXT IMPORTANT ASPECT WHICH NEEDS TO BE EXAMINED WH ETHER THE PROVISO TO SECTION 147 IS APPLICABLE IN THIS CASE BEFORE REOPENING THE ORIGIN AL ASSESSMENT AND TO EXAMINE THE CONTENTION OF THE LD. AR THAT THERE WAS NO ALLEGATI ON IN THE REASONS ABOUT FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERIAL FACTS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. ADMITTEDLY, IN THIS MATTER, THE REOPE NING IS DONE AFTER EXPIRY OF FOUR YEARS AND AS PER LAW, IT CAN BE DONE ONLY IF THE AO IS ABLE TO DEMONSTRATE THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING T HE MATERIAL FACTS. IN THIS REGARD, IT WOULD BE APPROPRIATE TO REPRODUCE HEREUNDER THE FIR ST PROVISO TO SECTION 147 OF THE ACT :- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTIO N (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSE SSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1 ) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR: THOUGH, IN THE LAST FEW LINES OF THE REASONS RECORD ED, THE AO HAS MADE AN AVERMENT THAT THUS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR THE A.Y. 2004-05 I AM ALSO SATISFIED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT WITH REGARD TO THE ASS ESSMENT YEAR UNDER CONSIDERATION. THIS BALD STATEMENT CANNOT SATISFY THE REQUIREMENT OF LAW. THE HONBLE BOMBAY HIGH COURT HAS HELD THAT IN THOSE CASES, WHERE THE FIRST PROVISO TO SECTION 147 IS APPLICABLE, THE REOPENING CANNOT BE DONE UNLESS THERE IS ALLEGA TION IN THE REASONS THAT THERE WAS 73 ITA NO.5611 & 5581/DEL/2013 FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE O F MATERIAL FACTS. HONBLE BOMBAY HIGH COURT IN THE CASE OF TATA BUSINESS SUPPORT SER VICES LTD. V. DCIT 232 TAXMAN 702. RELEVANT PARA IS REPRODUCED HERE UNDER:- IN THE PRESENT CASE, WHEN THE REVENUE ALLEGES FAIL URE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS, THEN, THE TERM F AILURE HAS SOME SPECIFIC LEGAL CONNOTATION. HERE, MATERIAL FACTS ARE PERTAIN ING TO THE EXPENSES UNDER THE HEAD MANAGEMENT FEES. IT IS APPARENT TH AT THE WORDS EMPLOYED ARE MATERIAL FACTS. IT IS NOT JUST FACTS B UT MATERIAL FACTS. THE WORD MATERIAL IN THE CONTEXT MEANS IMPORTANT, ES SENTIAL, RELEVANT CONCERNED WITH THE MATTER, NOT THE FORM OF REASONIN G (SEE OXFORD DICTIONARY CONCISE EIGHTH EDITION). JUST AS DISCLOS URE OF EVERY FACT WOULD NOT SUFFICE BUT FOR PROCEEDING UNDER SECTION 147 NON DISCLOSURE OUGHT TO BE OF A MATERIAL FACT. THE HONBLE SUPREME COURT IN THE CASE OF CIT V. AVA DH TRANSFORMERS (P.) LTD. 51 TAXMANN.COM 369, WHEREIN THE HONBLE SUPREME COURT HAS UPHELD THE JUDGMENT OF THE ALLAHABAD HIGH COURT, WHEREIN IT WAS HELD BY THE HO NBLE HIGH COURT THAT IN ABSENCE OF FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSUR E OF MATERIAL FACTS, THE REASSESSMENT PROCEEDINGS COULD NOT BE INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR MERELY ON THE GROUND THAT IN VIEW O F THE RETROSPECTIVE AMENDMENT TO PROVISIONS OF SECTION 80IA, THE ASSESSEE WAS NOT EN TITLED TO DEDUCTION GRANTED EARLIER UNDER SAID SECTION. THUS, EVEN IN SUCH CASES, WHEN THERE WAS A RETROSPECTIVE AMENDMENT IN THE LAW, THE HONBLE SUPREME COURT HAS APPROVED THE ORDER OF THE HONBLE HIGH COURT, UPHOLDING THE VIEW THAT NO REOP ENING CAN BE DONE AFTER THE EXPIRY OF FOUR YEARS UNLESS THERE WAS FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERIAL FACTS. 40. IN A RECENT JUDGMENT OF HONBLE DELHI HIGH COUR T IN THE CASE OF PR.CIT V. SAMCOR GLASS LTD. (ITA NO.768/2015 DATED 12.10.2015 ), WHEREIN HONBLE HIGH COURT FROWNED UPON THE INCOME TAX DEPARTMENT FOR REOPENIN G OF THE ASSESSMENTS OF THE TAX PAYERS, IN A CASUAL MANNER AND WITHOUT COMPLYING WI TH MANDATORY CONDITIONS OF LAW. RELEVANT PORTION OF THE JUDGMENT IS REPRODUCED BELO W:- 74 ITA NO.5611 & 5581/DEL/2013 4. ALTHOUGH THE ASSESSEES IN BOTH THE APPEALS ARE DIFFERENT, THE ISSUE INVOLVED IN BOTH CASES IS SIMILAR, I.E., WHET HER THE REOPENING OF THE ASSESSMENT UNDER SECTION 147/148 OF THE ACT IS VALI D? 5. APART FROM THE FACT THAT THE IMPUGNED ORDER OF THE ITAT SUFFERS FROM NO LEGAL INFIRMITY, THE COURT IS OF THE VIEW T HAT ON THE FACE OF IT, THE REASONS FOR REOPENING OF THE ASSESSMENT IN BOTH THE CASES DID NOT SATISFY THE BASIC REQUIREMENT OF THE LAW, IN AT LEAST IN TW O ASPECTS. ONE WAS THAT THE REOPENING WAS OF ASSESSMENT BEYOND FOUR YEARS A FTER THE AY FOR WHICH THE ORIGINAL ASSESSMENT WAS FRAMED AND YET TH E REASONS FOR REOPENING DID NOT CATEGORICALLY STATE THAT THERE WA S A FAILURE BY THE ASSESSEES TO DISCLOSE ANY MATERIAL PARTICULARS ON T HE BASIS OF WHICH THERE WERE REASONS TO BELIEVE THAT THE INCOME HAS E SCAPED ASSESSMENT. THIS COURT HAS RECENTLY, IN A DECISION DATED 22 ND SEPTEMBER 2015 IN ITA NO.356 OF 2013 (CIT V. MULTIPLEX TRADING & INDUSTRI AL CO. LTD.), CLEARLY STATED IN CASES WHERE REOPENING OF ASSESSME NT IS BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR THE CONDITION THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSE E TO TRULY AND FULLY DISCLOSE ALL MATERIAL FACTS MUST BE CONCLUDED WITH CERTAIN LEVEL OF CERTAINTY . 6. SECONDLY, THE COURT FINDS THAT AT LEAST IN RESPE CT OF ONE OF THE ISSUES, VIZ., PAYMENT OF INTEREST ON FIXED DEPOSITS , THE ASSESSEES DREW THE ATTENTION OF THE ASSESSING OFFICER (`AO) TO TH E FACT THAT THE AMOUNT HAS ALREADY BEEN OFFERED TO TAX AND TAX HAD BEEN PA ID AND YET, IN THE ORDER DISPOSING OF THE OBJECTIONS, THE AO IS COMPLE TELY SILENT AS REGARDS THIS OBJECTION. 7. THE COURT IS OF THE VIEW THAT NOTWITHSTANDING SE VERAL DECISIONS OF THE SUPREME COURT AS WELL AS THIS COURT CLEARLY ENUNCIATING THE LEGAL POSITION UNDER SECTION 147/148 OF THE ACT, THE REOP ENING OF ASSESSMENT IN CASES LIKE THE ONE ON HAND GIVE THE IMPRESSION T HAT REOPENING OF ASSESSMENT IS BEING DONE MECHANICALLY AND CASUALLY RESULTING IN UNNECESSARY HARASSMENT OF THE ASSESSEE. 8. THE COURT WOULD HAVE BEEN INCLINED TO IMPOSE HEA VY COSTS ON THE REVENUE FOR FILING SUCH FRIVOLOUS APPEALS BUT D ECLINES TO DO SO SINCE THE APPEALS ARE BEING DISMISSED EX PARTE. HOWEVER, THE COURT DIRECTS THE REVENUE THROUGH THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX (PR CIT) TO ISSUE INSTRUCTIONS TO THE AOS TO STRICTLY A DHERE TO THE LAW EXPLAINED IN VARIOUS DECISIONS OF THE SUPREME COURT AND THE HIGH COURT IN REGARD TO SECTIONS 147/148 OF THE ACT AND MAKE I T MANDATORY FOR THEM TO ENSURE THAT AN ORDER FOR REOPENING OF AN AS SESSMENT CLEARLY RECORDS THE COMPLIANCE WITH EACH OF THE LEGAL REQUI REMENTS. SECONDLY, THE AOS MUST BE DIRECTED TO STRICTLY COMPLY WITH TH E LAW EXPLAINED BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD V. INCOME TAX OFFICER (2003) 259 ITR 19 (SC) AS REGARDS THE DISPO SAL OF THE OBJECTIONS RAISED BY THE ASSESSEE TO THE REOPENING OF THE ASSE SSMENT. 75 ITA NO.5611 & 5581/DEL/2013 41. THE WELL SETTLED LAW IS THAT NEW TANGIBLE INFOR MATION WHICH THE AO GOT IN HIS POSSESSION MUST HAVE AN INEVITABLE LINK WITH ESCAPE MENT OF INCOME WHICH TRIGGERS THE AO TO FORM A BELIEF THAT THERE IS AN ESCAPEMENT OF INCOME, HOWEVER, WHEN THIS INFORMATION IS REGARDING AN ASSESSMENT YEAR WHICH I S FOUR YEARS BEFORE THEN AN ADDITIONAL REQUIREMENT OF LAW HAS TO BE ALSO SATISF IED, I.E., EVEN IF THERE IS AN ESCAPEMENT OF INCOME, STILL IT HAS TO BE SEEN WHETH ER THE ASSESSEE HAS FURNISHED TRUE AND FULL DISCLOSURE OF THE MATERIAL FACTS BEFORE THE AO DURING THE ORIGINAL ASSESSMENT. IF THE ASSESSEE HAS MADE TRUE AND FULL DISCLOSURE OF MATER IAL FACTS REGARDING THE NEW INFORMATION WHICH IS NOW IN THE HAND OF THE AO, THE N THE AO CANNOT REOPEN THE ASSESSMENT. THE APEX COURT HAS TIME AND AGAIN UNDE RSCORED THE NECESSITY OF FRESH TANGIBLE MATERIAL PERTAINING TO PROPOSED REOPENING OF ASSESSMENT YEAR, IN THE HANDS OF THE AO WHICH COULD FORM THE BASIS ON WHICH HE COULD DRAW THE REASON TO BELIEF ESCAPEMENT OF INCOME, IN THE ABSENCE OF SUCH A FRES H MATERIAL IN THE HANDS OF THE AO, THE HONBLE APEX COURT HAS UPHELD THE ORDERS OF THE TRIBUNALS AND HONBLE HIGH COURT HALTING THE MISADVENTURE OF THE AO IN REOPENING THE ASSESSMENT. 