Appeal Details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 6131 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 9 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
19-04-2021
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
SMC
Assessment Year
2011-2012
Appeal Filed On
01-07-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, SMC-2: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.5712/DEL/2019 ASSESSMENT YE AR : 2011-12 RAJESH GUPTA HUF, C/O-RAJ KUMAR & ASSOCIATES, CHARTERED ACCOUNTANTS, L-7A (LGF), SOUTH EXTENSION PART-II, NEW DELHI-110049 PAN-AAGHR9262M VS. ITO, WARD-31(4), R. NO.1209, CIVIC CENTRE, NEW DELHI-110002 (APPELLANT) (RESPONDENT) APPELLANT BY : SH . RAJ KUMAR, CA SH. AMAN GUPTA, CA RESPONDENT BY : SH. FARAT KHAN , SR. DR DATE OF HEARING : 01.02.2021 DATE OF PRONOUNCEMENT : 19.04.2021 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.06.2019 OF THE LEARNED CIT(A)-11, NEW DELHI, RELATING TO A SSESSMENT YEAR 2011-12. 2. FACT OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED IT S RETURN OF INCOME ON 20.09.2011, DECLARING TOTAL INCOME OF RS.10,92,630/- . THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENT LY, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY RECORDING THE FOLLOWING REASON S:- REASONS FOR RE-OPENING OF THE ASSESSMENT IN CASE O F SH. RAJESH GUPTA (HUF) FOR A.Y.2011-12 U/S 147 OF THE INCOME T AX ACT, 1961. ITA NO.5712/DEL/2019 2 1. AS PER THE ITD INFORMATION, RAJESH GUPTA (HUF) IS H AVING PAN: AAGHR9262M ADDRESS AT 14, SAINIK FARM, LANE C-3, KHA NPUR, NEW DELHI. FURTHER, AS PER ITD DATABASE, THE AFORES AID ASSESSEIT'FILED HIS RETURN OF INCOME FOR A.Y.2011-1 2 ON 20.09.2011 DECLARING AN INCOME OF RS.10,92,630/-. THE RE*N OF INCOME WAS PROCESSED U/S 143(1). 2. IN THIS CASE, INFORMATION WAS RECEIVED FROM THE OFF ICE ADITFLNV.) UNIT- 1(3), MUMBAI VIDE OFFICE LETTER NO. ADIT(LNV.)/UNIT -L(3)/DMC EDU/2017-18/1082 DATED 21/03/2018 IN THIS OFFICE ON 27/03/2018. AS PER THE INFORMATION, IT IS GATHERED THAT M/S DMC EDUCATION LTD. (SCRIPT NAME DMC EDUCATION) IS A PEN NY STOCK LISTED ON BSE WITH SCRIPT CODE (517973) AND TRADING IN THI S SCRIPT IS HIGHLY SUSPICIOUS AND THIS COMPANY HAS BEEN USED TO FACILI TATE INTRODUCTION OF UNACCOUNTED INCOME OF MEMBERS OF BENEFICIARIES I N THE FORM OF EXEMPT CAPITAL GAIN OR SHORT TERM CAPITAL LOSS IN T HEIR BOOKS OF ACCOUNTS. THE FINANCIALS OF THE COMPANY FOR THE REL EVANT PERIOD DO NOT SHOW ANY SUBSTANTIAL CHANGE SO AS TO SUPPORT SU CH AS HUGE SHARE PRICE MOVEMENT. THE SHARP RISE IN THE MARKET PRICE OF THIS ENTITY IS NOT SUPPORTED BY FINANCIAL FUNDAMENTALS O F THE COMPANY. BOTH PURCHASE AND SALE OF THE SHARES ARE CONCENTRAT ED WITHIN FEW PERSONS/ENTITIES. THE EXIT PROVIDERS DO NOT HAVE CR EDITWORTHINESS. THEY ARE EITHER NON-FILERS OR HAVE FILED NOMINAL RE TURN OF INCOME. FURTHER, DURING IT WAS ALSO EXAMINED THAT THAT THIS SCRIPT WAS ALSO INDULGED IN SELF-TRADING. 