42. NOW LET US EXAMINE THIS CASE AS TO WHETHER THE PROVISO TO SECTION 147 IS SATISFIED BEFORE THE AO REGARDING REOPENING THE ASS ESSMENT, I.E. AS TO WHETHER THE TWIN CONDITION THAT WHETHER THE ASSESSEE HAD DISCLOSED T RULY AND FULLY PRIMARY FACTS NECESSARY FOR COMPLETION OF ASSESSMENT DURING THE O RIGINAL ASSESSMENT. 43. FROM A READING OF THE SAID REASONING GIVEN BY T HE AO, IT CAN BE SEEN THAT A SEARCH CONDUCTED ON 21.01.2011 I.E. IN FY 2010-11 I .E., THE AY 2011-12, IS THE FULCRUM ON WHICH THE AO IS BASING HIS REASONS TO REOPEN, WE DO NOT FIND IN THE AFORESAID REASON A WHISPER OF ANY MATERIAL WHICH COULD BE THE BASIS ON WHICH IT COULD SUGGEST THAT THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR THE ASSESSMENT WHICH IN TURN FACILITATED ESCAPEMENT OF INCOME. 76 ITA NO.5611 & 5581/DEL/2013 44. WE TAKE NOTE THAT THE CIT (A) AS WELL AS THE AO WERE HAVING A VIEW THAT MANUFACTURING PROCESS AND DETAILS OF TRANSFER OF MA TERIAL WHICH WERE FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT DID NOT DISCLOSE THE FLOW OF GOODS AND MANUFACTURING PROCESS OF VARIOUS RAW MATE RIALS TO FINISHED GOODS UNIT-WISE. FURTHER, IT WAS STATED THAT COLUMN NO.20 OF FORM NO .10CCB REQUIRED AS PER RULE NO.18BBB OF INCOME TAX RULES, 1962 FOR CLAIMING DED UCTION U/S 10CCB WAS NOT FULLY DISCLOSED BY THE ASSESSEE IN ITS RETURN OF INCOME A S WELL AS PROCEEDINGS PRIOR TO SECTION 147 OF THE ACT AND, THEREFORE, IT WAS HELD BY THEM THAT FIRST PROVISO TO SECTION 147 OF THE ACT, DOES NOT IN ANY MANNER HELP THE ASSESSEE. 45. HOWEVER, AFTER PERUSING THE RECORDS SUBMITTED D URING ORIGINAL ASSESSMENT U/S143(3) BY THE ASSESSEE TO THE DETAILED QUERIES O F BOTH AO AND ADDITIONAL COMMISSIONER U/S 144A OF THE ACT, WE FIND THAT THE SUBSTANCE IN THE CONTENTION OF THE ASSESSEE THAT TRUE AND FULL DISCLOSURE WAS MADE BY IT DURING ORIGINAL ASSESSMENT U/S 143(3) WE TAKE NOTE THAT DURING THE COURSE OF ASSES SMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE CLAIM OF THE ASSESSEE U/S 80IC WAS EXAMINE D BY THE AO VIDE PARA NO.1 OF THE ASSESSMENT ORDER. FOR THE PURPOSE OF GRANTING DEDU CTION, WE FIND THAT THE AO HAS EXAMINED THE AUDITED BALANCE SHEET AND PROFIT & LOS S ACCOUNT OF THE COMPANY AS WELL AS CERTIFICATES ISSUED BY THE CHARTERED ACCOUNTANT IN FORM NO.10CCB FOR ALL THE ELIGIBLE UNITS. VIDE LETTER DATED 13.01.2006, VIDE PARA NO.1 , WITH REFERENCE TO EACH OF THE UNIT, ASSESSEE SUBMITTED DETAILED NOTE ON ITEMS MANUFACTU RED AND TRADED BY IT ALONG WITH DETAILS OF MANUFACTURING PROCESS INVOLVED THEREIN A ND THE DETAILS OF PROCUREMENT OF RAW MATERIALS ALONG WITH ROLE PLAYED BY DELHI OFFICE IN MAKING PROCUREMENT OF RAW MATERIALS. IN RESPONSE TO THIS, ASSESSEE VIDE LETT ER DATED 02.02.2006 , ASSESSEE SUBMITTED THE MANUFACTURING PROCESS VIDE ANNEXURE A & B TO TH AT LETTER. FURTHER, IT WAS SUBMITTED THAT THE DELHI OFFICE HAS NO ROLE TO PLAY IN PROCUREMENT PROCESS. ALONG WITH 77 ITA NO.5611 & 5581/DEL/2013 THAT BOOKS OF ACCOUNT OF EACH MANUFACTURING UNIT MA INTAINED SEPARATELY WERE ALSO SUBMITTED. THE FLOW CHART OF THE PROCESS IS FOUND PLACED AT PAGES 184 TO 188 OF THE PB WHICH WERE ALSO SUBMITTED BEFORE THE AO. FURTHER, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, BASED ON THE QUANTITATIVE DETAILS OF E ACH OF THE UNDERTAKING ELIGIBLE FOR DEDUCTION, VIDE LETTER DATED 09.03.2006, UNIT-WISE WASTAGE AND YIELD ANALYSIS WAS SUBMITTED BEFORE THE AO. FURTHER, UNIT-WISE CLOSIN G STOCK AND COMPARATIVE ANALYSIS OF YIELD OF BETEL NUT IN VARIOUS UNITS AS COMPARED TO OTHER UNITS WERE ALSO SUBMITTED. WHILE SUBMITTING THESE DETAILS, THE OPENING STOCK O F RAW MATERIAL AS WELL AS WORK-IN- PROGRESS AND PURCHASES MADE DURING THE YEAR RESULTI NG INTO THE CONSUMPTION OF MATERIAL AS WELL AS CLOSING STOCK OF RAW MATERIAL OR WORK-IN -PROGRESS IN QUANTITY WERE SUBMITTED. FURTHER, VIDE LETTER DATED 20.11.2006, ASSESSEE SUB MITTED DETAILS IN RESPONSE TO A SPECIFIC QUERY THAT THE MOVEMENT OF RAW MATERIAL AN D OTHER INPUTS ARE CONCERNED AGAINST THE PURCHASE ORDERS RAISED FOR AND BY VARIO US INDUSTRIAL UNDERTAKINGS LOCATED IN VARIOUS PARTS OF THE COUNTRY, AND THAT THE MATERIAL S ARE DIRECTLY SUPPLIED TO THE UNIT AND NO SUCH INPUT IS BEING MOVED THROUGH THE CORPORATE OFFICE OF THE ASSESSEE COMPANY LOCATED AT NOIDA, UTTAR PRADESH. FURTHER, VIDE LET TER DATED 27.11.2006, THE ASSESSEE SUBMITTED THAT FINISHED UNBRANDED GOODS ARE TRANSFE RRED FROM ONE UNIT/BRANCH TO ANOTHER UNIT/BRANCH IN THE COURSE OF LOCAL MOVEMENT AS WELL AS INTER-STATE TRANSFERS WHICH HAVE BEEN REFLECTED ON THE FACE OF THE PROFIT & LOSS ACCOUNT. FURTHER, ASSESSEE ALSO STATED THAT THESE TRANSFERS ARE FOR CAPTIVE CO NSUMPTION, SAME ARE TRANSFERRED AT COST. THE ASSESSEE SUBMITTED THAT THE GOODS WHICH MAY BE SUBJECT TO TRANSFER INCLUDES PAN MASALA AND FLAVOURED TOBACCO IN UNBRANDED FORM. VID E LETTER DATED 09.03.2007, THE ASSESSEE FURTHER SUBMITTED THAT ALL THESE COMMODITI ES ARE MANUFACTURED AT ITS MANUFACTURING UNIT LOCATED AT VARIOUS SITES AND DIS TRIBUTED THROUGH A BUSINESS CHANNEL. FURTHER, VIDE LETTER DATED 15.03.2007, THE ASSESSEE SUBMITTED UNIT-WISE EXPENDITURE OF 78 ITA NO.5611 & 5581/DEL/2013 ALL THESE UNITS BEFORE THE AO. FURTHER, WE TAKE NO TE THAT VIDE LETTER DATED 06.12.2006, VIDE POINT NO.2, THE ASSESSEE HAD SUBMITTED THAT GR OSS SALES OF THE COMPANY HAS BEEN REDUCED BY THE INTER-UNIT TRANSFERS AND IN THE SAME LETTER, VIDE POINT NO.4, THE DETAILS OF THE VALUATION OF CLOSING STOCK AS WELL AS WORK-IN-P ROGRESS WAS ALSO EXPLAINED ALONG WITH DETAILS OF GROSS PROFIT OF THE UNITS. WE ALSO TAKE NOTE THAT VIDE POINT NO.6, IN THE SAID LETTER THE COMPARATIVE STATEMENT OF PERCENTAG E OF YIELD, GROSS PROFIT AND NET PROFIT AS COMPARED TO PRECEDING THREE YEARS WAS ALSO SUBMI TTED. ON AN ANALYSIS OF THE ABOVE FACTS, IT IS APPARENT THAT THE AO HAD ON RECORD THE AFORESAID DETAILS WHICH WAS SOUGHT BY HIM AND OBVIOUSLY HAD APPLIED HIS MIND ON EACH AND EVERY ITEM WHICH HAS GONE INTO THE PROFIT DERIVED BY THE INDUSTRIAL UNDERTAKING AN D AFTER THAT, THE AO HAS GRANTED AS DEDUCTION U/S 80IC OF THE ACT. 46. ON READING OF THE FIRST PROVISO TO SECTION 147, IT IS APPARENT THAT THE NOTICE U/S 148 CAN BE ISSUED WHEN AN ASSESSMENT HAS BEEN MADE U/S 143(3) AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, ONLY IF THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR . 47. FROM THE ABOVE STATED SUBMISSIONS MADE DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, IT IS APPARENT THAT ASSESSEE HAS DISCL OSED FULLY AND TRULY ALL MATERIAL FACTS WHICH WERE NECESSARY FOR THE ASSESSMENT OF INCOME. NOW, COMING TO THE ISSUE THAT THE ASSESSEE HAS FAILED TO DISCLOSE FLOW OF GOODS AND M ANUFACTURING PROCESS OF VARIOUS RAW MATERIALS TO FINISHED GOODS AS ALLEGEDLY HAVE NOT B EEN DISCLOSED. WE HAVE REFERRED TO VARIOUS PAGES OF SUBMISSION MADE U/S 143(3) BY THE ASSESSEE WHEREIN A FLOW CHART OF MANUFACTURING PROCESS IS DISCLOSED. FURTHERMORE, R EGARDING FLOW OF GOODS, ASSESSEE HAS SUBMITTED A DETAILED CHART ACCORDING TO WHICH I T HAS SHOWN OPENING STOCK OF RAW 79 ITA NO.5611 & 5581/DEL/2013 MATERIAL, PURCHASES, CLOSING STOCK OF RAW MATERIAL AND MATERIAL CONSUMED ALONG WITH THE OPENING AND CLOSING STOCK OF RAW MATERIAL AND M ATERIAL CONSUMED ALONG WITH OPENING AND CLOSING STOCK OF WORK-IN-PROGRESS. ASS ESSEE HAS ALSO DISCLOSED THE OPENING STOCK AND CLOSING STOCK OF FINISHED GOODS A ND ITS VALUATION METHODOLOGY. BASED ON THIS, QUANTITATIVE DETAILS FOR EACH OF THE UNIT AND YIELD OF THE MATERIAL PRODUCED ARE ALSO EXPLAINED. COUPLED WITH THE ABOV E QUANTITATIVE INFORMATION, ASSESSEE HAS SUBMITTED COMPARATIVE GROSS PROFIT AND NET PROFIT TOO, THEREFORE, IN OUR CONSIDERED OPINION, ASSESSEE HAS DISCLOSED FULLY AN D TRULY THE FLOW OF GOODS AS WELL AS MANUFACTURING PROCESS OF RAW MATERIALS TO FINISHED GOODS UNIT-WISE. 48. THE LD. DR VEHEMENTLY ARGUED THAT IN FORM NO.10 CCB FILED WITH THE AO FOR CLAIMING EXEMPTION, THE ASSESSEE HAS NOT FURNISHED INTER UNIT TRANSFER OF ELIGIBLE UNITS IN COLUMN NO.20 OF FORM NO.10CCB. AT SL. NO.20 OF THE AUDIT REPORT, THE ASSESSEE HAS NOT MENTIONED ANYTHING ABOUT INTER-UNIT TRANSFER OF THE GOODS. HERE ALSO, WE WOULD LIKE TO POINT OUT THAT THIS DEFICIENCY POINT OUT IN FORM 10CCB IS NOT EMERGING FROM THE REASONS RECORDED AND WE ARE AWARE THAT WE SHOULD LO OK INTO THE REASONS ON A STANDALONE BASIS. HOWEVER, FOR COMPLETENESS, WE WOULD LIKE TO DEAL WITH IT. WE FIND THAT IN FORM 10CCB, THE ASSESSEE HAS DESCRIBED CERTAIN TRANSACTI ONS THEREIN REGARDING FUNCTIONS FROM CORPORATE OFFICE, ALL EXPENDITURE, SUCH AS, DI RECTORS REMUNERATION AND COMMISSION, BE THAT BE. ON A PERUSAL OF THE FIRST PROVISO TO SECTION 147 SPEAKS ABOUT THE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, ASSESSEE HAS SUBMITTED ABOUT THE INTER UNIT TRANSFER OF THE MATERIAL AS WELL AS EXPLAINED THE R OLE OF ITS DELHI CORPORATE OFFICE IN PROCUREMENT OF MATERIAL. IN VARIOUS SUBMISSIONS, I T HAS BEEN ASCERTAINED THAT THERE IS INTER-UNIT TRANSFER OF GOODS BETWEEN ONE UNIT TO OT HER UNIT OF THE ASSESSEE IN MORE THAN ONE SUBMISSION AND FURTHER, ASSESSEE HAS ALSO DISCL OSED THE PRICING OR THE VALUE AT 80 ITA NO.5611 & 5581/DEL/2013 WHICH SUCH MATERIALS ARE TRANSFERRED. ASSESSEE FUR THER SUBMITTED THAT DURING THE ORIGINAL ASSESSMENT, SALE OF GOODS ACCOUNTED FOR AR E ALSO NET OF INTER-UNIT TRANSFER. FROM THIS, IT IS EVIDENT THAT THE DETAILS OF INTER- UNIT TRANSFER WERE FURNISHED BY THE ASSESSEE BEFORE AO AT MULTIPLE TIMES AND ANSWERS TO ADDITIONAL CIT U/S 144 OF THE ACT. NOW, WE GO TO EXAMINE THAT IN SPITE OF SUBMITTING T HIS INFORMATION WHETHER NOT MENTIONING OF THESE TRANSACTIONS IN SL.NO.20 OF THE FORM NO.10CCB CAN IT BE SAID TO BE A MATERIAL FACT FOR THE PURPOSE OF ASSESSMENT OF IN COME OF THE ASSESSEE. IN OUR VIEW, THE ASSESSEE HAS SUBMITTED VOLUMINOUS DETAILS REGAR DING INTER UNIT TRANSFER ALONG WITH ITS VALUATION AND DISCLOSURES. MERELY BECAUSE COLU MN NO.20 OF THE FORM NO.10CCB WAS NOT FILLED PROPERLY, IT CANNOT BE SAID THAT MAT ERIAL FACTS HAVE NOT BEEN FULLY AND TRULY DISCLOSED BY THE ASSESSEE. FORM NO.10CCB IS AN AUDIT REPORT WHICH IS REQUIRED TO BE CERTIFIED BY A CHARTERED ACCOUNTANT WHO CERTIFIE S THAT THE CONDITIONS STIPULATED IN SECTION 80IC AND THE AMOUNT OF DEDUCTION CLAIMED BY THE ASSESSEE MEETS THE REQUIRED CONDITIONS AS PER LAW. PERHAPS, THE AUDITOR HAS CE RTIFIED ONLY THE PAYMENT MADE TO PERSONS SPECIFIED U/S 40A (2)(B) OF THE ACT AND A P ERUSAL OF THE BALANCE SHEETS OF EACH UNIT CLEARLY SPELLS OUT IN NO UNCERTAIN TERMS THE I NTER UNIT TRANSFER WHICH WERE PRODUCED BEFORE THE AO DURING THE ORIGINAL ASSESSMENT. ADMI TTEDLY, THE INFORMATION SOUGHT BY FORM NO.10CCB HAS BEEN CONTAINED THEREIN THE BALANC E SHEET OF EACH UNIT. THE AO HIMSELF HAS EXAMINED THESE ASPECTS IN A PROPER MANN ER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS AND BEING SATISFIED HAS NOT TAKEN ANY A DVERSE VIEW THAT TOO UNDER THE WATCHFUL EYES OF THE ADDITIONAL COMMISSIONER U/S 14 4A OF THE ACT. SINCE SUCH INFORMATION HAS ALREADY BEEN GATHERED BY AO/ADDITIO NAL COMMISSIONER DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN MORE EXHAUSTIVE MANNER, AND IN THE LIGHT OF THE FACT THAT AUDITED BALANCE SHEETS ARE PART OF FORM N O.10CCB THERE IS NO MERIT IN THE 81 ITA NO.5611 & 5581/DEL/2013 ALLEGATION THAT THERE WAS OMISSION OR FAILURE ON TH E PART OF THE ASSESSEE IN DISCLOSING THE PRIMARY FACTS. 49. WE WISH TO MAKE IT CLEAR THAT THE STATUTORY THR ESHOLD PROVIDES FOR AN OBLIGATION ON THE AO TO SPELL OUT IN CLEAR TERMS WHICH FACTS WERE NOT FULLY AND TRULY DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT BY THE ASSESSEE. A BALD ASSERTION TO THE SAID EFFECT DOES NOT SATISFY THE SAID THRESHOLD AS HELD IN THE CASE OF ATMA RAM PROPERTIES PVT. LTD. VS. DCIT 343 ITR 141(DEL), WHEREIN THE HONBLE JURISD ICTIONAL HIGH COURT HELD AS UNDER: PAGE NO.218 THE REASONS RECORDED ABOVE DO STATE THAT THE APPE LLANT ASSESSEE HAD FAILED TO FULLY AND TRULY DISCLOSE THE FACTS BUT DO NOT INDIC ATE WHY AND HOW THE ASSESSEE HAD FAILED TO MAKE FULL AND TRUE DISCLOSURE OF THE MATERIAL FACTS. MERE REPETITION OR QUOTING THE LANGUAGE OF THE PROVISO IS NOT SUFFI CIENT. THE BASIS OF THE AVERMENT/STATEMENT SHOULD BE EITHER STATED OR SHOUL D BE APPARENT/ LUCID/EXPLAINED FROM THE RECORD. 50. APART FROM THE ABOVE, HERE IS THE CASE WHERE RE ASONS HAVE BEEN RECORDED ON THE BASIS OF INFERENCES AND NOT ON FACTS PERTAINING TO THE INSTANT YEAR. INFERENCES ARE IN THE DOMAIN OF THE AO AND NOT IN THE REALM OF THE ASSESS EE. THIS WAS SO HELD BY THE CONSTITUTION BENCH OF HONBLE SUPREME COURT BY MAJO RITY ORDER IN THE CASE OF CALCUTTA DISCOUNT CO. LTD. VS. ITO REPORTED IN 41 ITR 191 (S C). THE FACTS OF THE CASE WAS THAT IN THE ORIGINAL ASSESSMENTS OF THE COMPANY (I.E. CA LCUTTA DISCOUNT LTD.) FOR THE ASSESSMENT YEARS 1942-43, 1943-44 AND 1944-45, THE PROFITS REALIZED BY THE COMPANY BY SALES OF SHARES WERE NOT ASSESSED TO TAX. THE I NCOME-TAX OFFICER PROPOSED TO INITIATE REASSESSMENT PROCEEDINGS AGAINST THE COMPANY AND IN HIS REPORTS TO THE COMMISSIONER FOR THE PURPOSE OF OBTAINING HIS SANCTION, HE STATE D THAT AT THE TIME OF THE ORIGINAL ASSESSMENTS THE PRESENTATIONS MADE ON BEHALF OF TH E COMPANY THAT THE SALES OF SHARES WERE CASUAL TRANSACTIONS AND IN THE NATURE OF MERE CHANGE OF INVESTMENTS WERE 82 ITA NO.5611 & 5581/DEL/2013 ACCEPTED, HOWEVER, THE RESULT OF THE COMPANYS TRAD ING FROM YEAR TO YEAR REVEALED THAT IT HAD REALLY BEEN SYSTEMATICALLY CARRYING ON A TRA DE IN THE SALE OF INVESTMENTS, AND THAT AS SUCH THE COMPANY HAD FAILED TO DISCLOSE THE TRUE INTENTION OF THE SALE OF SHARES. ON MARCH 28, THE INCOME-TAX OFFICER ISSUED NOTICES U/S 34 OF THE ACT CALLING UPON THE COMPANY TO SUBMIT FRESH RETURNS. THE COMPANY SUBMI TTED THE RETURNS BUT APPLIED TO THE HIGH COURT UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA FOR THE ISSUE OF APPROPRIATE WRITS OR ORDERS DIRECTING THE OFFICER NOT TO PROCEE D TO ASSESS ON THE BASIS OF THESE NOTICES, ON THE GROUND, INTER ALIA, THAT THE INCOME -TAX OFFICER DID NOT HAVE REASON TO BELIEVE THAT UNDER-ASSESSMENT HAD OCCURRED BY REASO N OF THE OMISSION OR FAILURE ON THE PART OF THE COMPANY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE INCOME-TAX OFFICER FILED AN AFFID AVIT IN COURT IN WHICH HE STATED THAT IN THE COURSE OF ASSESSMENT PROCEEDING FOR THE YEAR 1944-45, IT WAS REPRESENTED ON BEHALF OF THE COMPANY THAT THE SALES OF SHARES IN T HAT YEAR WERE CASUAL TRANSACTIONS AND WERE IN THE NATURE OF MERE CHANGE IN INVESTMENTS ; THAT IN THE ASSESSMENT FOR THE YEARS 1945-46 AND 1946-47 PROFITS EARNED BY SALE OF SHARES WERE INCLUDED IN THE TOTAL ASSESSABLE INCOME OF THE COMPANY, IT HAVING BEEN DI SCOVERED THAT THE COMPANY WAS IN FACT CARRYING ON THE BUSINESS OF SELLING SHARES CON TRARY TO ITS EARLIER REPRESENTATIONS; AND THAT BY ITS MEMORANDUM AND ARTICLES OF ASSOCIATION, THE COMPANY WAS AUTHORIZED TO CARRY ON BUSINESS OF DIVERSE KINDS, ESPECIALLY TO H OLD AND DEAL IN SHARES AND SECURITIES AND TO CARRY ON BUSINESS AS FINANCIERS; AND ASSERTE D THAT HE HAD REASONS TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE OF THE COMPANY TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, INCOME CHARGEABLE TO INCOME-TAX HAD BEEN UNDER-ASSESSED AND THAT HE HAD RECORDED HIS REASON IN THAT BEHALF IN THE REPORTS SUBMITTED BY HIM TO THE COMMISSIONER. 