2.1. AFTER EXAMINING OF TRADE DATA OF M/S DMC EDUCA TION LTD BY THE INVESTIGATION WING, MUMBAI, IT WAS ANALYZED THA T THE FOLLOWING BENEFICIARY HAS ALSO TRADED IN THE SCRIPT OF M/S DM C EDUCATION LTD DURING THE F.Y,2010-11: 3. INFORMATION RECEIVED IS ANALYZED AT OUR END AND AFT ER ANALYZING IT IS OBSERVED THAT THE ASSESSEE SH.RAJESH GUPTA (HUF) , WAS INVOLVED IN BUYING THE BOGUS INFLATED/DEFLATED SHAR ES THROUGH THE PREARRANGED TRANSACTIONS ON THE STOCK EXCHANGE IN T HE SHARES OF M/S DMC EDUCATION LTD AND MADE TOTAL TRADE VALUE OF RS.1,90,800/-. THE TRADING PATTERN OF SHARES OF M/S DMC EDUCATION LTD SHOWS THAT THE PRICES ROSE AND FELL S HARPLY IN A PRE- ARRANGED TRADING PATTERN. FURTHER, THE FLUCTUATION IN THE SHARE PRICES IS NOT IN SYNCHRONIZING WITH THE GENERAL SEN SEX LEVEL. ALSO THE SHARP RISE AND FALL IN THE PRICE OF SHARES OF M /S DMC EDUCATION LTD IS NOT CORRELATED WITH THE FUNDAMENTA LS OF COMPANY. S.NO. NAME OF BENEFICIARY PAN OF THE BENEFICIARY TOTAL TRADE VALUE FOR F.Y.2010-11 1. RAJESH GUPTA (HUF) AAGGR9262M RS. 1,90,800/- ITA NO.5712/DEL/2019 3 THE FINANCIALS OF THE COMPANY ALSO DO NOT JUSTIFY T HE SHARP RISE & FALL IN THE PRICE OF THE SHARES FOR THE PURPOSE OF GIVING BOGUS ENTRY/BOGUS LTCG TO THE DIFFERENT BENEFICIARIES ON COMMISSION. 4. ON PERUSAL OF INFORMATION RECEIVED FROM THE OFFICE OF THE ADIT(INV.) UNIT-1(3), MUMBAI AND AFTER VERIFICATION OF RETURN OF INCOME FILED BY THE ASSESSEE, IT IS OBSERVED THAT THE ASSESSEE HAS NOT DECLARED THE TRANSACTION OF RS. 1,90,800/- IN HIS RETURN OF INCO ME AND THE SAME REMAINS UNACCOUNTED FOR BEING NOT DECLARED BY THE A SSESSEE TO THE DEPARTMENT AND HENCE INCOME OF RS.L LAKH OR MORE HA S ESCAPED ASSESSMENT IN A.Y.2011-12, THUS TO BRING THE ABOVE AMOUNT TO TAX, RE-OPENING THE CASE U/S 147 IS PROPOSED. 5. IT IS PERTINENT TO MENTION THAT IN THE CASE OF CIT VS NOVA PROMOTERS & FINLEASE (P) LTD. (ITA NO.342 OF 2011) DATED 15/0 2/2012, THE HON'BLE DELHI HIGH COURT, WHICH IS THE JURISDICTION AL HIGH COURT, HELD THAT AS LONG AS THERE IS A 'LIVE LINK' BETWEEN THE MATERIAL WHICH WAS PLACED BEFORE THE ASSESSING OFFICER AT TH E TIME WHEN REASONS FOR REOPENING WERE RECORDED, PROCEEDINGS U/ S 147 WOULD BE VALID. THE COURT ALSO HELD:- 'WE ARE AWARE OF THE LEGAL POSITION THAT AT THE STA GE OF ISSUING THE NOTICE U/S 148, THE MERITS OF THE MATTE R ARE NOT RELEVANT AND THE ASSESSING OFFICER AT THAT STAG E IS REQUIRED TO FORM ONLY A PRIMA FACIE BELIEF OR OPINI ON THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. 6. IT IS PERTINENT TO MENTION HERE THAT IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERA TION BUT NO ASSESSMENT AS STIPULATED U/S 2(40) OF THE INCOME TA X ACT WAS MADE AND THE RETURN OF INCOME WAS PROCESSED U/S 143 (1) OF THE INCOME TAX ACT. IN VIEW OF THE ABOVE, PROVISIONS OF CLAUSE (B) OF EXPLANATION 2 TO SEC.147 ARE APPLICABLE TO FACTS OF THIS CASE AND THE ASSESSMENT YEAR UNDER CONSIDERATION IS DEEMED T O BE A CASE WHEN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. 