83 ITA NO.5611 & 5581/DEL/2013 51. THE HONBLE SUPREME COURT CONSTITUTION BENCH BY A MAJORITY LAID THE LAW AS TO WHAT CONSTITUTES FULL AND TRUTHFUL DISCLOSURE AND H ELD IN PAGE 201 AS UNDER :- DOES THE DUTY, HOWEVER, EXTEND BEYOND THE FULL AN D TRUTHFUL DISCLOSURE OF ALL PRIMARY FACTS? IN OUR OPINION, TH E ANSWER TO THIS QUESTION MUST BE IN THE NEGATIVE. ONCE ALL THE PRIM ARY FACTS ARE BEFORE THE ASSESSING AUTHORITY, HE REQUIRES NO FURTHER ASS ISTANCE BY WAY OF DISCLOSURE. IT IS FOR HIM TO DECIDE WHAT INFERENCES OF FACTS CAN BE REASONABLY DRAWN AND WHAT LEGAL INFERENCES HAVE ULT IMATELY TO BE DRAWN. IT IS NOT FOR SOMEBODY ELSE - FAR LESS THE ASSESSEE - TO TELL THE ASSESSING AUTHORITY WHAT INFERENCES, WHETHER OF FACTS OR LAW, SHOULD BE DRAWN. INDEED, WHEN IT IS REMEMBERED THAT PEOPLE OFTEN DIF FER AS REGARDS WHAT INFERENCES SHOULD BE DRAWN FROM GIVEN FACTS, IT WIL L BE MEANINGLESS TO DEMAND THAT THE ASSESSEE MUST DISCLOSE WHAT INFEREN CES - WHETHER OF FACTS OR LAW - HE WOULD DRAW FROM THE PRIMARY FACTS . IF FROM PRIMARY FACTS MORE INFERENCES THAN ONE CO ULD BE DRAWN, IT WOULD NOT BE POSSIBLE TO SAY THAT THE ASSESSEE SHOU LD HAVE DRAWN ANY PARTICULAR INFERENCE AND COMMUNICATE IT TO THE ASSE SSING AUTHORITY. HOW COULD AN ASSESSEE BE CHARGED WITH FAILURE TO COMMUN ICATE AN INFERENCE, WHICH HE MIGHT OR MIGHT NOT HAVE DRAWN ? IT MAY BE POINTED OUT THAT THE EXPLANATION TO THE SUB SECTION HAS NOTHING TO DO WITH 'INFERENCES' AND DEALS ONLY WITH THE QUESTION WHETHER PRIMARY MATERIAL FACTS NOT DISCLOSED COULD STILL BE SAID TO BE CONSTRUCTIVELY DISCLOSED ON THE GROUND THAT WITH DU E DILIGENCE THE INCOME TAX OFFICER COULD HAVE DISCOVERED THEM FROM THE FACTS ACTUALLY DISCLOSED. THE EXPLANATION HAS NOT THE EFFECT OF EN LARGING THE SECTION, BY CASTING A DUTY ON THE ASSESSEE TO DISCLOSE 'INFEREN CES' TO DRAW THE PROPER INFERENCES BEING THE DUTY IMPOSED ON THE INCOME TAX OFFICER. WE HAVE, THEREFORE, COME TO THE CONCLUSION THAT W HILE THE DUTY OF THE ASSESSEE IS TO DISCLOSE FULLY AND TRULY ALL PRI MARY RELEVANT FACTS, IT DOES NOT EXTEND BEYOND THIS. 52. IN PAGE 203, THE HONBLE SUPREME COURT WHILE RE VERSING AND DISAGREEING WITH THE VIEW OF THE HONBLE CALCUTTA HIGH COURT REPORTE D IN (1953) 23 ITR 471 HELD AS UNDER :- THE LEARNED CHIEF JUSTICE SEEMS TO HAVE PROCEEDED ON THE BASIS THAT WHEN FROM CERTAIN FACTS INFERENCES ARE TO BE D RAWN THERE IS A DUTY ON THE ASSESSEE TO STATE WHAT THE CORRECT INFERENCE SH OULD BE AND IF HE HAS MADE A WRONG STATEMENT AS REGARDS THE INFERENCE TO BE DRAWN THAT ALSO IS 84 ITA NO.5611 & 5581/DEL/2013 AN 'OMISSION OR FAILURE TO DISCLOSE A MATERIAL FACT .' FOR THE REASONS GIVEN EARLIER WE DO NOT THINK THAT THIS IS THE CORRECT PO SITION IN LAW. 53. IN THE SAID CASE, THE HONBLE SUPREME COURT TO MEET THE POINT OF THE ITO THAT DURING THE ORIGINAL ASSESSMENT, THE ASSESSEE HAD MA DE A STATEMENT THAT THE PROFITS OF THE COMPANY ARISING OUT OF DEALINGS IN SHARES WERE NOT TAXABLE AS THE COMPANY WAS NOT A DEALER IN SHARES AND SECURITIES AND THE DEALINGS IN SHARES WERE CASUAL TRANSACTIONS AND WERE IN THE NATURE OF MERE CHANGE IN INVESTMENTS AN D THUS, THE PROFITS RESULTING THEREFROM WERE NOT TAXABLE AND, THEREFORE, BASED ON THAT STATEMENT, THE ORIGINAL ASSESSMENTS WERE MADE ON THE BASIS THAT ASSESSEE WA S NOT CARRYING ON ANY BUSINESS DEALINGS IN SHARES. HOWEVER, IN THE ASSESSMENTS FOR 1945-46 AND 1946-47, THE PROFITS ON SALE OF SHARES WERE INCLUDED IN THE TOTAL ASSESSABL E INCOME OF THE ASSESSEE IT HAVING BEEN THEN DISCOVERED THAT THE ASSESSEE WAS IN FACT CARRYING ON BUSINESS IN SHARES CONTRARY TO ITS REPRESENTATION THAT IT WAS NOT. THE REFORE, THE ITO HAD REASONS TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENTS, THERE FORE, THE REOPENING WAS JUSTIFIED. THE HONBLE SUPREME COURT HAS HELD AS UNDER :- IT APPEARS CLEAR THAT THE INCOME TAX OFFICERS WHO MADE THE ASSESSMENTS FOR THE YEARS 1942-43, 1943-44 AND 1944-45 PROCEEDE D ON THE BASIS THAT THIS WAS AN INVESTMENT COMPANY AND CONSIDERED THE Q UESTION WHETHER IN SPITE OF ITS BEING AN INVESTMENT COMPANY CERTAIN SA LES OF SHARES WHEREFROM THE COMPANY MADE A PROFIT WERE BY WAY OF TRADING IN SHARES AND NOT BY WAY OF CHANGING THE FORM OF INVESTMENT. WHETHER THESE SALES BY AN INVESTMENT COMPANY SHOULD IN LAW BE TREATED A S TRADING TRANSACTIONS, AND THE PROFITS MADE FROM THE SALES A RE TRADING PROFITS LIABLE TO TAX, WAS THE MATTER WHICH IT WAS THE INCOME TAX OFFICER'S TASK TO DECIDE. NO DUTY LAY ON THE COMPANY TO ADMIT THAT TH ESE TRANSACTIONS WERE BY WAY OF TRADE. THE FACT THAT ON BEHALF OF THE COM PANY MR. SMITH OF LOVELOCK & LEWES STATED THAT THE COMPANY WAS NOT A DEALER IN SHARES AND SECURITIES DOES NOT, THEREFORE, AMOUNT TO AN OM ISSION TO DISCLOSE FULLY AND TRULY ANY MATERIAL FACT. 85 ITA NO.5611 & 5581/DEL/2013 54. APPLYING THE ABOVESAID RATIO LAID BY THE HONBL E SUPREME COURT CONSTITUTION BENCH WHEREIN THE AO BASED ON THE SUBSEQUENT YEAR D ISCLOSURE BY THE ASSESSEE ON AN ISSUE TRIED TO INVOKE THE REOPENING OF ORIGINAL ASS ESSMENT AFTER 4 YEARS DRAWING INFERENCE THAT ASSESSEE FAILED TO TRULY AND FULLY D ISCLOSE MATERIAL FACTS WAS SET AT NAUGHT BY THE HONBLE SUPREME COURT. IT NEEDS TO BE SEEN THAT THE ASSUMPTION BY THE PRESENT AO IN THE INSTANT CASE THAT PROCESS FROM A TO H W ERE NOT CARRIED OUT AT THE ELIGIBLE UNDERTAKING IN THE INSTANT YEAR IS MERELY AN INFERE NCE AND NOT A FACT SUPPORTED BY ANY MATERIAL STATED IN THE REASON RECORDED. AS INFERENC ES CANNOT BE SUBSTITUTED FOR FACTS AND ALSO, THEREFORE, CANNOT BE TERMED AS TANGIBLE MATER IAL FOR UNLOCKING THE ALREADY COMPLETED ASSESSMENT U/S 143(3). 55. WE FIND THAT IN THIS CASE APART FROM FILING OF FORM 10CCB, AUDITED ACCOUNTS AND BALANCE SHEETS OF EACH UNIT WERE FILED WHICH EXPRES SLY REFLECTED THE INTER UNIT SALES, SO, IN THESE CIRCUMSTANCES, WE FIND THAT AS REGARDS INT ER-UNIT SALES, FULL DETAILS WERE IN FACT DISCLOSED BEFORE THE AO DURING ORIGINAL ASSESSMENT AND SPECIFIC QUERIES ABOUT DETAILS OF INTER-UNIT SALES WERE ASKED BY THE ADDITIONAL COMMI SSIONER WHILE SUPERVISING THE ORIGINAL ASSESSMENT IN EXERCISE OF HER POWERS U/S 1 44A OF THE ACT, WHICH ULTIMATELY WAS REVIEWED BY THE COMMISSIONER U/S 264 OF THE ACT . IN THE AFORESAID CIRCUMSTANCES, IT MUST, THEREFORE, BE HELD THAT THE AO, WHO ISSUED THE NOTICES, HAD NOT BEFORE HIM ANY NON-DISCLOSURE OF A MATERIAL FACT AND SO HE COULD H AVE NO MATERIAL BEFORE HIM FOR BELIEVING THAT THERE HAD BEEN ANY MATERIAL NON-DISC LOSURE BY REASON OF WHICH AN ESCAPEMENT OF INCOME HAD TAKEN PLACE. 56. LD. DR TOOK OUR ATTENTION TO PAGE 247 OF PB WH EREIN THE ASSESSEE HAD REPLIED DATED 27 TH NOVEMBER, 2006 TO THE AO, THE FOLLOWING OF WHICH R EADS AS UNDER:- 86 ITA NO.5611 & 5581/DEL/2013 WE CONFIRM IN REPLY TO YOUR QUERY THAT OUR FINISHE D UNBRANDED GOODS ARE TRANSFERRED FROM ONE UNIT/BRANCH TO ANOTHER UNIT/BR ANCH IN THE COURSE OF LOCAL MOVEMENT AS WELL AS INTER STATE TRANSFERS, W HICH HAS BEEN REFLECTED ON THE FACE OF THE PROFIT AND LOSS ACCOUNT. SINCE T HE TRANSACTION AFORESAID FALLS IN THE NATURE OF TRANSFER FOR CAPTIVE CONSUMP TION, HENCE NO NOTIONAL PROFITS IS BEING GENERATED /ACCRUED AT TRANSFEROR B RANCH. THE GOODS WHICH MAY BE SUBJECT TO TRANSFER IN THE AFORESAID NATURE, INCLUDES PAN MASALA AND FLAVORED TO BACCO IN UNBRANDED FORM. AS REGARD TO THE MIXING PROCESS AND PERSON RESPONSI BLE ARE CONCERNED FOR THE SAME PROCESS, WE WISH TO CLARIFY THAT NORMALLY THE MIXING PROCESS OF ALL INPUTS VIZ PERFUMERY COMPOUNDS, RAW MATERIAL TO FORMULATE THE FINAL OUTCOME IS BEING CARRIED OUT BY THE SALARIED EMPLOY EES OF THE COMPANY. MD IS NOT DIRECTLY INVOLVED IN MIXING OF THE INPUTS TO BRING THE FINAL OUTCOME SOLD BY US VIZ. PAN MASALA, GUTKHA, AND TOB ACCO ETC. ON THE BASIS OF THE ABOVE REPLY, ACCORDING TO HER, THE ASSESSEE DID NOT STATE FULLY AND TRULY ALL MATERIAL FACTS. ACCORDING TO HER, ONLY AF TER THE SEARCH, THE AO GOT THE MATERIAL THAT THERE IS PROFIT SHIFTING WHICH IS IN VIOLATION OF SECTION 80IA (8) OF THE ACT, WE FIND NO MERIT IN THE SAID SUBMISSION. THE ARGUMENT DOES NOT MEET THE BASIC ALLEGATION THAT THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DIS CLOSE, FULL AND TRUE MATERIEL FACTS NECESSARY FOR ASSESSMENT. ON THE CONTRARY, IT SUPPO RTS THE SAID CLAIM OF THE ASSESSEE. AT BEST, IT CAN BE ASSUMED THAT THE AO AT THE STAGE OF ASSESSMENT COULD HAVE DRAWN A CONCLUSION AS IS NOW BEING CONTENDED BY THE REVENUE . THUS, IT IS ALSO A CASE OF INFERENCE WHICH IS DIFFERENT FROM THE EARLIER INFER ENCE ACCEPTING THE CLAIM OF ASSESSEE. BUT CERTAINLY IT IS NOT A CASE OF FAILURE TO DISCLO SURE OF FACTS ON THE PART OF THE ASSESSEE. 