7. IN THIS CASE, MORE THAN FOUR YEARS HAVE ELAPSED FRO M THE END OF ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, NECESSA RY APPROVAL U/S 151(1) OF THE INCOME TAX ACT MAY KINDLY BE ACCO RDED FOR ISSUING NOTICE U/S 148 OF THE ACT FOR A.Y. 2011-12. 3. THE ASSESSING OFFICER THEREAFTER ISSUED NOTICE U/S 148 OF THE ACT ON 30.03.2018 WHICH WAS DULY SERVED ON THE ASSESSE E. THE ASSESSEE IN RESPONSE TO THE SAME FILED THE RETURN OF INCOME ON 10.04.2 018 DECLARING TOTAL INCOME OF RS.7,50,590/- AND ASKED FOR REASONS WHICH WERE DULY ITA NO.5712/DEL/2019 4 PROVIDED TO THE ASSESSEE. THE ASSESSEE FILED OBJECTIONS A GAINST SUCH REOPENING WHICH WERE DISPOSED OF BY THE ASSESSING OFFICER B Y PASSING A SPEAKING ORDER, WHEREIN, HE REJECTED THE VARIOUS OBJECTIONS OF T HE ASSESSEE. 3.1. SUBSEQUENTLY, DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY ADDITION SHOULD NOT BE MADE ON ACCOUNT OF ACCOMMODATION ENTRY FO R LONG TERM CAPITAL GAIN AMOUNTING TO RS.1,90,800/- U/S 68 OF THE INCO ME TAX ACT AND THE COMMISSION ON ACCOUNT OF PROVIDING SUCH ACCOMMOD ATION ENTRY. REJECTING THE VARIOUS EXPLANATION GIVEN BY THE ASSESSEE AND INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT AND GENUINENESS OF THE CLAIM OF LONG TERM CAPITAL GAIN U/S 10(38) OF THE ACT, THE ASSESSING OFFIC ER MADE ADDITION OF RS.1,90,800/- TO THE TOTAL INCOME OF THE ASSESS EE. HE FURTHER MADE ADDITION OF RS.9,540/- BEING COMMISSION PAID FOR ARRANGIN G SUCH ACCOMMODATION ENTRY. 4. IN APPEAL, THE LEARNED CIT(A), SUSTAINED THE ADDITION MA DE BY THE ASSESSING OFFICER. HE ALSO UPHELD THE VALIDITY OF REASSES SMENT PROCEEDINGS CHALLENGED BEFORE HIM. 5. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(A), THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING FOLLOWING GROUNDS OF APPEAL 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, PROCEEDINGS U/S 147/148 ARE WITHOUT JURISDICTION, WITHOUT APPLICATI ON OF MIND, UNWARRANTED, MECHANICAL, ON BORROWED SATISFACTION A ND ON THE BASIS OF WRONGLY TAKEN FACTS, HENCE UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE APPROV AL U/S 151 IS FATALLY DEFECTIVE, MECHANICAL AND WITHOUT APPLIC ATION OF MIND WHICH MAKES THE WHOLE PROCEEDINGS WITHOUT JURISDICTION, I LLEGAL AND ITA NO.5712/DEL/2019 5 UNWARRANTED. 3. THAT THE LD. A.O., DID NOT ADJUDICATE THE OBJECTIO NS AGAINST INITIATION OF RE-ASSTT PROCEEDINGS FULLY, AS PER LA W AND AS PER THE DIRECTIONS OF HONBLE SC IN THE CASE OF OF G.K.N. D RIVE SHAFTS, HENCE CONSEQUENTIAL PROCEEDINGS AND IMPUGNED ASSTT. IS IL LEGAL AND WITHOUT JURISDICTION. 4. THAT UNDER THE FACTS AND CIRCUMSTANCES, THERE IS NO JUSTIFICATION IN LAW AS WELL AS ON MERITS FOR ADDITION OF RS. 1,9 0,800/- U/S 68 FOR THE SALE CONSIDERATION AMOUNT REED ON SALE OF SHARE DURING THE YEAR WHICH WERE ACQUIRED IN F.Y 2005-06 AND FURTHER ERRE D IN NOT ALLOWING THE EXEMPTION U/S 10(38) FOR LTCG AMOUNT OF RS. 1,3 0,800/- 4.1 THAT UNDER THE FACTS AND CIRCUMSTANCES, PROVISIONS OF SECTION 68 ARE NOT APPLICABLE ON THE IMPUGNED ADDITION OF R S. 1,90,800/-. 4.2 THAT IN THE ABSENCE OF PROVIDING AND CONFRONTING A LLEGED ADVERSE MATERIAL AND IN THE ABSENCE OF CROSS EXAMIN ATION BEING ALLOWED, NO COGNIZANCE OF SUCH MATERIAL CAN BE TAKE N, THUS THE A.O ERRED IN LAW AND ON MERITS IN MAKING ADDITION OF RS .1,90,800/- ON THE BASIS OF SUCH MATERIAL. 5. THAT THERE IS NO LEGALITY AND JUSTIFICATION FOR ADD ITION OF RS.9,540/- AS UNEXPLAINED EXPENDITURE U/S 69C FOR A LLEGED COMMISSION EXPENSE @5% OF RS.1,90,800/- ALTHOUGH TH ERE IS NO MATERIAL AND EVIDENCE FOR THE SAME. 6. THE LEARNED COUNSEL FOR THE ASSESSEE, REFERRING TO P AGE 3 AND 4 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO T HE REASONS RECORDED BY THE ASSESSING OFFICER, ACCORDING TO WHICH, THE ASSESSE E HAS NOT DECLARED THE TRANSACTION OF RS.1,90,800/- IN HIS RETURN OF INCOME AN D THE INCOME REMAINED UNACCOUNTED FOR BEING NOT DECLARED BY THE ASSE SSEE BEFORE THE DEPARTMENT. REFERRING TO PAGE 48 TO 50 OF THE PAPER BO OK, THE LEARNED COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE COPY OF THE RETURN OF INCOME FILED BY THE ASSESSEE, WHEREIN, THE ASSES SEE HAS DECLARED LONG TERM CAPITAL GAIN OF RS.1,29,903/- AS PER SCHEDULE E- 1 OF THE INCOME TAX RETURN. HE ACCORDINGLY SUBMITTED THAT THE ASSESSING OFFICER WITHOUT VERIFYING THE RETURN OF INCOME FILED BY THE ASSESSE E AND IN A MECHANICAL MANNER AND UNDER BORROWED SATISFACTION HAS RE OPENED THE ITA NO.5712/DEL/2019 6 ASSESSMENT WHICH IS NOT VALID IN LAW. HE SUBMITTED THAT WH EN THE REOPENING IS BASED ON WRONG APPRECIATION OF FACTS, SUCH RE OPENING IS HELD TO BE INVALID IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS KAMDHENU STEEL & ALLOYS REPORTED IN 248 C TR 33(DEL.), IN THE CASE OF CIT VS SH. ATUL JAIN AND VINIT JAIN REPORTED IN 2 92 ITR 383(DEL.) AND IN THE CASE OF PR. CIT VS RMG POLYVINYL (I) LTD . REPORTED IN 396 ITR 5(DEL.). 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER NOTICE U/S 148, THE CASE OF THE ASSESSEE WAS REOPENED AFTER GETTING APPROVAL FROM THE PR.CIT-11, NEW DELHI. THE ASSESSEE VIDE LE TTERS DATED 02.05.2018 AND 13.08.2018 REQUESTED THE ASSESSING OFFICER TO PROVIDE THE COPY OF THE APPROVAL TAKEN U/S 151(1) OF THE ACT. HOWE VER, NO SUCH COPY OF APPROVAL WAS EVER PROVIDED BY THE ASSESSING OFFICER TO THE ASSESSEE. REFERRING TO VARIOUS DECISIONS, HE SUBMITTED THAT WHEN THE APPROVAL HAS BEEN GIVEN IN A MECHANICAL MANNER, SUCH APPROVAL IS NOT AC CORDANCE WITH LAW AND THEREFORE, THE REASSESSMENT PROCEEDINGS HAS TO BE HELD AS INVALID. HE SUBMITTED THAT THE ASSESSING OFFICER IN THE INSTANT CAS E HAS INITIATED REASSESSMENT PROCEEDINGS IN A MECHANICAL MANNER WITHOUT APPLICATION OF MIND. REFERRING TO THE FOLLOWING DECISIONS, HE SUBMITTED THAT WHERE, THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE BA SIS OF INFORMATION FROM THE INVESTIGATION WING AND WITHOUT INDEPENDENT APPLICA TION OF MIND, SUCH REASSESSMENT PROCEEDINGS ARE HELD TO BE INVALID BEING NOT ACCO RDANCE WITH LAW. FOR THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS: I. PR. CIT VS G AND G PHARMA INDIA LTD. 384 ITR (2016)(DEL.) 147 ITA NO.5712/DEL/2019 7 II. SARTHAK SECURITIES CO. (P) LTD. 329 ITR 110(DEL.) III. CIT VS KAMDHENU STEEL & ALLOYS LTD. (2012) 248 CTR (DEL.) 33 IV. PCIT VS MEENAKSHI OVERSEAS (I) LTD. 395 ITR 677 (DEL.) 8. SO FAR AS THE MERITS OF THE CASE IS CONCERNED, THE LE ARNED COUNSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE H AD APPLIED FOR 5000 SHARES HAVING FACE VALUE OF RS.10 EACH OF M/S SWEN TELEVISIO N LTD. IN A.Y. 2006-07. THEREAFTER, SHARES OF M/S SWEN TELEVISION LTD. WE RE SPLIT INTO THE FACE VALUE OF RS.5/- EACH, FURTHER, BONUS SHARES IN THE RA TIO OF 1:1 WERE ALLOTTED BY THE CO. HENCE, IN THIS MANNER, ASSESSEE HELD 20,000/- SHARES IN M/S SWEN TELEVISION LTD. THEREAFTER, M/S SWEN TELEVISION LTD. WAS AMALGAMATED WITH M/S DMC INTERNATIONAL, AND ASSESSEE WAS ALLOTTED 3 SHARES FOR EVERY 4 SHARES HELD IN M/S SWEN TELEVISION LTD . I.E. 15000 SHARES OF DMC ALLOTTED AGAINST 20000 SHARES OF SWEN TELE VISION. IN THIS MANNER, THE ASSESSEE GOT 15000 SHARES IN M/S DMC INTE RNATIONAL. SUCH 15000 SHARES WERE SOLD IN A.Y. 2011-12. THE LTCG ARISING ON SALE OF SHARES ARE AS UNDER:- M/S DMC INTERNATIONAL. SALE CONSIDERATION RS.1,90,227/- LESS: PURCHASE COST RS. 60,000/- LESS: TRF EXP RS. 324/- LTCG RS.1,29,903/- 9. REFERRING TO VARIOUS PAGES OF THE PAPER BOOK, THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE H AS DULY DISCLOSED SUCH LONG TERM CAPITAL GAIN ON ACCOUNT OF SALE OF THE SH ARES AFTER DEDUCTING THE PURCHASE COST (RS.60,000/-) AND THE TRANSFE R EXPENSES (RS.324/-) FROM THE SALE CONSIDERATION OF RS.1,92,227/-. THEREFOR E, BOTH LEGALLY AND FACTUALLY, THE ADDITION MADE BY THE ASSESSING O FFICER AND ITA NO.5712/DEL/2019 8 SUSTAINED BY THE LEARNED CIT(A) IS NOT IN ACCORDANCE WITH LAW. REFERRING TO THE VARIOUS DECISIONS PLACED IN THE PAPER BOOK, THE LEARNE D COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE REASSESSMENT PROCEEDINGS IN THE INSTANT CASE IS NOT IN ACCORDANCE WITH LAW AND THEREFORE HAS TO BE QUASHED. 10. THE LEARNED DR, ON THE OTHER HAND, HEAVILY RELIED ON THE ORDER OF THE LEARNED CIT(A). 11. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARN ED CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CON SIDERED THE VARIOUS DECISIONS CITED BEFORE ME. I FIND THE ASSESSING O FFICER IN THE INSTANT CASE, ON THE BASIS OF INFORMATION OBTAINED FROM THE INVESTIGATION WING THAT THE ASSESSEE HAS TRADED IN A PENNY STOCK NA MELY SHARES OF M/S DMC EDUCATION LTD. AND HAS NOT DISCLOSED THE INCOME ARIS ING OUT OF SUCH TRANSACTION, REOPENED THE ASSESSMENT, THE REASONS OF WH ICH HAVE ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPH. I FIND REJE CTING THE VARIOUS EXPLANATION GIVEN BY THE ASSESSEE, THE ASSESSING OFFICER MA DE ADDITION OF RS.1,90,800/- U/S 68 OF THE ACT AND MADE FURTHER ADDITION OF RS.7,540/- U/S 69C OF THE ACT BEING THE EXPENDITURE INCURRED FOR AR RANGING SUCH ACCOMMODATION ENTRIES. I FIND IN APPEAL, THE LEARNED CIT(A ) UPHELD THE