57. WE, THEREFORE, ARE BOUND TO HOLD THAT THE CONDI TIONS PRECEDENT TO THE EXERCISE OF JURISDICTION UNDER SECTION 147/148 OF THE ACT DID N OT EXIST AND THE AO HAD, THEREFORE, NO JURISDICTION TO ISSUE THE IMPUGNED NOTICES UNDER SECTION 147/148 IN RESPECT OF THE RELEVANT ASSESSMENT I.E. AY 2004-05 AFTER THE EXPIR Y OF FOUR YEARS ON THIS COUNT ALSO. 87 ITA NO.5611 & 5581/DEL/2013 58. NEXT LET US LOOK WHETHER THE IMPUGNED REASSESSM ENT IN THE FACTS OF THIS CASE BE TERMED AS REVIEW OR CHANGE OF OPINION OF THE ORIGIN AL ASSESSMENT U/S 143(3). 59. FROM A PERUSAL OF THE LETTER OF AO DATED 13.03. 2007 (REPRODUCED SUPRA) AND THE AOS NARRATION OF UNIT-WISE ACTIVITIES DESCRIBED BY THE AO, CAN IT BE NOW SAID THAT AO DURING ORIGINAL ASSESSMENT PROCEEDINGS COMPLETED U/ S 143(3) OF THE ACT WAS IN THE DARK ABOUT UNIT-WISE ACTIVITIES CARRIED OUT BY THE ASSES SEE. SO THE ARGUMENT OF THE LD. DR, THAT FLOW CHART WHICH IS MENTIONED IN THE REASONS R ECORDED THREW LIGHT FOR THE FIRST TIME INTO THE UNIT-WISE TRANSACTION OF THE ASSESSEE IS B EREFT OF ANY MERITS AND SO CANNOT BE COUNTENANCED. MOREOVER, AS STATED EARLIER ALSO, WE TAKE NOTE OF THE FACT THAT THE ISSUE OF DEDUCTION U/S 80IC WAS EXTENSIVELY CONSIDERED IN OR IGINAL ASSESSMENT PASSED U/S 143(3) DATED 28.12.2006 (P.B. 177-186 AT P.B. 178-182) AND IN THE ASSESSMENT ORDER PASSED U/S 143(3) /264 DATED 28.03.2007 (P.B. 300-310 AT 3 03-308). FURTHER, WE FIND THAT THERE WAS EVEN A REVISION ORDER U/S 264 DATED 29-01 02007 (P.B.187-198 AT 187-190) ON THIS ISSUE. A PERUSAL OF PB 59-62 AT 59-60, WE FIND THAT QUESTIONNAIRE DATED 13/01.2006 FROM LD. AO ISSUE IN ORIGINAL ASSESSMENT U/S 143(3) ASKING ABOUT PROCUREMENT OF RAW MATERIAL FROM DIFFERENT UNITS/DIVISIONS AND ABOUT D EDUCTION U/S 80IC, EXCISE DUTY. AND PB 63-85 IS ASSESSEES LETTER DATED 02.02.2006 GIVI NG DETAILS OF INTER UNIT TRANSFERS AND THAT DELHI OFFICE HAS NO ROLE IN PROCUREMENT PROCES S AND DETAILED EXPLANATION OF SECTION 80IC AND ABOUT INCOME FROM ELIGIBLE AND NON-ELIGIBL E UNITS, EXCISE DUTY PAID IN GUWAHATI AND AGARTALA UNITS IN PECULIAR CIRCUMSTANC ES AND ABOUT ROYALTY PAYMENT TO M/S FLOSYN FRAGRANCES (P) LTD. EXCISE NOTIFICATION S TOGETHER WITH ANNEXURE A, B, C (PB 74-76, 77-81, 82-85). AND PB 86-93 AT 86-8 7 IS COPY OF LETTER DATED 10.02.2006, THE ASSESSEE HAS SUBMITTED ABOUT DETAIL S OF EXCISE DUTY REFUND IN RESPECT OF GUWAHATI UNIT AND ITS RELEVANCE FOR DEDUCTION U/S 8 0IC TOGETHER WITH ANNEXURE A, B (PB-90-91, 92-93). WE TAKE NOTE THAT PB 94-124 IS COPY OF ASSESSEES REPLY DATED 88 ITA NO.5611 & 5581/DEL/2013 22.02.2006 FILED TO AO EXPLAINING UNIT WISE SALES, NATURE OF UNIT WISE EXPENSES AND PROFIT OF VARIOUS UNITS, UNIT WISE WASTAGE TOGETHER WITH ALL ANNEXURE OF THIS LETTER. WE FIND THAT THE ASSESSEE VIDE LETTER DATED 09.03.2006 TOGETHER WITH ALL ITS ANNEXURES SHOWING UNIT WISE STOCK, PARTY WISE DETAILS OF JOB WORK (PB 125-133). AND PB 134- 135 IS LETTER DATED 10/11/2006 GIVING DETAILED NOTE ON DEDUCTION U/S 80IC. AND PB 136-141 IS LETTER DATED 20.11.2006 EXPLAINING ABOUT MOVEMENT OF RAW MATERIAL AND OTHER INPUTS FROM VARIOUS UNITS. 60. FURTHER, PB 139-138 IS LETTER DATED 27.11.2006 EXPLAINING ABOUT TRANSFERS FROM ONE UNIT TO ANOTHER. MOREOVER, WE TAKE NOTE THAT PB 316 IS A TABLE PREPARED TO SHOW THAT CONTENTIONS RAISED IN THE REASON RECORDED ARE THE O NES RELATING TO WHICH SUBMISSIONS WERE MADE IN THE ORIGINAL ASSESSMENT PROCEEDINGS U/ S 143(3), 144A & 264. AND PB 921-922 COPY OF ASSESSEES REPLY DATED 09/04/2006 F ILED TO LD. ADDL. CIT IN ASSESSMENT PROCEEDINGS FOR AY 2004-05 SUBMITTING AB OUT THE MANUFACTURING OF PAN MASALA. AND PB 970-971 COPY OF ASSESSEES REPLY ON THE ISSUE DATED 13/04/2009 TO CIT(A) FOR AY 2004-05. 61. THUS, ABOVE WOULD SHOW THAT THE ISSUE OF DEDUCT ION U/S 80IC, MANNER OF COMPUTATION OF DEDUCTION U/S 80IC, UNIT WISE TRANSF ERS OF MATERIAL, IMPACT OF EXCISE DUTY ON THE DEDUCTION U/S 80IC AND ROYALTY HAVING B EARING ON THE DEDUCTION U/S 80IC ALL HAVE BEEN THE SUBJECT MATTER OF ASSESSMENT PROCEEDI NGS, REVISIONAL PROCEEDING, REASSESSMENT PROCEEDING ON EARLIER OCCASION. WE FIN D THAT THE ASSESSEE HAD EXPLAINED THE ACTIVITIES CARRIED OUT AT EACH OF ITS UNITS SIT UATED IN DIFFERENT PARTS OF INDIA AND FILED BALANCE SHEETS UNIT-WISE, PROFIT & LOSS ACCOUNT, IN TER-UNIT TRANSFER OF MATERIALS LOCAL AND INTER-STATE, HAS BEEN FULLY AND TRULY DISCLOSED AND THUS THE MATERIAL PARTICULARS NECESSARY FOR THE ASSESSMENT DURING THE SCRUTINY OR IGINAL ASSESSMENT U/S 143(3) UNDER 89 ITA NO.5611 & 5581/DEL/2013 THE WATCHFUL EYES AND SUPERVISION OF THE ADDITIONAL COMMISSIONER U/S 144; FURTHER REVISIONAL ASSESSMENT UNDER THE COMMISSIONER U/S 26 4 OF THE ACT AND THEREAFTER, THE AO PASSED THE ORIGINAL ASSESSMENT. WE FIND FROM TH E QUERIES POISED BY THE AUTHORITIES I.E., AO, ADDITIONAL COMMISSIONER AND COMMISSIONER DURING THE ORIGINAL ASSESSMENT, CLEARLY BEARS THE FACT THAT THE ISSUE WHICH THE AO WISH THE REOPEN WAS THREAD BARE ANALYSED AND THE ASSESSEE HAD FULLY AND TRULY DISCL OSED THE MATERIAL FACT BEFORE ALL THE AUTHORITIES AS DISCUSSED ABOVE. THERE BEING NOTHING FOUND OUT DURING THE COURSE OF SEARCH WHICH COULD HAVE SHOWN ANY THING ADVERSE TO THE ASSESSEE OR DIFFERENT AS IS CLEAR FROM THE PLAIN READING OF THE READING OF THE REASON RECORDED, THE IMPUGNED REASSESSMENT IS NOTHING BUT CHANGE OF OPINION ON TH E SAME SET FACTS WHICH IS NOT PERMISSIBLE IN THE EYES OF LAW IN VIEW OF THE ABOVE MENTIONED CATENA OF JUDICIAL DECISIONS AND IN VIEW OF THE LATEST JUDICIAL DECISI ON FROM HONBLE DELHI HIGH COURT IN THE CASES OF CIT VS. KELVINATOR INDIA LTD. (SUPRA), CIT VS USHA INTERNATIONAL LTD. 348ITR485(DEL)(FB) AND BY HONBLE SUPREME COURT CIT VS ICICI SECURITIES PRIMARY DEALERSHIP LTD. 348ITR299 (SC) AND SO, THE REASSESS MENT DONE IS BAD IN LAW AND HAS TO BE STRUCK DOWN. 62. NOW LET US EXAMINE THE SANCTION GRANTED BY THE COMMISSIONER OF INCOME-TAX U/S 151 OF THE ACT AND SEE WHETHER THE CIT & ADDL.C IT HAS GRANTED SANCTION IN A MECHANICAL MANNER OR DUE APPLICATION OF MIND WAS TH ERE TAKING INTO CONSIDERATION THE HISTORY OF THE ORIGINAL ASSESSMENT. 63. LD. DR WHILE COUNTERING THE ARGUMENT OF THE ASS ESSEE THAT THE SATISFACTION OF THE LD. COMMISSIONER WHILE GIVING APPROVAL U/S 151 IS W ITHOUT APPLICATION OF MIND, SHE MADE REFERENCE TO HONBLE SUPREME COURTS JUDGEMENT IN THE CASE OF S. NARAYANAPPA & ORS. VS COMMISSIONER OF INCOME TAX, (1967) 63 ITR 0219, WHEREIN THEIR LORSHIPS 90 ITA NO.5611 & 5581/DEL/2013 HAVE HELD THAT THERE IS NO REQUIREMENT IN ANY OF THE PROVISIONS OF THE ACT OR ANY SECTION LAYING DOWN AS A CONDITION FOR THE INITIATI ON OF THE PROCEEDINGS THAT THE REASONS WHICH INDUCED THE CIT TO ACCORD SANCTION TO PROCEED UNDER S 34 MUST ALSO BE COMMUNICATED TO THE ASSESSEE. LD. DR CONTENDED THAT THE SAID ORDER HAS ENDORSED THE VIEW OF THE HONBLE MADRAS HIGH COURT IN THE CASE O F THE PRESIDENCY TALKIES LTD VS FIRST ADDL. ITO. 64. LD. DR ON THIS GROUND FURTHER EXPLAINED THAT IN THE CASE OF THE ASSESSEE, THE LD. COMMISSIONER HAS DULY ACCORDED HIS APPROVAL BY STAT ING THAT I AM SATISFIED. ACCORDING TO THE LD. DR, HE HAS NOT USED WORDS SUCH AS YES OR I AGREE. LD. DR ASSERTED THAT AN ADMINISTRATIVE COMMISSIONER HAS CO NSIDERABLE EXPERIENCE BEHIND HIM AND CAN EFFICIENTLY ANALYZE THE SATISFACTION NOTE P UT UP BY THE AO ALONG WITH TANGIBLE MATERIAL PLACED BEFORE HIM. HENCE, ACCORDING TO HER , IT CANNOT BE SAID THAT HE DID NOT APPLY HIS MIND BEFORE ACCORDING APPROVAL. MOREOVER, AS PER HER, THE ADEQUACY OF THE REASONS FOR ARRIVING AT THE SATISFACTION BY THE COM MISSIONER CANNOT BE QUESTIONED BY THE COURTS AS HELD ABOVE BY THE HONBLE MADRAS HIGH COURT WHICH WAS APPROVED BY THE HONBLE APEX COURT CITED (SUPRA). LET US EXAMI NE THE APPROVAL GRANTED BY THE COMMISSIONER U/S 151 OF THE ACT TO ADJUDICATE WHETH ER THERE WAS APPLICATION OF MIND BY THE CIT AS ENVISAGED IN SECTION 151 OF THE ACT F OR THAT WE HAVE ALREADY REPRODUCED THE SANCTION GRANTED BY THE COMMISSIONER ON 28.03.2 011 AT PAGES 59 & 60 ABOVE. 65. ON 25.03.2011, WHEN THE AO RECORDED THE REASONS TO REOPEN AND COMMISSIONER AND ADDL.CIT GRANTED SANCTION ON 28.03.2011, THE PR EVIOUS AOS LETTER DATED 13.03.2007 (SUPRA) WAS ON RECORD WHEREIN THE AO HAS CLEARLY UNDERSTOOD AND SPELLED OUT THE MODUS-OPERANDI FOLLOWED BY THE ASSESSEE. T HE ASSESSEE HAD DISCLOSED THE UNIT- WISE ACTIVITIES, BALANCE SHEETS UNIT WISE AND THE D ETAILS OF TRANSFER OF MATERIALS BETWEEN 91 ITA NO.5611 & 5581/DEL/2013 UNITS/BRANCHES IN THE COURSE OF LOCAL MOVEMENT AND INTER-STATE TRANSFERS AND PROFIT AND LOSS ACCOUNT WAS DULY FILED BEFORE THE AO AND THERE AFTER HIS ORDER WHICH WAS PASSED UNDER THE SUPERVISION OF ADDITIONAL COMMISSIONER U/ S 144A OF THE ACT, EVEN IF ERRONEOUS, CANNOT BE REOPENED BECAUSE INTENDED REOP ENING IS AFTER 4 YEARS SO HAS TO SATISFY THE PROVISIO OF SEC 147. THAT IS IF THE ASS ESSEE HAD DISCLOSED FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT THEN, EVEN IF THE AO HAS TAKEN AN ERRONEOUS VIEW IT CANNOT BE REVIEWED AFTER 4 YEARS AS HELD BY HONBLE SUPREME COURT IN CIT, CALCUTTA V. BURLOP DEALERS LTD. - 79 ITR 609 (SC). THE RATIONALE BEHIND IS THAT LEGISLATURE HAS TAKEN CARE OF A SITUATION WHEREIN, THE AO COMMIT ERROR, THEN COMMISSIONER HAS BEEN EMPOWERED U/S 263 TO SUO-MOTT O TO INTERFERE AND PROTECT THE INTEREST OF REVENUE. SO THE COMPLETED ASSESSMENT U/ S 143(3) AFTER 4 YEARS, IF THE ASSESSEE HAS DISCLOSED TRUE AND FULL DISCLOSURE OF MATERIAL FACTS, THEN THE AO CANNOT REVIEW THE ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. 66. IT HAS TO BE KEPT IN MIND THAT THE ENTIRE ASSES SMENT RECORD PERTAINING TO THE AY 2004-05 WAS BEFORE THE AO, AND IF HE HAD GONE THROU GH THE VOLUMINOUS DOCUMENT FILED BEFORE HIM BY THE ASSESSEE FOR CLAIMING 80IC AND QU ESTION RAISED BY THE ADDITIONAL COMMISSIONER U/S 144A AS REPRODUCED ABOVE AND QUERI ES OF AO AND REPLIES FURNISHED BY THE ASSESSEE AND THE AOS OWN LETTER DATED 13.03 .2007 (SUPRA) DESCRIBING ELABORATELY THE MODUS OPERANDI; THEN THE AO WOULD H AVE FOUND EVERYTHING WHICH HE SAYS ABOUT THE SO CALLED NEW DISCOVERY (I.E. AS T O STAGE A TO H ) WERE ALL IN THE FILE. HERE COMES THE IMPORTANCE OF THE SANCTION OF THE CO MMISSIONER U/S 151 FOR ISSUANCE OF NOTICE TO REOPEN AFTER 4 YEARS. WE FIND THAT THE LE GISLATURE HAS PROVIDED THIS SAFEGUARD TO KEEP A CHECK ON THE AO NOT TO REOPEN CASUALLY AN ASSESSMENT WHICH HAS BEEN COMPLETED U/S 143(3) AFTER 4 YEARS. 92 ITA NO.5611 & 5581/DEL/2013 67. LD. DR STATED BEFORE US, THAT INVESTIGATION WIN G OF THE DEPARTMENT HAS FORWARDED THE INFORMATION. WHEREAS A PERUSAL OF THE REASONS RECORDED, WHICH SHOULD BE LOOKED INTO ON A STANDALONE BASIS, WE DO NOT FIND A NY WHISPER OR MENTION OF THE INFORMANT (INVESTIGATION WING). THE AO DOES NOT ME NTION THE FACTS CONTAINED, IF ANY, FROM SUCH COMMUNICATION WHICH IS PERTINENT TO THE Y EAR UNDER CONSIDERATION. NEITHER ANYTHING CAN BE ADDED NOR OMITTED FROM THE REASONS RECORDED. THE REASON RECORDED SHOULD SPEAK FOR ITSELF AS TO THE REASONS WHICH ARE INTRINSIC TO MAKE A PRUDENT PERSON BELIEVE IN THE EXISTENCE OF THE BELIEF THAT THERE I S ESCAPEMENT OF INCOME. ALL THAT HE SAYS IS THAT IT APPEARS THAT ASSESSEE IS ATTRIBUTIN G THE ENTIRE VALUE ADDITION TO THE GUWAHATI UNIT TO CLAIM HIGHER AMOUNT OF DEDUCTION U /S 80IC. THE AO HAS NOT EVEN COME TO A PRIMA FACIE CONCLUSION THAT THE ASSESSEE IS SHIFTING PROFITS TO EARN HIGHER AMOUNT OF DEDUCTION. HE APPEARS TO HAVE HAD ONLY A VAGUE FEELING THAT THE SEARCHED SEIZURE SUGGEST ASSESSEES GUWAHATI UNIT IS CLAIM ING HIGHER DEDUCTION U/S 80IC. SUCH A CONCLUSION DOES NOT FULFILL THE REQUIREMENT OF SECTION 151 (2). 68. WE FIND THAT ON THE FORMAT WHICH HAS BEEN REPRO DUCED, THE ADDITIONAL CIT AND COMMISSIONER HAS SIMPLY WRITTEN YES I AM SATISFIED ON THE SAME DAY, I.E. 28.03.2011 WHICH DOES NOT IN ANY MANNER SHED ANY LIGHT AS TO W HETHER THERE WAS ANY APPLICATION OF MIND AT ALL BY THE AFORESAID TWO SENIOR OFFICERS, W HO WERE DUTY BOUND TO HAVE LOOKED IN TO CAREFULLY THE REASONS RECORDED BY THE AO AND SEE N THE HISTORY BEHIND THE ASSESSMENT WHICH WAS PROPOSED TO BE REOPENED BY THE AO. WHEN A SUPERIOR AUTHORITY IS GIVEN POWER BY THE LEGISLATURE, TO GRANT SANCTION TO DO A N ACT BY AN AUTHORITY BELOW HIM, THEN THAT POWER NEEDS TO BE EXERCISED WITH DUE CARE AND CIRCUMSPECTION AND AFTER DUE APPLICATION OF MIND. MECHANICAL MANNER OF GIVING SA NCTION LIKE IN THIS CASE HAVE NOT BEEN APPROVED BY THE HONBLE SUPREME COURT IN A SIM ILAR CASE IN CHHUGAMAL RAJPAL VS. S.P. CHALIHA & ORS. 79 ITR 603 (SC) AND HONB LE HIGH COURT OF MADHYA PRADESH 93 ITA NO.5611 & 5581/DEL/2013 IN ARJUN SINGH VS ASSTT. DIRECTOR OF INCOME TAX (M. P.) REPORTED IN (2000) 246 ITR 363 (MP). THUS, WE ARE NOT SATISFIED THAT AO HAD ANY M ATERIAL BEFORE HIM WHICH SATISFIES THE REQUIREMENTS OF SECTION 147. THEREFORE, HE COU LD NOT HAVE ISSUED NOTICE U/S 148. FURTHER, THE REPORT SUBMITTED BY HIM U/S 151 DOES N OT MENTION ANY REASON AND DOES NOT MENTION WHICH FACTS WERE NOT DISCLOSED BY THE ASSES SEE. WE ARE ALSO OF THE OPINION THAT THE COMMISSIONER HAS MECHANICALLY ACCORDED PERMISSI ON. IF ONLY HE HAD READ THE REPORT AND SEEN THE HISTORY OF THE ORIGINAL ASSESSMENT, HE WOULD NOT HAVE GRANTED PERMISSION. THE SAFEGUARD AGAINST REOPENING U/S 151 OF THE ACT HAS BEEN DONE BY BOTH THE SUPERIOR AUTHORITIES VERY LIGHTLY AND AS HELD BY THE HONBLE SUPREME COURT IN CHUGAMAL RAJPAL (SUPRA), THE AUTHORITIES SUBSTITUTED FORM OVER SUBS TANCE. THUS, WE HOLD THAT THE SANCTION GRANTED BY THE COMMISSIONER U/S 151 IS INVALID AND SO, THE NOTICE OF THE AO DATED 29.03.2011 IS BAD IN LAW AND HAS TO BE NECESSARILY STRUCK DOWN. 69. NOW LET US LOOK INTO THE CONTENTION RAISED BEFO RE US THAT THE ASSESSEE WAS NOT IN RECEIPT OF 143 (2) NOTICE AND ACCORDING TO THE ASSE SSEE, THE 143 (2) NOTICE HAD NOT BEEN ISSUED AT ALL. HOWEVER, THE LD. DR TOOK US THROUGH THE ORDER SHEET ENTRY DATED 24.11.2011, WHEREIN THE AO HAS STATED THAT HE HAS I SSUED THE SAID NOTICE AND ALSO MENTIONS THE ISSUANCE OF 143(2) NOTICE IN THE NOTI CE TO THE ASSESSEE FOR SPECIAL AUDIT AND NOW THE ASSESSEE CANNOT TAKE THE PLEA THAT HE I S NOT IN RECEIPT OF 143(2) NOTICE WHEN ORDER SHEET ENTRY DATED 28.11.2011 REVEALS THAT THE DIRECTOR AND GM (TAXATION) OF THE ASSESSEE COMPANY HAD IN FACT PARTICIPATED IN THE PR OCEEDINGS BEFORE THE AO. SO, THEREFORE, IT HAS TO BE ASSUMED THAT THE NOTICE DAT ED 24.11.2011 HAS BEEN RECEIVED BY THE ASSESSEE AND APPEARANCE WAS IN PURSUANCE OF THE SAID NOTICE. SHE ALSO CLAIMED THAT SINCE THE REASSESSMENT ORDER WAS PASSED ON 22.06.20 12, SECTION 292BB APPLIES IN FULL VIGOR AND SINCE THE ASSESSEE HAS