REASSESSMENT PROCEEDINGS AS WELL AS THE ADDITION ON MERIT . IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT T HE REOPENING HAS BEEN MADE BY THE ASSESSING OFFICER IN A MECHANICAL MANNER AND ON BORROWED SATISFACTION WITHOUT INDEPENDENT APPLICATION OF MIND . IT IS HIS SUBMISSION THAT THE ASSESSEE HAS ALREADY DECLARED INCOME FROM LONG TERM ITA NO.5712/DEL/2019 9 CAPITAL GAIN AMOUNTING TO RS.1,29,903/- AFTER CLAIMING PURCHA SE COST OF RS.60,000/- AND TRANSFER EXPENSES OF RS.324/- FROM THE SA LE CONSIDERATION OF RS.1,19,227/- IN RESPECT OF SALE OF 1500 SHARES OF M/S D MC EDUCATION LTD. THEREFORE, THE REOPENING OF THE ASSESSMENT WITHOUT V ERIFYING THE RETURN AND ON THE BASIS OF REPORT OF THE INVESTIGATION W ING AND WITHOUT INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER MAK E SUCH REASSESSMENT PROCEEDINGS A NULLITY. 12. I FIND MERIT IN THE ABOVE ARGUMENT OF THE LEARNED CO UNSEL FOR THE ASSESSEE. THE COPY OF THE RETURN FILED BY THE ASSESS EE WHICH IS PLACED AT PAGE 48 TO 50 OF THE PAPER BOOK SHOWS THAT THE AS SESSEE HAS DECLARED LONG TERM CAPITAL GAIN OF RS.1,29,903/- AS PER SCHEDULE E- 1 OF THE INCOME TAX RETURN AND HAS CLAIMED THE SAME AS EXEMPT. FROM THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BEFORE THE LEARNED CIT(A) , I FIND THE ASSESSEE HAS DEMONSTRATED T HAT HE HAD SOLD 15,000 SHARES OF M/S DMC EDUCATION LTD., DURING THE AY 2011-12 FOR A CONSIDERATION OF RS.1,90,227/- AND AFTER DEDUCTING THE PURC HASE COST OF RS.60,000, SHARES OF WHICH WERE ACQUIRED IN AY 2006-07 (5,0 00 SHARES) AND SUBSEQUENT BONUS SHARES, THE ASSESSEE AFTER DEDUC TING THE PURCHASE COST AND TRANSFER EXPENSES HAD DECLARED LONG TERM CAP ITAL GAIN OF RS.1,29,903/-. THEREFORE, ONCE, THE ASSESSEE HAD DECLARED S UCH INCOME AND CLAIMED THE SAME AS EXEMPT, THE ASSESSING OFFICER WIT HOUT VERIFYING THE RETURN AND WITHOUT INDEPENDENT APPLICATION OF MIND COU LD NOT HAVE REOPENED THE ASSESSMENT ON THE BASIS OF REPORT FROM TH E INVESTIGATION WING, WHICH IS ON ACCOUNT OF BORROWED SATISFACTION AND NOT INDEPENDENT ITA NO.5712/DEL/2019 10 APPLICATION OF MIND. THUS, I FIND MERIT IN THE ARGUMENT OF T HE LEARNED COUNSEL FOR THE ASSESSEE THAT SUCH REOPENING IS BASED O N WRONG APPRECIATION OF FACTS AND ON BORROWED SATISFACTION. 12.1 IT HAS BEEN HELD IN VARIOUS DECISIONS THAT WHEN THE REOPENING OF THE ASSESSMENT IS BASED ON INCORRECT OR WRONG APPR ECIATION OF FACTS, SUCH REOPENING IS NOT IN ACCORDANCE WITH LAW. IT HAS ALS O BEEN HELD IN VARIOUS DECISIONS THAT WHEN THE REOPENING IS MADE ON THE BASIS OF R EPORT OF THE INVESTIGATION WING AND WITHOUT INDEPENDENT APPLICATIO N OF MIND BY THE ASSESSING OFFICER TO THE RETURN FIELD BY THE ASSESSEE, SUCH REOPENING OF ASSESSMENT IS ALSO NOT IN ACCORDANCE WITH LAW AND HAS TO BE QUASHED. THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS G AND G PHARMA INDIA LTD.(SUPRA) HAS HELD THAT WHERE THE ASSESSING OFFICER HAS N OT APPLIED HIS MIND INDEPENDENTLY TO THE INFORMATION RECEIVED FROM THE DIR ECTOR OF THE INVESTIGATION WING AND NO PRIMA FACIE OPINION FORMED, SUCH RE ASSESSMENT PROCEEDINGS IS INVALID. THE HONBLE DELHI HIGH COURT IN THE C ASE OF SARTHAK SECURITIES CO. (P) LTD. (SUPRA) HAS HELD THAT WHERE THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER BUT ACTING UNDE R INFORMATION FROM INVESTIGATION WING, SUCH NOTICE U/S 147 HAS TO BE QU ASHED. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS KAMDHENU STEEL & ALLOYS LTD. REPORTED IN (2012) 248 CTR (DEL) 33 HELD THAT WHERE TH E ASSESSING OFFICER ACTED MECHANICALLY ON THE INFORMATION SUPPLIED BY THE DIRECTORATE OF INCOME TAX (INVESTIGATION) ABOUT THE ALLEGED BOGUS/ACCO MMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES, WITHOUT AP PLICATION OF HIS OWN MIND, HE WAS NOT JUSTIFIED IN INVOKING JURISDICTION U/S 147 OF THE ITA NO.5712/DEL/2019 11 ACT. IT IS PERTINENT TO MENTION HERE THAT SLP FILED BY THE REVENUE AGAINST THE ABOVE DECISION OF THE HONBLE DELHI HIGH COURT WAS DIS MISSED BY HONBLE SUPREME COURT VIDE ORDER DATED 17.09.2012. THE HONBLE DELHI HIGH COURT IN THE CASE OF PCIT VS MEENAKSHI OVERSEAS (P) LTD. REPORTED IN 395 ITR 677(DEL.) HAS HELD THAT WHERE REASSESSMENT WAS R ESORTED ON THE BASIS OF INFORMATION FROM DIT (INVESTIGATION) THAT ASSESSEE H AD RECEIVED ACCOMMODATION ENTRY BUT THERE WAS NO INDEPENDENT APPLIC ATION OF MIND BY THE ASSESSING OFFICER TO TANGIBLE MATERIAL AND REASONS FA ILED TO DEMONSTRATE LIVE LINK BETWEEN TANGIBLE MATERIAL AND FORMATION OF REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT SUCH REOPEN ING IS NOT JUSTIFIED. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN PAPER BOOK TO THE PROPOSITION THAT WHE N THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON WRONG APPRECIATIO N OF FACTS AND WITHOUT INDEPENDENT APPLICATION OF MIND BUT ACTED MECHANIC ALLY ON THE BASIS OF REPORT FROM THE INVESTIGATION WING, SUCH REASSES SMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH LAW SUPPORT HIS C ASE. SINCE, IN THE INSTANT CASE, THE ASSESSING OFFICER HAS ACTED MECHANICALLY ON THE BASIS OF REPORT FROM THE INVESTIGATION WING AND WITHOUT INDEPENDEN T APPLICATION OF MIND AND THE REOPENING OF ASSESSMENT IS ON WRONG APPREC IATION OF FACTS, THEREFORE, SUCH REOPENING OF THE ASSESSMENT, IN MY OPINIO N, IS NOT IN ACCORDANCE WITH LAW. I, THEREFORE, QUASH THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S 147 OF THE ACT AND U PHELD BY THE LEARNED CIT(A). THE LEGAL GROUNDS RAISED BY THE ASSESSE E CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDINGS ARE ACCORDINGLY ALLOWED. ITA NO.5712/DEL/2019 12 13. SINCE, THE ASSESSEE SUCCEEDS ON THE LEGAL GROUND, TH E VARIOUS OTHER GROUNDS CHALLENGING THE ADDITION ON MERIT ARE NOT BEING AD JUDICATED BEING ACADEMIC IN NATURE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 19.04.2021. SD/- SD/- (SUCHITRA KAMBLE) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI/DATED- 19.04.2021 F{X~{T COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSISTANT REGISTRAR, ITAT, DELHI