NOT RAISED THE ISS UE OF NON-RECEIPT OF NOTICE U/S 143(2), THE ASSESSEE IS PRECLUDED FROM RAISING IT BEFORE TH E CIT (A) AND SO, CIT (A) HAS RIGHTLY 94 ITA NO.5611 & 5581/DEL/2013 TURNED DOWN THE OBJECTION REGARDING NON-RECEIPT OF 143(2) NOTICE. HOWEVER, THE LD. AR POINTED OUT THAT DESPITE THE BENCH DIRECTING THE DR TO FILE AN AFFIDAVIT IN RESPECT TO ISSUANCE AND SERVICE OF NOTICE U/S 143(2), THE AO, FOR THE REASONS BEST KNOWN TO HIM, HAS NOT FILED THE AFFIDAVIT, NOR THE DR COULD PRODU CE A COPY OF THE 143(2) NOTICE PURPORTEDLY ISSUED BY THE AO IF ANY FROM THE REASSE SSMENT RECORDS. SO, ACCORDING TO THE LD. AR, THE MERE ENTRY IN THE ORDER SHEET THAT 143(2) NOTICE CANNOT IN ANY MANNER SATISFY THE REQUIREMENT OF LAW AND SINCE 143(2) NOT ICE IS MANDATORY, AS PER HOTEL BLUE MOON (SUPRA) AS LAID DOWN BY THE HONBLE SUPREME CO URT, THE NON-ISSUANCE OF NOTICE ITSELF VITIATES THE ENTIRE REASSESSMENT PROCEEDINGS AND, THEREFORE, THE IMPUGNED ORDER IS NULL IN THE EYES OF LAW. 70. WE FIND THAT THE ASSESSEE HAD RAISED THIS LEGAL GROUND BEFORE THE CIT (A) THAT 143(2) NOTICE HAS NOT BEEN ISSUED / RECEIVED BY THE ASSESSEE BEFORE COMPLETION OF THE IMPUGNED REASSESSMENT. ONCE A LEGAL ISSUE OF NON-I SSUE/ NON-RECEIPT OF 143(2) NOTICE WAS RAISED BY THE ASSESSEE BEFORE THE CIT (A), HE W AS BOUND TO ADJUDICATE THIS QUESTION OF FACT; AND SHOULD HAVE GIVEN HIS FINDING ON THE Q UESTION OF FACT WHETHER THE AO HAD ISSUED 143(2) NOTICE OR NOT; AND, IF SO, ON WHICH D ATE, MODE OF SERVICE AND WHETHER IT WAS SERVED ON THE ASSESSEE. RATHER THAN DOING THAT , WE FIND THAT THE CIT (A) HAS SIMPLY STATED THAT 143(2) NOTICE IS NOT REQUIRED IN 153A P ROCEEDINGS AND HAS DISMISSED THIS GROUND OF THE ASSESSEE IN A VERY CASUAL MANNER WHIC H CANNOT BE COUNTENANCED FOR THE SIMPLE REASON THAT THE LD. CIT (A) ERRED IN NOT APP RECIATING THE FACT THAT FIRST OF ALL THE IMPUGNED ORDER HAS NOTHING TO DO WITH SECTION 153A OF THE ACT. IN THIS CASE, REASSESSMENT IS FOR AY 2004-05 WHICH WAS REOPENED U /S 148/147 OF THE ACT AND 143(2) NOTICE IS MANDATORY REQUIREMENT OF LAW AS HELD BY T HE HONBLE SUPREME COURT IN HOTEL BLUE MOON (SUPRA) WHEREIN THE HONBLE SUPREME COURT HAS SAID THAT IN REASSESSMENT 95 ITA NO.5611 & 5581/DEL/2013 PROCEEDINGS, 143(2) NOTICE IS MANDATORY AND IS NOT A CURABLE DEFECT. RELIANCE IS PLACED ON THE FOLLOWING ORDERS :- ACIT & ANR. VS. HOTEL BLUE MOON: [(2010) 321 ITR 3 62 (SC)] HELD: IT IS MANDATORY FOR THE AO TO ISSUE NOTICE U /S 143 (2). THE ISSUANCE AND SERVICE OF NOTICE U/S 143 (2) IS MANDA TORY AND NOT PROCEDURAL. IF THE NOTICE IS NOT SERVED WITHIN THE PRESCRIBED PERIOD, THE ASSESSMENT ORDER IS INVALID REASSESSMENT-----NOTICE -----ASSESSEE INTIMATING ORIGINAL RETURN BE TREATED AS FRESH RETU RN---REASSESSMENT PROCEEDINGS COMPLETED DESPITE ASSESSEE FILING AFFID AVIT DENYING SERVICED OF NOTICE UNDER SECTION 143(2)----ASSESSIN G OFFICER NOT REPRESENTING BEFORE COMMISSIONER (APPEALS) THAT NOT ICE HAD BEEN ISSUED---- REASSESSMENT ORDER INVALID DUE TO WANT O F NOTICE UNDER SECTION 143(2)--- INCOME-TAX ACT, 1961, SS. 143, 14 7, 148(1), PROV.---- ITO V. R.K. GUPTA [308 ITR 49 (DELHI)TRIBU., CIT VS. VISHU & CO. LTD. IN ITA NO. 470 OF 2008 (20 10) 230 CTR (DEL) 62 ASSESSMENT VALIDITY NON SERVICE OF NOTICE UNDER SECTION 143(2) WITHIN TIME NOTICE SERVED ON THE LAST DATE AFTER OFFICE HOURS BY AFFIXTURE AS NO AUTHORIZED PERSON WAS PRESENT AT AS SESSEES PREMISES IS NOT A VALID SERVICE OF NOTICE ASSESSMENT FRAMED IN PURSUANCE OF SUCH NOTICE IS NOT VALID IT IS IMMATERIAL THAT THE AS SESSEE APPEARED IN THE PROCEEDINGS. CIT VS. CEBON INDIA LTD. (2012) 347 ITR 583 (P&H) 5. WE FIND THAT CONCURRENT FINDING HAS BEEN RECORDE D BY THE CIT(A) AS WELL THE TRIBUNAL ON THE QUESTION OF DATE OF SERVICE OF NOTICE. NOTICE WAS NOT SERVED WITHIN THE STIPULATED TIME. M ERE GIVING OF DISPATCH NUMBER WILL NOT RENDER THE SAID FINDING TO BE PERVERSE. IN ABSENCE OF NOTICE BEING SERVED, THE AO HAD NO JURIS DICTION TO MAKE ASSESSMENT. ABSENCE OF NOTICE CANNOT BE HELD TO BE CURABLE UNDER S 292BB OF THE ACT. CIT VS.MR. SALMAN KHAN, ITA NO.508 OF 2010 1. IN THE PRESENT CASE, REASSESSMENT ORDER PASSED UNDER SECTION 143(3) R/W 147 OF THE INCOME TAX ACT, 1961 IS HELD TO BE BAD IN LAW IN VIEW OF THE FACT THAT THE ASSESSING OFFICER HAS NOT ISSUED NOTICE UNDER SECTION 143(2) AFTER ISSUING NOTICE UNDER SECTION 1 48 OF THE INCOME TAX ACT, 1961. THIS COURT IN THE CASE OF THE COMMISSION ER OF INCOME TAX VIS. MR. SALMAN KHAN [INCOME TAX APPEAL NO.2362 OF 2009)DECIDED ON 1ST DECEMBER, 2009 HAS CONSIDERED SIMILAR QUESTI ON AND HAS HELD 96 ITA NO.5611 & 5581/DEL/2013 THAT IN THE ABSENCE OF NOTICE UNDER SECTION 143(2) (PRIOR TO THE INSERTION OF SECTION 292BB), THE REASSESSMENT ORDER CANNOT BE SUSTAINED. IN THE PRESENT CASE, THE REASSESSMENT YEAR INVOLVED RELATE S TO THE PERIOD PRIOR TO THE INSERTION OF SECTION 292BB. IN THIS VIEW OF THE MATTER, THE APPEAL IS DISMISSED WITH NO ORDER AS TO COSTS. DCIT VS. M/S SILVER LINE, ITA NO.1809,1504,1505 & 1 506/DEL/2013 VII. THE HON'BLE ITAT OF AGRA BENCH, IN THE CASE OF ITO V. ALIGARH AUTO CENTRE REPORTED IN 152 TTJ (AGRA) 767, ON AN I DENTICAL ISSUE THAT OF THE PRESENT ISSUE, HAS RECORDED ITS FINDINGS AS UNDER: '5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE FILE D ORIGINAL RETURN OF INCOME AND AT THE REASSESSMENT PROCEEDINGS, THE ASS ESSEE CONTENDED BEFORE THE AO THAT THE ORIGINAL RETURN FILED EARLIE R MAY BE TREATED TO HAVE BEEN FILED IN RESPONSE TO THE NOTICE U/S. 147, WHICH IS ALSO SUPPORTED BY ORDER SHEET ENTRY DATED 09.08.2006 (PB -20). IT IS ALSO NOT IN DISPUTE THAT AO NEVER ISSUED ANY NOTICE U/S. 143 (2) OF THE IT ACT. THE REVENUE MERELY CONTENDED THAT THE CIT (A) SHOUL D HAVE APPRECIATED THE PROVISIONS OF SECTION 292BB OF THE IT ACT. SECTION 292 BB OF THE IT ACT PROVIDES AS UNDER: '292BB. WHERE AN ASSESSEE HAS APPEARED IN ANY PROCE EDING OR CO- OPERATED IN ANY INQUIRY RELATING TO AN ASSESSMENT O R REASSESSMENT, IT SHALL BE DEEMED THAT ANY NOTICE UNDER ANY PROVISION OF THIS ACT, WHICH IS REQUIRED TO BE SERVED UPON HIM, HAS BEEN DULY SE RVED UPON HIM IN TIME IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT AND SUCH ASSESSEE SHALL BE PRECLUDED FROM TAKING ANY OBJECTION IN ANY PROCEEDING OR INQUIRY UNDER THIS ACT THAT THE NOTICE WAS- (A) NOT SERVED UPON HIM; OR (B) NOT SERVED UPON HIM IN TIME; OR (C) SERVED UPON HIM IN AN IMPROPER MANNER: PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY WHERE THE ASSESSEE HAS RAISED SUCH OBJECTION BEFORE THE COMPL ETION OF SUCH ASSESSMENT OR REASSESSMENT.' THE ABOVE PROVISION HAS BEEN INSERTED BY THE FINANC E ACT, 2008 W.EF. 01.04.2008. ITAT, DELHI SPECIAL BENCH IN THE CASE O F KUBER TOBACCO PRODUCT PVT. LTD. VS. DCIT, 117ITD 273 HELD THAT SE CTION 292BB HAS BEEN INSERTED BY FINANCE ACT, 2008, HAS NO RETROSPE CTIVE EFFECT AND IS TO BE CONSTRUED PROSPECTIVELY. THE ASSESSMENT ORDER UN DER APPEAL IS 2001- 02. THEREFORE, THE PROVISION OF SECTION 292BB OF TH E IT ACT WOULD NOT APPLY IN THE CASE OF THE ASSESSEE. FURTHER, NO NOTI CE U/S. 143(2) HAS BEEN ISSUED OR SERVED UPON THE ASSESSEE. THEREFORE, THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CEBON IN DIA LTD. (SUPRA) SQUARELY APPLIES AGAINST THE REVENUE. IT WAS HELD I N THIS CASE THAT ABSENCE OF NOTICE IS NOT CURABLE DEFECT U/S. 292BB OF THE IT ACT. CONSIDERING THE ABOVE DISCUSSION AND THE CASE LAWS CITED ABOVE, THE SOLE OBJECTION OF THE REVENUE IS NOT MAINTAINABLE. THEREFORE, THE ID. 97 ITA NO.5611 & 5581/DEL/2013 CIT (A) WAS JUSTIFIED IN SETTING ASIDE THE ENTIRE A SSESSMENT ORDER. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE ID. CIT (A) FOR INTERFERENCE. ' (V) THE HON'BLE MUMBAI BENCH OF THE ITAT HAS, IN T HE CASE OF SANJEEV R ARORA V. ACIT [IT (SS)A NO.103/MUML2004 D ATED 25.7.2012], RECORDED ITS FINDINGS AS UNDER: 'EVEN, THE IRREGULARITY IN PROPER SERVICE OF NOTICE WHICH CAN BE TREATED AS CURABLE UNDER SECTION 292B OF THE INCOME-TAX ACT IS ONLY IN THE CASES WHERE THE NOTICE UNDER SECTION 143(2) WAS ISSUED PR OPERLY AND WITHIN THE PERIOD OF LIMITATION AND THE ASSESSEE DID NOT R AISE ANY OBJECTION REGARDING THE SERVICE OF THE NOTICE DURING THE ASSE SSMENT PROCEEDINGS AND ALSO PARTICIPATED IN THE ASSESSMENT PROCEEDINGS THEN AT A LATER STAGE THE ASSESSEE IS PRECLUDED FROM RAISING SUCH OBJECTI ON. THEREFORE, THE PROVISIONS OF SECTION 292B ARE NOT APPLICABLE IN TH E CASE WHERE THE ASSESSING OFFICER HAS NOT AT ALL ISSUED NOTICE UNDE R SECTION 143 (2) WITHIN THE PERIOD AS PRESCRIBED.' 7.9. TAKING INTO ACCOUNT THE FACTS AND CIRCUMSTANC ES OF THE ISSUE AS DELIBERATED UPON IN THE FORE-GOING PARAGRAPHS AND A LSO IN VIEWS OF THE JUDICIAL PRONOUNCEMENTS (SUPRA), WE ARE OF THE VIEW THAT THE RE- ASSESSMENT'S MADE FOR THE ASSESSMENT YEARS UNDER CO NSIDERATION HAVE BECOME INVALID FOR NOT HAVING SERVED THE MANDATORY NOTICE U/S 43(2) OF THE ACT ON THE ASSESSEE. IT IS ORDERED ACCORDINGLY. 7.10 WE HAVE SINCE DECIDED THAT THE RE-ASSESSMENT P ROCEEDINGS CONCLUDED U/S 147 R/W 143(3) OF THE ACT WERE INVALI D FOR THE AYS UNDER DISPUTE, THE ISSUES RAISED BY THE REVENUE IN ITS AP PEALS AND ALSO THE CROSS OBJECTIONS OF THE ASSESSEE FIRM BASED ON THE INVALID ASSESSMENT ORDERS HAVE NOT BEEN ADDRESSED TO. WE ALSO RELY ON THE ORDER OF THE HONBLE JURISDICTI ONAL HIGH COURT WHEREIN THEIR LORDSHIPS HAVE UPHELD THE ORDER OF THE SPECIAL BENC H IN KUBER TOBACCO PVT. LTD. VS. DCIT (SUPRA) WHEREIN THE TRIBUNAL HELD THAT SECTION 292BB IS PROSPECTIVE IN OPERATION AND SO IS APPLICABLE FROM AY 2008-09 ONWARDS. SINC E THE PRESENT APPEAL BEFORE US IS RELATING TO AY 2004-05, AND AS WE ARE BOUND BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, SO SECTION 292BB OF THE ACT CANNOT COME TO THE RESCUE OF THE REVENUE IN RESPECT TO ISSUANCE / RECEIPT OF NOTICE U/S 143(2) OF THE ACT. 71. NOW, IN THE PRESENT CASE, THE LD. DR COULD PROD UCE BEFORE US ONLY AN ORDER SHEET DATED 24.11.2011 WHEREIN IT IS WRITTEN BY THE AO TH AT NOTICE U/S 143(2) HAS BEEN ISSUED; 98 ITA NO.5611 & 5581/DEL/2013 OTHER THAN THAT THERE IS NO MENTION OF THE MODE OF SERVICE, WHEN IT WAS DISPATCHED ETC.. HER ASSERTION THAT THE DIRECTOR AND GM (TAXATION) H AS APPEARED BEFORE THE AO ON 28.11.2011 GOES TO SHOW THAT THEY HAVE APPEARED PUR SUANT TO THE RECEIPT OF NOTICE U/S 143(2) CANNOT BE ACCEPTED BECAUSE IT IS CLEARLY WRI TTEN ON THE ORDER SHEET ON 28.11.2011 BY THE AO THAT THE ASSESSEE HAD SUBMITTED OBJECTION IN RESPECT TO REOPENING OF THE ASSESSMENT AND THIS FACT IS STATED BY THE AO IN THE IMPUGNED REASSESSMENT ORDER. MOREOVER, WE HAD GIVEN TIME AND DIRECTED THE LD. DR TO FILE AFFIDAVIT, IF ANY, OF THE AO TO SUPPORT THE CLAIM OF ISSUANCE / DISPATCH / SERVI CE OF THE 143(2) NOTICE, HOWEVER, WE FIND THAT THE LD. DR HAVE NOT FILED ANY AFFIDAVIT O N BEHALF OF THE DEPARTMENT TO SUPPORT THEIR CONTENTION THAT AO IN FACT HAD ISSUED THE NOT ICE. THE LD. DR FAIRLY CONCEDED THAT NEITHER COULD SHE TRACE A COPY OF THE NOTICE U/S 14 3(2) NOR COULD BRING COPY OF THE DISPATCH REGISTER TO BUTTRESS HER CLAIM THAT IN FAC T, NOTICE U/S 143(2) HAD BEEN ISSUED. IN SUCH A SCENARIO, MERE ORDER SHEET ENTRY WITHOUT FOL LOWING UP BY ISSUANCE 143(2) NOTICE AS REQUIRED BY LAW AND DISPATCHING THE SAME TO THE CORRECT ADDRESS OF THE ASSESSEE AND BY MERELY MENTIONING THAT 143(2) NOTICE HAS BEEN IS SUED IN THE SHOW CAUSE NOTICE FOR SPECIAL AUDIT CANNOT SUBSTITUTE THE MANDATORY REQUI REMENT OF LAW IN RESPECT TO ISSUE OF NOTICE U/S 143(2) IN REASSESSMENT PROCEEDINGS AS HE LD BY HONBLE SUPREME COURT IN HOTEL BLUE MOON (SUPRA) AND BY THE HONBLE JURISDIC TIONAL HIGH COURT. THEREFORE, ON THIS COUNT ALSO, THE ASSESSEE SUCCEEDS AND THE ENTI RE REASSESSMENT PROCEEDINGS IS VITIATED FOR NON-ISSUANCE OF 143(2) NOTICE BY THE A O. 72. VIEWED FROM ANOTHER ANGLE, IT HAS TO BE KEPT IN MIND THAT FROM THE REASON RECORDED TO RE-OPEN, IT IS MANIFEST THAT THE SEARCH CONDUCTED ON THE ASSESSEE ON 21.01.2011 WAS THE EVENT FROM WHICH THE AO SAYS HE HAS REASON TO BELIEF ESCAPEMENT OF INCOME. KEEPING THIS FACTUAL BACKGROU ND IN MIND, WE CANNOT TAKE OUR EYES OF THE MECHANISM WHICH GETS TRIGGERED AFTER A SEARCH U/S 132 OF THE ACT, WHEREIN 99 ITA NO.5611 & 5581/DEL/2013 THE PROVISION OF SECTION 153A OF THE ACT KICKS IN. NOW THE SETTLED POSITION OF LAW IN CASE OF SEARCH IS THAT NO ADDITION CAN BE MADE WIT HOUT ANY INCRIMINATING EVIDENCE UNEARTHED DURING THE SEARCH AS HELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN CIT V KABUL CHAWLA 61 TAXMANN.COM 412 (DELHI). IF THAT IS SO, WHETHER THE AO CAN RE- OPEN AN ASSESSMENT WITHOUT ANY INCRIMINATING MATERI AL, WHICH WOULD SUGGEST ESCAPEMENT OF INCOME OF THE YEAR WHICH HE PROPOSES TO RE-OPEN. HERE WHEN WE AGAIN PERUSE THE REASONS RECORDED WE DO NOT FIND ANY WHISPER OF ANY TANGIBLE MATERIA L OR TRACE OF ANY INCRIMINATING MATERIAL WHICH COULD ARM THE AO INVOKE SECTION 147/148 OF THE ACT. MOREOVER, THE ASSESSEES SISTER CONCERN, DHARAMPAL PREMCHAND LTD., WAS ALSO SEARCHED IN JANUARY 2011, AND SIMILAR ADDITIONS WER E MADE ON SIMILAR GROUNDS ALLEGING VIOLATION OF SECTION 80IA(8) FOR ELIGIBLE UNIT CLAI MING 80IC/80IB AND APPEAL PREFERRED BY IT IN ITA NOS.5079, 5080 & 5081/DEL/2013 FOR AY 2005-06 TO AY 2007-08 WAS HEARD BY US AND WE HAVE HELD AS UNDER :- 24. BASED ON THIS WE HAVE COME TO CONCLUSION THAT :- A. NONE OF THE MATERIAL SEIZED DURING THE SEARCH RELAT ES TO THE YEAR UNDER APPEAL. B. NONE OF THE MATERIAL FOUND RELATE TO THE GOODS TR ANSFER TO ONE UNIT FROM OTHER FOR THE PERIOD. C. NONE OF THE MATERIAL RELATES TO THE PURCHASES FROM SISTER CONCERNS. D. NONE OF THE MATERIAL SUGGEST THAT THE MATERIAL TRAN SFERRED TO ELIGIBLE UNDERTAKING IS LESS THAN THE MARKET RATE. E. NONE OF THE MATERIAL SUGGEST THAT THE ELIGIBLE UNIT S ARE NOT CARRYING OUT MANUFACTURING ACTIVITY, WHICH IS STATED BY ASSE SSEE. F. NONE OF THE MATERIAL SHOWS THAT THERE IS INFLATION OF THE PROFIT BY ASSESSEE OF ELIGIBLE UNDERTAKINGS. G. NONE OF THE MATERIAL SUGGEST THAT APPROPRIATION OF PROFIT MADE BY THE ASSESSEE TO DERIVE THE INCOME OF ELIGIBLE UNDER TAKING IS INCORRECT. H. NONE OF THE MATERIAL SUGGEST THAT ELIGIBLE UNITS EA RNS MORE THAN ORDINARY PROFITS. 100 ITA NO.5611 & 5581/DEL/2013 IN VIEW OF ABOVE, WE CONFIRM THAT THE MATERIAL FOUN D DURING THE COURSE OF SEARCH IS NOT INCRIMINATING WHICH EVEN REMOTELY SUG GEST THAT ASSESSEE S CLAIM OF DEDUCTION U/S 80IC/80 IB IS INCORRECT. THUS, IN THE PRESENT CASE, WE ARE AFRAID, WE DO NOT FIND ANY MATERIAL NEITHER TANGIBLE NOR INCRIMINATING MATERIAL IN THE HANDS OF THE AO TO AS SUME JURISDICTION TO REASSESS THE ASSESSEE, SO AO HAS ERRONEOUSLY USURPED JURISDICTIO N WHICH LAW DOES NOT PERMIT HIM TO DO ON THE REASONS GIVEN ABOVE, SO THE ENTIRE ACTION OF AO IS AB-INITIO VOID AND IS QUASHED. 73. BEFORE WE PART, WE WOULD LIKE TO APPRECIATE BOT H THE SIDES ESPECIALLY SHRI R.S. SINGHVI AND LD. CIT DR, MS. NANDITA KANCHAN FOR THE IR ERUDITE ASSISTANCE TO THE BENCH, IN GOING THROUGH THE VOLUMINOUS DOCUMENTS AND TACKL ING LEGAL ISSUES RAISED IN THE PRESENT APPEALS. 74. SINCE WE HAVE ALLOWED THE VARIOUS LEGAL GROUNDS RAISED BY THE ASSESSEE, OTHER GROUNDS RAISED BY BOTH THE PARTIES HAVE BECOME ACAD EMIC AND SO, ARE NOT ADJUDICATED. 75. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF JANUARY, 2016. SD/- SD/- (PRASHANT MAHARISHI) (A.T. VA RKEY) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED: THE 8 TH DAY OF JANUARY, 2016 TS 101 ITA NO.5611 & 5581/DEL/2013 COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A)-XXXIII, NEW DELHI. 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI