INCOME TAX OFFICER-10(1)(2), MUMBAI V. IDM AGRO BIO TECH LIMITED , MUMBAI

ITA 5805/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8065 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 12-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Assessee Lawyers: DR P DANIEL
• Keywords: Unexplained cash credit; Bogus Share capital; Search and seizure; Principle of natural justice; Opportunity of cross examination; Retrospective amendment; Corroborative evidences; Accommodation entries; Reason to believe
• Section: 143(3); 142(1); 147; 131; 68; 148; 132

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 5805/MUM/2017 ( / ASSESSMENT YEAR: 2008 - 09 ) ITO - 10(1)(2), ROOM NO. 25, AAYAKAR BHAVAN, GROUND FLOOR, M. K. ROAD, MUMBAI - 400 020 / VS. IDM AGRO BIO TECH LTD. A/45, NANDJYOT INDUSTRIAL ESTATE, SAFED POOL, SAKINAKA, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 072 ./ ./ PAN/GIR NO. AABC 17012 C ( REVENUE ) : ( ASSESSEE ) ./ C.O. NO. 260 /MUM/2017 (ARISING OUT OF ITA NO. 5805/MUM/2017) ( / ASSESSMENT YEAR: 2008 - 09 ) IDM AGRO BIO TECH LTD. A/45, NANDJYOT INDUSTRIAL ESTA TE, SAFED POOL, SAKINAKA, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 072 / VS. ITO - 10(1)(2), ROOM NO. 25, AAYAKAR BHAVAN, GROUND FLOOR, M. K. ROAD, MUMBAI - 400 020 ./ ./ PAN/GIR NO. AABC 17012 C (ASSESSEE) : ( REVENUE ) REVENUE BY : SHRI N. HEMALATHA ASSESSEE BY : DR. P. DANIEL / DATE OF HEARING : 15.11.2017 / DATE OF PRONOUNCEMENT : 04.12 .2017 2 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. / O R D E R PER SHAMIM YAHYA , A. M.: THIS A PPEAL BY THE REVENUE AND THE CROSS OB JECTION BY THE ASSESSEE ARISE OUT OF THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 30.03.2016 AND PERTAIN TO THE ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS OF APPEAL IN REVENUES APPEAL READ AS UNDER: 1 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) HAS ERRED IN DELETING THE ADDITION MADE U/S.68 OF THE ACT BY SOLELY RELYING ON THE RETRACTED STATEMENT OF SHRI PRAVIN KUMAR JAIN, IGNORING THE FACT THAT THE SAME HAS BEEN REBUTTED BY DDIT INVESTIGATION) - II (2),MUMBAI AND ALS O IGNORING THE STATEMENT OF SHRI NILESH PARMAR, A DUMMY DIRECTOR, HAVING RESPONSIBILITY OVER ACCOUNTS RECORDED U/S.131 WHEREIN HE HAS ACCEPTED THAT THE LENDER COMPANIES WERE NOTHING BUT PAPER COMPANIES.' 2 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CITA) HAS ERRED IN NOT CONSIDERING THE SEVERAL CASE LAWS WHEREIN THE HIGHER COURTS HAVE HELD THAT MERE PAYMENT BY CHEQUE DOES NOT PROVE THE GENUINENESS OF THE TRANSACTION.' 3 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD .CIT(A) ERRED IN DELETING INTEREST OF RS.90,617/ - IGNORING THE FACT THAT THE LOANS BEING NON GENUINE WERE ADDED U/S.68 OF THE ACT, ACCORDINGLY, THE INTEREST ALSO NEEDS TO BE ADDED BACK TO THE TOTAL INCOME'. 4 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE NOTIONAL COMMISSION OF RS.67,500/ - COMPUTED BY THE ASSESSING OFFICER IGNORING THE FACT THAT THE SAME NEEDS TO BE PAID FOR OBTAINING THE ACCOMMODATION ENTRIES.' 3. THE GROUNDS OF APPEAL RAISED IN THE CROSS OB JECTION READ AS UNDER: 1. THE LEARNED CIT(A) ERRED IN DISMISSING THE GROUND OF APPEAL REGARDING REOPENING OF THE ASSESSMENT U/S. 147 BY ISSUE OF NOTICE U/S. 148 WITHOUT ANY VALID REASON. 2. THE LEARNED A.O. PASSED AN ORDER U/S. 147 R.W.S. 143(3) WHICH IS ILLEGAL AND BAD IN LAW. 4. BRIEF FACTS OF THE CASE ARE AS UNDER: 3 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. THE ASSESSEE C OMPANY IS A PUBLIC LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF AGRICULTURE, HORTICULTURE, BIO - TECH AGRICULTURE, ETC. THE A SSESSEE HAD E - FILED ITS RETURN OF INCOME ON 13. 09.2008 DECLARING TOTAL LOSS OF RS.27.981/ - UNDER NORMAL PROVISIONS OF THE ACT. THE SAID RETURN WAS PROCESSED U/S 143(1) OF THE IT ACT, 1961. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM INVESTIGATION WING THAT THE ASSESSEE COMPANY HAS TAK EN ACCOMMODATION ENTRIES FROM VARIOUS BENAMI CONCERNS OPERATED BY SHRI PRAVIN KUMAR JAIN. AS PER THE INFORMATION, SHRI PRAVIN KUMAR JAIN USE D TO PROVIDE ACCOMMODATION ENTRIES OF DIFFERENT NATURE LIKE UNSECURED LOANS, BOGUS SHARE APPLICATION MONEY, ETC. AS PER THE ASSESSMENT ORDER, THE DETAILS OF UNSECURED LOANS AVAILED FROM BENAMI CONCERNS BY THE ASSESSEE ARE AS UNDER: - SR. NO NAME OF THE CONCERN AMOUNT (RS.) 1. M/S. KUSH HINDUSTAN ENTERTAINMENT LTD 30,00,000 2, OLIVE OVERSEAS P LTD (REALGOLD TRADING CO P LTD) 15,00,000 TOTAL 45,00,000 ACCORDINGLY THE ASSESSING OFFICER RECORDED HIS REASONS TO BELIEVE AND ISSUED NOTICE U/S 148. NOTICE U/S 143(2) AND 142(1) OF THE ACT WAS ISSUED AND DULY SERVED ON THE ASSESSEE. 5. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, ASSESSEE COMPANY WAS ASKED TO ESTABLISH THE IDENTITY, AND CREDITWORTHINESS OF THE SAID PARTIES AND GENUINENESS OF THE TRANSACTIONS. TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE COMPANY FURNISHED BANK STATEMENT OF THE SAID PARTIES HIGHLIGHTING THE RELEVAN T ENTRY. ALSO, LEDGER ACCOUNT AND 4 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. ACKNOWLEDGEMENT OF THE SAID PARTIES WERE PRODUCED. VARIOUS OTHER DOCUMENTS WERE PRODUCED TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SAID PARTIES AND GENUINENESS OF THE TRANSACTIONS. HOWEVER, ASSESSING OFFICER HA S NOT ACCEPTED THE ASSESSEE'S COMPANY CONTENTION, DISCUSSED ALL THE ISSUES AT PARA 3 OF THE ASSESSMENT ORDER AND ADDED THE SUM OF RS.45,00,000/ - AS UNEXPLAINED CASH CREDIT UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. HE H AD FURTHER DISALLOWED THE I NTEREST A ND C OMMISSION EXPENSE. 6. IN MAKING THE DISALLOWANCE, THE ASSESSING OFFICER INTER ALIA OBSERVED AS UNDER: A SEARCH AND SURVEY ACTION WAS CARRIED OUT IN THE CASE OF SHRI PRAVEEN KUMAR JAIN AN D HIS GROUP CONCERNS ON 01.10.2013 BY THE THEN DDIT( I NV.) UNIT - III (2), MUMBAI, WHICH RESULTED INTO COLLECTION OF EVIDENCES AND OTHER FINDINGS PROVING THAT SHRI PRAVEEN KUMAR JAIN, THROUGH A WEB OF CONCERNS RUN AND OPERATED BY HIM, IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF VARIOUS NATURE LIKE BOGUS UNSECURED LOA NS, BOGUS SHARE APPLICATION MONEY AND BOGUS SALES (PURCHASES FOR THE BENEFICIARIES) ETC. BASED ON THE FINDINGS OF THE SEARCH ACTION AND THE STATEMENTS OF VARIOUS PERSONS COVERED UNDER THE SEARCH ACTION, A REPORT WAS FORWARDED BY THE DDIT(LNV.), WHICH INTER ALIA INCLUDED A LIST OF THE ENTITIES CONTROLLED BY SHRI PRAVEEN KUMAR JAIN AND INVOLVED IN PROVIDING BOGUS ENTRIES FOR LOANS, SHARE APPLICATION MONEY AND PURCHASES, VARIOUS STATEMENTS STATING THE MODUS OPERAND], LIST OF BENEFICIARIES WHO WERE INVOLVED IN SUCH TRANSACTIONS ETC. IT I S SEEN FROM THE INFORMATION SO RECEIVED THAT THE PRESENT ASSESSEE'S NAME APPEARS IN THE LIST OF BENEFICIARIES WHO HAVE TAKEN ACCOMMODATION ENTRIES. FURTHER, THE DETAILS FURNISHED BY THE ASSESSEE ALSO REVEALED THAT THE ASSESSEE HA S TAKEN UNSECURED LOAN OF RS.45,00,000/ - FROM M/S. KUSH HINDUSTAN ENTERTAINMENT LTD. & OLIVE INDUSTRIES PRIVATE LIMITED, WHICH IS ONE OF THE ENTITIES CONTROLLED BY SHRI PRAVEEN KUMAR JAIN AND IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. DURING THE SEARC H AT VARIOUS PREMISES, WHICH WERE SHOWN BY THE ASSESSEE GROUP, TO BE THE PLACE OF OPERATION AND REGISTERED OFFICE ADDRESSES AS PER THE INCOME TAX RECORDS, THE OFFICIAL WEBSITE OF THE MINISTRY OF CORPORATE AFFAIRS AND BANK DOCUMENTS, IT WAS FOUND THAT THE E NTITIES WERE NON - 5 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. EXISTING AT THESE ADDRESSES AND NO GENUINE BUSINESS WAS BEING CARRIED OUT AT ANY OF THESE PREMISES. PRE - SEARCH ENQUIRIES HAD REVEALED VARIOUS PERSONS SHOWN TO BE THE DIRECTORS/PROPRIETORS OF DIFFERENT CONCERNS WERE NON - EXISTENT AT THE GIVE N ADDRESSES. HOWEVER, IN CERTAIN CASES, THE DIRECTORS' ADDRESSES WERE LOCATED AND THEY WERE COVERED IN THE ACTION U/S.132 OF THE ACT. IN THE STATEMENTS RECORDED U/S. 132(4)/131 OF THE ACT, THESE DIRECTORS/PROPRIETORS ADMITTED THAT THEY WERE MERELY DUMMY DI RECTORS AND USED TO SIGN DIFFERENT PAPERS FOR NOMINAL CONSIDERATION GIVEN BY SHRI PRAVEEN KUMAR JAIN. THEY WERE UNAWARE OF THE PLACE OF OPERATIONS, BOOKS OF ACCOUNTS AND THE BUSINESSES BEING CARRIED OUT BY THE CONCERNS WHERE THEY WERE DIRECTORS/PROPRIETORS . 7. THEREAFTER, THE ASSESSING OFFICER REFERRED TO THE STATEMENT OF DIRECTORS OF THE SO CALLED DUMMY COMPANIES AND THE SEARCH CONDUCTED IN THEIR CASES. THEREAFTER, THE ASSESSING OFFICER REFERRED TO SEVERAL CASE LAWS AND CONCLUDED AS UNDER: AFTER CAREFULL Y GOING THROUGH THE SUBMISSIONS OF THE ASSESSEE AS WELL AS THE DATA / DETAILS / DOCUMENTS AVAILABLE ON RECORD, IT BECOMES CRYSTAL CLEAR THAT; (A) THE PRIMARY ONUS IS ON THE ASSESSEE TO ESTABLISH THE GENUINENESS OF THE TRANSACTIONS RECORDED BY IT IN IT S BOOKS OF ACCOUNT; (B) SINCE THE PRIMARY FACTS ARE IN THE KNOWLEDGE OF THE ASSESSEE, IT IS THE DUTY OF THE ASSESSEE TO PROVIDE THE CORRECT DETAILS WITH REGARD TO THE IMPUGNED TRANSACTIONS; (C) IF THE INVESTIGATION DONE BY THE DEPARTMENT LEADS TO DOUBT REGARDING THE GENUINENESS OF THE TRANSACTIONS, IT IS INCUMBENT ON THE ASSESSEE TO PRODUCE THE PARTIES ALONG WITH THE NECESSARY DOCUMENTS TO ESTABLISH THE GENUINENESS OF THE TRANSACTION; AND (D) PAYMENT BY ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT. IN VIEW OF THE ABOVE DISCUSSION, IT IS EVIDENT THAT THE IDENTITY AND CREDITWORTHINESS OF M/S. KUSH HINDUSTAN ENTERTAINMENT LTD & OLIVE OVERSEAS PRIVATE LIMITED, WHICH IS ONE OF THE BENAMI CONCERNS OF SHRI PRAVEEN KUMAR JAIN, ARE NOT PROVED NOR THE GENUINEN ESS OF THE TRANSACTION IN THE FORM OF UNSECURED LOAN RAISED BY THE ASSESSEE COMPANY. THE ENTIRE GAMUT OF TRANSACTIONS SHOWS THAT THE FUNDS OF RS.45,00,000/ - HAVE BEEN BROUGHT IN BY WAY OF 'UNSECURED LOAN' IN THE NAME OF M/S. KUSH HINDUSTAN ENTERTAINMENT LT D & OLIVE OVERSEAS PRIVATE LIMITED, WHOSE VERY EXISTENCE COULD NOT BE ESTABLISHED BY THE ASSESSEE COMPANY NOR THE SOURCE OF THESE FUNDS. THEREFORE, THE PURPORTED UNSECURED LOAN OF RS.45.00.000 / - IS HEREBY TREATED AS A 'CASH 6 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. CREDIT' IN THE BOOKS OF THE ASSE SSEE COMPANY, WHOSE NATURE AND SOURCE IS NOT EXPLAINED AND, THEREFORE, DEEMED TO BE THE ASSESSEE'S INCOME AS ENVISAGED IN SECTION 68 OF THE INCOME TAX ACT, 1961 AND ACCORDINGLY THE SAME IS ADDED TO INCOME OF THE ASSESSEE COMPANY UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND THE SAME IS HEREBY HELD TO BE NOT ELIGIBLE FOR ANY DEDUCTION THERE AGAINST. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE HEREBY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME / CONCEALMENT OF INCOME, SEPARATELY. 8. FURT HER, THE ASSESSING OFFICER DISALLOWED THE INTEREST EXPENDITURE AND COMMISSION EXPENSES IN THIS REGARD BY OBSERVING AS UNDER: HAVING HELD IN THE PRECEDING PARAGRAPHS AS TO BOGUS / SHAM TRANSACTION OF UNSECURED LOANS AMOUNTING TO RS.45,00,000 / - CLAIMED TO HA VE BEEN OBTAINED FROM M/S. KUSH HINDUSTAN ENTERTAINMENT LTD & OLIVE OVERSEAS PRIVATE LIMITED [FORMERLY KNOWN AS REALGOLD TRADING CO. PRIVATE LIMITED], WHICH IS ONE OF THE BOGUS ENTITIES OF SHRI PRAVEEN KUMAR JAIN, WHO IS ADMITTEDLY AN ACCOMMODATION ENTRY P ROVIDER, THE INTEREST EXPENDITURE OF RS.90,617 / - CLAIMED TO HAVE BEEN PAID TO THE SAID BOGUS ENTITY IS ALSO HEREBY HELD TO BE A SHAM TRANSACTION. THE MODUS OPERAND! OF THE BUSINESS OF SHRI PRAVEEN KUMAR JAIN, THROUGH HIS VARIOUS ENTITIES, IS THAT OF PROVID ING ACCOMMODATION ENTRIES UNDER DIFFERENT FORMS VIZ. UNSECURED LOANS, SHARE APPLICATION MONEY, PURCHASES, SALES ETC. AND TO CHARGE COMMISSION BY SHRI PRAVEEN KUMAR JAIN 1.5% TO 2% ON THE VALUE OF TRANSACTIONS. HERE, IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED TO HAVE OBTAINED A SUM OF RS.45,00,000 / - AS 'UNSECURED LOANS' FROM M7S. KUSH HINDUSTAN ENTERTAINMENT LTD & OLIVE OVERSEAS PRIVATE LIMITED, ONE OF THE ENTITIES OF SHRI PRAVEEN KUMAR JAIN, AND HAS ALSO CLAIMED TO HAVE PAID INTEREST OF RS. 90,617 / - AN D MUST HAVE ALSO PAID COMMISSION OF AT LEAST RS. 67,500 / - BEING 1.5% OF T H E TRANSACTION VALUE OF RS. 45, 00,000/ - . THE PRACTICE OF SHRI PRAVEEN KUMAR JAIN WAS TO ACCOMMODATE AND FACILITATE THE ENTRIES UNDER DIFFERENT FORMS WHEREBY HE USED TO ACCEPT & GIVE BA CK CASH FROM 7 TO THE PARTIES AGAINST THE PAYMENT & RECEIPTS MADE THROUGH BANKING CHANNEL. THUS, IN THE INSTANT CASE, THE PURPORTED EXPENDITURE CLAIMED UNDER THE GARB OF INTEREST & COMMISSION MUST HAVE BEEN RECEIVED BACK BY THE ASSESSEE FROM THE BOGUS ENTI TY OF SHRI PRAVEEN KUMAR JAIN & AS SUCH THE SAID EXPENDITURE CANNOT BE ALLOWED TO THE ASSESSEE. ACCORDINGLY, INTEREST EXPENDITURE OF RS. 90.617 / - AND COMMISSION EXPENDITURE OF RS. 67,500 / - ARE HEREBY DISALLOWED AND ADDED BACK TO INCOME OF THE ASSESSEE UNDE R THE HEAD 'INCOME FROM OTHER SOURCES' IN VIEW OF THE FACT THAT THE ASSESSEE MUST HAVE RECEIVED BACK THE SAID SUMS IN CASH. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT ARE HEREBY INITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOM E /CONCEALMENT OF INC OME, SEPARATELY . 7 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. 9. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CHALLENGING BOTH THE REOPENING AS WELL AS MERITS OF THE ADDITION. 10. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE REOPENI NG BY OBSERVING AS UNDER: THE ISSUES RAISED IN THE ABOVE GROUND CHALLENGES THE RE - OPENING OF ASSESSMENT PROCEEDINGS. IN THIS CASE, INFORMATION IS RECEIVED FROM INVESTIGATION WING OF THE INCOME TAX DEPARTMENT THAT A SEARCH AND SURVEY ACTION WAS CARRIED OUT IN THE CASE OF SHRI PRAVEEN KUMAR JAIN AND HIS GROUP ON 01.10.13. THE SEARCH ACTION RESULTED INTO COLLECTION OF EVIDENCE AND OTHER FINDINGS WHICH CONCLUSIVELY PROVED THAT THE PRAVIN JAIN THROUGH A WEB OF CONCERNS RUN AND OPERATED BY HIM, IS ENGAGED IN PROV IDING ACCOMMODATION ENTRIES OF VARIOUS NATURE LIKE BOGUS UNSECURED LOANS, BOGUS SHARE APPLICATION AND BOGUS SALES(PURCHASES FOR BENEFICIARIES) ETC. EVEN DURING THE POST SEARCH ENQUIRIES, SEVERAL BENEFICIARIES HAVE CONFIRMED THE FACT THAT THEY HAVE TAKEN AC COMMODATION ENTRIES THROUGH CONCERNS RUN BY SHRI PRAVEEN JAIN. ALSO, ENQUIRES MADE IN THIS REGARD HAVE REVEALED THAT THE STATEMENT OF SHRI PRAVEEN KUMAR JAIN RECORDED ON 01.10.13 U/S 132(4) OF THE IT ACT, 1961 IS NOT THE ONLY STATEMENT WHEIE HE HAS DIVULG ED THE DETAILS OF THE TRUE NATURE OF PROVIDING ACCOMMODATION ENTRIES. RATHER, AT LEAST THREE MORE STATEMENT U/S 131 OF THE IT ACT, 1961 HAVE BEEN RECORDED BY DIFFERENT OFFICERS, ON DIFFERENT DATES AND DIFFERENT CASES, WHERE THEY HAVE ADMITTED THAT HE THROU GH THE VARIOUS CONCERNS RUN AND OPERATED BY HIM IS INDULGED IN PROVIDING ACCOMMODATION ENTRIES. FROM ALL THESE FACTS AND INFORMATION COLLECTED IN THIS REGARD, IT CAN BE SEEN THAT THE AO HAD A REASON TO BELIEVE THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENT RIES OF RS 45,00,000/ - IN THE NATURE OF UNSECURED LOANS AND INCOME HAD ESCAPED ASSESSMENT FOR AY 2008 - 09 WITHIN THE MEANING OF SEC. 147 OF THE I .T ACT TO THIS EXTENT. ACCORDINGLY, THE AO ISSUED NOTICE U/S 148 OF THE IT ACT, 1961. THE ASSESSEE RAISED OBJEC TION TO THE RE - OPENING OF THE ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT AND VALIDITY U/S 148 OF THE IT ACT. THE AO REBUTTED THE OBJECTIONS. ACCORDING TO THE AO, WITH EFFECT FROM 01.04.1989 FINANCIAL YEAR 1989 - 90 ONLY CONDITION BEFORE ISSUE OF NOTICE U/S 14 8 IS THAT AO SHOULD HAVE 8 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, IRRESPECTIVE OF ANY FAILURE OF THE PART OF ASSESSEE. IT DOES NOT REQUIRE THAT THE VERY OUTSET THERE SHOULD BE AN ESTABLISHED FACTUM OF ESCAPEMENT. AT THE STAGE OF ISSUE OF NOTICE ONLY QUESTION IS WHETHER THE MATERIAL PRIMA FACIE SHOWS ESCAPEMENT. WHETHER THE MATERIAL WOULD CONCLUSIVELY PROVE THE ESCAPEMENT, IS NOT THE CONCERN AT THIS STAGE. THE AO RELIED ON THE FOLLOWING CASES; RAYMOND WOOLLEN MILLS LTD. (1 999) 236 ITR 34 (SC) CENTRAL PROVINCES MANGANESE ORE CO. LIMITED (1991) 191 ITR 66 (SC) SRI KRISHNA PRIVATE LIMITED (1996) 221 ITR 538 (SC) INFORMATION FROM ENFORCEMENT DIRECTORATE SHOWING POSSIBLE INFLATION OF PURCHASES - NOT ICE ISSUED U/S 148 VALID. (STERLITE INDUSTRIES (INDIA) LTD VS ACIT (MAD) 302 ITR 275 INFORMATION FROM INVESTIGATION WING - NOTICE 148 ISSUED ON THE BASIS OF SUCH LETTER IS VALID. AGR INVESTMENT LTD VSADDL. CIT (DEL) 333 ITR 146 SHAFCNAR BU U CON P LW VS ITO (ITAT. JAIPUR) 136 TTJ 701 IT IS IMPORTANT TO POINT OUT THAT THERE WAS NO ASSESSMENT OR REASSESSMENT PRIOR TO ISSUANCE OF NOTICE U /S. 148. IT IS A SETTLED LEGAL PROPOSITION THAT IN A CASE WHERE, NO ASSESSMENT OR REASSESSMENT PRIOR TO RE - OPENING OF THE AS SESSMENT, EVEN IF ALL THE MATERIAL FACTS ARE DISCLOSED IN THE RETURN OF INCOME ALREADY, REOPENING CAN BE INITIATED IF THE AO HAS 'REASON TO BELIEVE 1 THAT INCOME HAS ESCAPED ASSESSMENT. THE APPELLANT IN SUCH CASES, CANNOT ASSAIL THE RE - OPENING ON THE GROUND THAT THE FACTS WERE ALREADY PLACED ON RECORD AND THE AO OUGHT TO HAVE CONSIDERED THE FACTS. SECONDLY, THE HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. (291 ITR 510) OBSERVED THAT THE WORD 'REASON', IN THE 'REASON T O BELIEVE' WILL MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME - HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE 'REASON TO BELIEVE' THAT THE INCOME HAD ESCAPED ASSESSMENT, IT IS FURTHER OBSERVED BY THE HONORA BLE COURT THAT THE WORD 'EXPRESSION 1 CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACTS BY LEGAL EVIDENCE OR CONCLUSION. AT THIS STAGE, WHAT IS REQUIRED IS REASON TO BELIEVE, BUT NOT THE ESTABLISHED FACTS OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUANCE OF NOTICE, THE ONLY QUESTION IS WHERE THERE WAS A RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF THAT INCOME HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE, IT IS EVIDENT FROM THE REASONS RECORDED THAT THE AO RECEIVED A SPECIFIC AND CREDIBLE INFORMATION FROM INVESTIGATION WING, MUMBAI AND ACCORDING TO THE INFORMATION, THE APPELLANT HAS TAKEN ACCOMMODATION ENTRIES FROM THE PRAVIN JAIN AND GROUP. BASED ON THIS PRECISE INFORMATION, THE AO ISSUED NOTICE U/S.148 OF THE IT. ACT, AS HE HAD PRIMA FACIE REASONS TO 9 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. THUS, THERE WAS A CAUSE OR JUSTIFICATION FOR THE AO TO INVOKE PROVISIONS OF SECTION 147 AND ISSUED NOTICE U/S.148. AS ALREADY MENTIONED, AT THE INITIATION STAGE, WHAT IS REQUIRED TO BE SEEN IS WHETHER THERE ARE PRIMA FACIE REASONS TO BELIEVE NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. THE AO ALSO RECORDED PROPER REASONS OF FORMATION OF BEL IEF THAT INCOME HAD ESCAPED ASSESSMENT. IT IS ALSO IMPORTANT TO NOTE THAT THE STATEMENT OF VARIOUS PERSONS ASSOCIATED WITH PRAVIN JAIN WERE RECORDED RELATING TO AND THEREFORE, THE REASONS FOR RE - OPENING OF THE ASSESSMENT ARE NOT BASED ON MERE SUSPICION. TH E FOLLOWING JUDICIAL PRECEDENTS SUPPORT THE ACTION OF THE AO - THE SUPREME COURT IN THE CASE OF INCOME - TAX OFFICER, CUTTACK AND OTHERS V. BIJU PATNAIK (1991) 188 ITR 247 THAT: 'THUS, THOUGH EX FACIE THE NOTICE DOES NOT DISCLOSE THE SATISFACTION OF THE REQUIREMENT OF SECTION 147(A), FROM THE RECORD AND THE AVERMENTS IN THE COUNTER AFFIDAVIT, IT IS CLEAR THAT THE INCOME TAX OFFICER HAD APPLIED HIS MIND TO THE FACTS AND, AFTER PRIMA FACIE SATISFYING HIMSELF OF THE EXISTENCE OF THOSE TWO CONDITIONS PRECEDENT, REACHED THE CONCLUSION FOR REOPENING THE ASSESSMENT . IT IS SETTLED LAW THAT, IN AN ADMINISTRATIVE ACTION , THOUGH THE ORDER DOES NOT EX FACIE DISCLOSE THE SATISFACTION BY THE OFFICER OF THE NECESSARY FACTS IF T HE RECORD DISCLOSES THE SAME , THE NOTICE OR THE ORDER DOES NOT PER SE BECOME ILLEGAL .' (EMPHASIS SUPPLIED) A SIMILAR ISSUE HAS BEEN CONSIDERED AND REJECTED B Y THE ITAT IN THE CASE OF SUKH RAM V. ACIT (2007) 99 ITD 417(DEL) AND BY THE DELHI HIGH COURT IN 285 ITR 256 ( DEL) IN THE SANE CASE . IN THE SUKH RAM CASE THE A PPELLANT HAD BELONGED TO A POLITICAL PARTY. THE AO RECORDED A STATEMENT OF THE PARTY TREASURER OF THE POLITICAL PARTY WHO REFUTED THIS CLAIM. BEFORE THE ITAT AN D THE HIGH COURT THE ASSESSEE CLAIMED THAT NO ADDITION CAN BE MA DE IN HIS CASE UNLESS HE GETS TO CROSS - EXAMINE THE PARTY TREASURER. THIS ARGUMENT OF THE APPELLANT IN THIS CASE WAS REJECTED AND IT WAS HELD THAT WHEN THE AO MERELY SEEKS TO VERIFY THE CLAIM OF THE ASSESSEE, IT IS NOT AKIN TO TAKING EVIDENCE BEHIND THE BAC K OF THE ASSESSEE. THE ASSESSEE ALSO RAISED AN OBJECTION THAT THE SANCTION FOR THE ISSUANCE OF THE NOTICE WAS NOTICE UNDER SECTION 149/151 OF THE IT ACT 1961 WAS NOT OBTAINED. I HAVE CALLED A REMAND REPORT FROM THE AO AND THE REPORT SO RECEIVED PROVE THAT AN APPROVAL HAS BEEN OBTAINED FROM THE CIT FOR REOPENING OF THE ASSESSMENT U/S 151(2) OF THE ACT. HENCE THIS CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE. THE AO HAS VERY ELABORATELY RECORDED THE REASONS BEFORE ISSUE OF NOTICE U/S 148 AND CLEARLY NARRATED THE FACTS AND MATERIAL ON WHICH THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IS BASED. THE BELIEF IS BASED ON THE RELEVANT 10 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. MATERIAL AND REASONS WERE FORMED. ACCORDINGLY AT THE STAGE OF ISSUE OF NOTICE ONLY QUESTION IS WHETHER THE MATERIAL PRIMA FACIE SHOW S ESCAPEMENT. WHETHER THE MATERIAL WOULD CONCLUSIVELY PROVE THE ESCAPEMENT IS NOT THE CONCERN AT THE STAGE OF ISSUANCE OF THE NOTICE. I THEREFORE HOLD THAT THE AO WAS JUSTIFIED IN RE - OPENING OF THE ASSESSMENT U/S 147 OF THE ACT. THEREFORE THIS GROUND OF AP PEAL IS DISMISSED. 11. AS REGARDS THE MERITS OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION BY OBSERVING AS UNDER: THE ASSESSEE HAD TAKEN LOAN OF RS 45,00,000 IN AY 2008 - 09 FROM THE FOLLOWING TWO PARTIES - KUSH HINDUSTAN E NTERTAINMENT LTD. RS 30,00,000 AND REAL GOLD TRADING COMPANY PVT LTD (NOW KNOWN AS OLIVE OVERSEAS PVT. LTD) RS 15,00,000. THE ASSESEEE COMPANY HAS REPAID THESE LOANS IN AY 2009 - 10 AND 2010 - 11 BY ACCOUNT PAYEE CHEQUES. TO SUBSTANTIATE AND PROVE THE GENUINEN ESS AND BONAFIDENESS OF THE TRANSACTION, THE ASSESSEE COMPANY - SUBMITTED THE FOLLOWING DOCUMENTS (I) COPIES OF LEDGER ACCOUNT OF THE PARTIES (II) LIST OF DIRECTORS OF THE PARTIES FROM ROC RECORDS (III) COPY OF ACCOUNTS OF ASSESSEE APPEARING IN THE BO OKS OF SAID PARTIES (IV) COPY OF BANK STATEMENTS OF THE SAID PARTIES (V) ITR COPIES AND AUDITED BOOKS OF ACCOUNT FOR AY 2008 - 09 OF THE SAID PARTIES (VI) AFFIDAVITS OF ONE OF THE DIRECTORS OF THE COMPANIES FROM WHOM LOANS HAVE BEEN TAKEN DURING THE YEAR WHEREIN THE PARTIES HAVE AFFIRMED THE REGISTERED OFFICE ADDRESS OF THE COMPANY, NATURE OF BUSINESS, REGISTRATION NUMBER OF THE COMPANY WITH REGISTRAR OF COMPANIES, CIN AND PAN. THEY ALSO HAVE AFFIRMED ABOUT THE FILING OF RETURN OF INCOME AND LOANS GRANTED TO THE ASSESSEE. ON A PERUSAL OF THE BANK STATEMENTS OF THE PARTIES, IT IS SEEN THAT BOTH THE COMPANIES HAVE SUFFICIENT BALANCES TO ADVANCE THE LOANS. WITH THE ABOVE DOCUMENTS, THE IDENTITY, GENUINENESS OF THE TRANSACTION AND CREDIT WORTHINESS OF THE PARTI ES HAVE BEEN PROVED BY THE ASSESSEE BY FILING THE NECESSARY DOCUMENTS. THE IMPORTANT ASPECT TO BE NOTED HERE IS THAT THE LOANS WERE BORROWED BY THE ASSESSEE IN FY 2007 - 08 AND REPAID IN FINANCIAL YEAR 2008 - 09 AND 2009 - 10 WHEREAS THE SEARCH AND SURVEY ACTION ON PRAVIN KUMAR JAIN AND HIS ASSOCIATE COMPANIES WAS SUBSEQUENT. 11 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. THE CONCLUSION OF THE AO THAT THE ASSESSEE COMPANY HAS NOT PROVED THE GENUINENESS OF THE TRANSACTION APPEARS TO BE FACTUALLY INCORRECT AS ALL THE EVIDENCING DOCUMENTS WERE PLACED ON RECORD BY THE ASSESSEE COMPANY. THE AO DISCHARGED HIS ONUS OF ESTABLISHING THAT THE LOANS WERE NOT GENUINE BY HEAVILY RELYING ON THE STATEMENT GIVEN BY SHRI. PRAVIN KUMAR JAIN AND HIS ASSOCIATES TO THE DEPARTMENT U/S. 132 WHICH WAS RETRACTED SUBSEQUENTLY THROUGH AN AFFIDAVIT. THE STATEMENT OF SHRI PRAVIN KUMAR JAIN AND HIS ASSOCIATES DOES NOT HIGHLIGHT THE NAME OF THE ASSESSEE COMPANY. IT WAS NEVER AN AVERMENT OF SHRI. PRAVIN KUMAR JAIN THAT HE HAD PROVIDED ACCOMMODATION LOAN ENTRIES TO THE ASSESSEE THROUGH THE AB OVE LENDER COMPANIES. THE AO, IN THIS CASE, HAS MERELY RELIED UPON THE STATEMENT OF SHRI PRAVIN KUMAR JAIN (WHICH WAS ALREADY BEEN RETRACTED AND DOES NOT REFER THE NAME OF THE APPELLANT COMPANY AS BENEFICIARY) AND DID NOT MAKE ANY INQUIRIES WITH THE LENDER COMPANIES TO ESTABLISH THE GENUINENESS OF THE TRANSACTION. IT IS SETTLED LAW THAT WHEN THERE ARE TWO CONTRADICTORY STATEMENT OF A PERSON, THE RETRACTING STATEMENT IS TO BE ACCEPTED UNLESS IT IS PROVIDED OTHERWISE BY BRINGING IN CORROBORATIVE EVIDENCES. TH E ASSESSEE HAS ALSO CONTENDED THAT AN OPPORTUNITY OF CROSS EXAMINATION WAS NOT GRANTED TO THE ASSESSEE. IN CASE OF CIT V. ASHISH INTERNATIONAL, HIGH COURT OF BOMBAY (ITA NO. 4299 OF 2009), THE JURISDICTIONAL THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT THE TRIBUNAL HAS RECORDED A FINDING OF FACT THAT THE ASSESSEE HAD DISPUTED THE CORRECTNESS OF THE STATEMENT OF THE DIRECTOR OF M/S. THAKKAR AGRO INDUSTRIAL CHEM SUPPLIES P. LTD. AND ADMITTEDLY THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE CON CERNED DIRECTOR WHOSE STATEMENT WAS RELIED UPON BY THE DIRECTOR. IN CASE OF HEIRS AND LRS OF LATE LAXMANBHAI S. PATE! V. CIT 22 CTR 0138 (GUJ) THE LEGAL EFFECT OF THE STATEMENT RECORDED BEHIND THE BACK OF THE ASSESSEE AND WITHOUT FURNISHING THE COPY THEREO F TO THE ASSESSEE OR WITHOUT GIVING AN OPPORTUNITY OF CROSS - EXAMINATION, IF THE ADDITION IS MADE, THE SAME IS REQUIRED TO BE DELETED ON THE GROUND OF VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. THIS IS CLEARLY STATED BY THE HON'BLE SUPREME COURT IN THE CASE OF KISHINCHAND CHELLARAM VS. CIT (SUPRA) WHEREIN IT IS STATED THAT BEFORE THE IT AUTHORITIES COULD RELY UPON IT, THEY WERE BOUND TO PRODUCE IT BEFORE THE ASSESSEE SO THAT THE ASSESSEE COULD CONTROVERT THE STATEMENTS CONTAINED IN IT BY ASKING FOR AN O PPORTUNITY TO CROSS - EXAMINE. THE JURISDICTIONAL MUMBAI ITAT IN THE CASE OF SMT JYOTI D. SHAH (ITA NO. 1843/M/2012) HAS HELD THAT SHRI MUKESH CHOKSI HAD ISSUED A GENERAL STATEMENT, AND THEREFORE A GENERAL STATEMENT GIVEN BY MUKESH CHOKSI CANNOT BY APPLIED TO EACH AND EVERY CASE. THE ADDITIONS MADE WERE DELETED AS THERE WAS NO DIRECT EVIDENCE AGAINST THE ASSESSEE. NEITHER THE STATEMENT OF MUKESH CHOKSI WAS PROVIDED TO THE ASSESSEE NOR ANY OPPORTUNITY FOR CROSS EXAMINATION 12 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. OF MUKESH CHOKSI WAS PROVIDED. VARIO US COURTS HAVE HELD AND REITERATED THE PRINCIPLE THAT W HERE THE ASSESSEE IS NOT GRANTED AN OPPORTUNITY OF CROSS EXAMINATION OF THE PERSON WHOSE STATEMENT HAS BEEN RELIED UPON DURING THE COURSE OF ASSESSMENT, WHICH COULD HAVE HELD THE ASSESSEE TO REBUT THE STATEMENTS, THE ADDITION MADE BASIS THE STATEMENT IS NOT CORRECT AS THERE IS A VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. THIS PRINCIPLE HAS BEEN SETTLED TIME AND AGAIN BY THE HIGHER COURTS. SECTION 68 OF THE ACT CASTS THE RESPONSIBILITY UPON THE ASSES SEE TO PROVE THE IDENTITY OF THE CREDITORS, CAPACITY OF THE CREDITORS AND GENUINENESS OF THE LOAN. THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THE IDENTITY OF THE CASH CREDITORS, THEIR CREDIT WORTHINESS AND THE GENUINENESS OF TRANSACTION BY FURNISHING EVIDENCE LIKE THEIR I . T. DETAILS, MODE OF PAYMENT, ETC. ONCE THE ASSESSEE HAS DISCHARGED THE OBLIGATION OF ESTABLISHING THE IDENTITY, CREDITWORTHINESS OF THOSE PARTIES AS WELL AS GENUINENESS OF THE TRANSACTION, THE ONUS NOW SHIFTS ON THE AO. IT IS NOTED THAT THE A O HAS NOT TAKEN ANY STEPS TO IDENTIFY THE CREDITWORTHINESS OF THE LENDER COMPANIES AS WELL AS GENUINENESS OF THE LOAN GIVEN. THE AO HAS MERELY RELIED ON THE STATEMENTS OF SHRI PRAVEEN KUMAR JAIN IGNORING THE FACT THAT THE STATEMENT WAS LATER RETRACTED BY H IM. THERE IS NO INVESTIGATION WHATSOEVER MADE BY THE AO. NO EFFORT WAS MADE TO OBTAIN THE EVIDENCE COLLECTED BY THE DGIT (INV) AND THE CONCLUSIONS DRAWN ON SUCH EVIDENCE IF ANY BY THAT AU THORITY. NO MATERIAL IN THE FORM OF STATEMENTS RECORDED FROM SHRI PRA VIN KUMAR JAIN OR THE OTHER EVIDENCE COLLECTED BY THE DGIT (INV) MUMBAI WERE GIVEN TO THE ASSESSEE OR ANY OPPORTUNITY OF CROSS EXAMINATION WAS GRANTED. IN CIT VS LOVELY EXPORTS (P) LTD. [ITA NO. 953/2006], DELHI ITAT HELD THAT WHEN THE AO HAS FAILED TO RE ACT TO THE SHIFTING OF THE BURDEN TO INVESTIGATE INTO THE CREDITWORTHINESS OF THE SHARE APPLICANTS, THE ADDITION CANNOT BE SUSTAINED. IN CIT V. ORISSA CORPORATION P. LTD. [1986] 159 ITR 78 (SC), THE HON'BLE SUPREME COURT HELD THAT ONCE THE PRIMARY ONUS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION IS DONE BY THE ASSESSEE BY FURNISHING THE DETAILS LIKE NAME, ADDRESS, PAN. CONFIRMATION, COPY OF TAX RETURN, ETC, IT WAS THE DUTY OF THE AO TO VERIFY THE GENUINENESS OF THESE TRANSACTIONS BY STRICTLY ENFORCI NG THE PROVISIONS OF SECTION 131 OF THE ACT IF AT ALL THOSE CREDITORS WERE REQUIRED TO BE PRODUCED BEFORE HIM. THE ENTIRE TRANSACTION HAS BEEN THROUGH THE BANKING CHANNELS ONLY AND THEREFORE, THE AO SHOULD HAVE VERIFIED THE TRANSACTION WITH RELEVANT BANKS AND SHOULD HAVE MADE FURTHER INQUIRIES IN THIS REGARD, WHICH HE FAILED TO DO SO. THE AO HAS NOT ESTABLISHED THE CASE OR BOUGHT ANY MATERIAL ON RECORD TO EVEN REMOTELY RECORD THAT THE MONEY ORIGINALLY BELONGED TO THE ASSESSEE AND IT WAS AN ADJUSTMENT ENTRY. THE ASSESSEE IN FACTS HAS GONE TO ESTABLISH THAT THE LENDER COMPANIES HAD ENOUGH BANK BALANCES BEFORE GRANTING 13 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. THE LOANS AND NO CASH WAS DEPOSITED BY THE LENDER COMPANIES WHILE GRANTING THE LOANS. I HAVE ALSO PERUSED THE DECISIONS CITED BY THE ASSESSEE IN ITS SUBMISSIONS. THE AO HAS NOT DISCHARGED HIS ONUS OF REBUTTING THE DOCUMENTS SUBMITTED BY THE ASSESSEE BY RECOURSING TO THE MEANS OF INITIATING INQUIRES WITH THE LENDER PARTIES OR ISSUING SUMMONS AND PRODUCING THE PARTY FOR CROSS EXAMINATION OR PROVING THAT THE TRANSACTION WAS AN ADJUSTMENT ENTRY AND THAT THE CASH HAD EXCHANGED HANDS. THE ASSESSEE ALSO SUBMITTED THE DETAILS OF CONFIRMATION OF LOANS OF ALL THE PARTIES WITH THEIR INCOME TAX ACKNOWLEDGEMENTS OF THE RETURN FILED AND FINANCIAL STATEMENTS AND BANK STATEMENTS. THERE WAS SUFFICIENT CREDITWORTHINESS OF THE LENDING COMPANIES AND BANK BALANCE BEFORE LENDING THE MONIES TO THE ASSESSEE. THE AO HAS NOT CONSIDERED THESE EVIDENCES FILED BY THE ASSESSEE AND SIMPLY RELIED ON THE STATEMENTS OF SHRI PRAVEEN KUMAR JAIN, WHICH HAS BEEN SUBSEQUENTLY RETRACTED, WITHOUT INDEPENDENTLY N VERIFYING ANY FACTS OF THE MATTER. THE FACTS IN THE CASE OF M/S. KOMALAGROTECH PVT. LTD. VS ITO WARD 2(1), ITA NO. 37/HYD/2016, (HYD) WERE AS UNDER - AS PER THE ASSESSING OFFICER TH E ENTIRE SUM WAS RECEIVED FROM CERTAIN COMPANIES MA NAGED BY ONE MR. PRAVEEN KUMAR JAIN WHO HAS ADMITTED THAT THIS MONEY WAS ROUTED THROUGH BOGUS SHARE APPLICATIONS. ACCORDING TO THE ASSESSING OFFICER, THE SAID SUM OF RS.75,00,000 REPRESENTED THE AMOUNTS RE CEIVED FROM SHELL COMPANIES.' THEREFORE , THE ASSESSING OFFICER HAD ADDED THE ENTIRE SUM OF RS.75,00,000 AS UNEXPLAINED CREDIT U/S 68 OF THE ACT. THE HONORABLE TRIBUNAL CONSIDERED VARIOUS JUDGMENTS AND ULTIMATELY CAME TO THE FOLLOWING CONCLUSION '9.1. A PLA IN READING OF THE ASSESSMENT ORDER DEMONSTRATES THAT THE A.O. MERELY WENT BY THE INVESTIGATION DONE BY THE OFFICE OF D.G.I (INVESTIGATION), MUMBAI. NO ENQUIRIES OR INVESTIGATION WAS CARRIED OUT. NO EVIDENCE TO CONTROVERT THE CLAIMS OF THE ASSESSEE WAS BROU GHT ON RECORD BY THE A. O. EVEN THE STATEMENT OF MR. PRAVEEN KUMAR WAS NOT SUPPLIED. NOTHING IS ON RECORD ABOUT THE RESULT OF INVESTIGATIONS DONE BY DGIT (INV.), MUMBAI. THE PAPERS FILED BY THE ASSESSEE DO DEMONSTRATE THE IDENTITY, CREDIT WORTHINESS AND GE NUINENESS OF THE TRANSACTION. THE ADDITION IS MADE MERELY ON SURMISES END CONJECTURES. IN VIEW OF THE ABOVE DISCUSSION, THE TRIBUNAL HELD THAT THE ADDITION MADE UNDER SECTION 68 OF THE ACT IS IN BAD IN LAW. RECENTLY THE HON'BLE BOMBAY HIGH COURT IN THE CAS E OF GAGANDEEP INFRASTRUCTURE (P) LTD (2017) 80 TAXMANN.COM272 (BOMBAY) - THE PROVISO TO SECTION 68 HAS BEEN INTRODUCED BY THE FINANCE ACT, 2012 WITH EFFECT FROM 1 . 4 . 2013. THUS, IT WOULD BE EFFECTIVE ONLY FROM THE ASSESSMENT YEAR 2013 - 14 ONWARDS AND NOT FOR THE SUBJECT ASSESSMENT 14 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. YEAR. IN FACT, BEFORE THE TRIBUNAL, IT WAS NOT EVEN THE CASE OF THE REVENUE THAT SECTION 68 AS IN FORCE DURING THE SUBJECT YEARS HAS TO BE READ/UNDERSTOOD AS THOUGH THE PROVISO ADDED SUBSEQUENTLY EFFECTIVE ONLY FROM 1 - 4 - 2013 WAS ITS NORMAL MEANING. THE PARLIAMENT DID NOT INTRODUCED TO PROVISO OF SECTION 68, WITH RETROSPECTIVE EFFECT NOR DOES THE PROVISO TO INTRODUCED STATES THAT IT WAS INTRODUCED 'FOR REMOVAL OF DOUBTS' OR THAT IT IS 'DECLARATORY'. THEREFORE, IT IS NOT OPEN TO GIVE I T RETROSPECTIVE EFFECT, BY PROCEEDING ON THE BASIS THAT THE ADDITION OF THE PROVISO TO SECTION 68 IS IMMATERIAL AND DOES NOT CHANGE THE INTERPRETATION OF SECTION 68 BOTH BEFORE AND AFTER THE ADDING OF THE PROVISO.' THE HON'BLE MUMBAI ITAT IN CASE OF M/S. E NRICH ENTERPRISES PVT. LTD. V. 1TO WARD 4(1)(4) ITA NO, 4930 / MUM / 2015 QUASHED THE REOPENING OF THE ASSESSMENT WHERE THE FACTS WERE SIMILAR LIKE IN THE CASE OF THE ASSESSEE. HAVING CONSIDERED ALL OF THE ABOVE, I AM OF THE VIEW THAT THE ASSESSEE HAS DISCHARG ED HIS ONUS OF ESTABLISHING THE GENUINENESS OF THE TRANSACTION AND THE ONUS WAS ON THE DEPARTMENT. THE AO HAS NOT DISCHARGED HIS DUTIES AND PROVED OTHERWISE EXCEPT FOR RELYING ON THE STATEMENTS OF SHRI PRAVEEN KUMAR JAIN WHICH DOES NOT REFER THE NAME OF TH E APPELLANT COMPANY AS BENEFICIARY AND THE LOAN WAS BORROWED DURING FINANCIAL YEAR 2007 - 08 AND REPAID DURING 2008 - 09 AND 2009 - 10 WHEN S HRI PRAVEEN JAIN WAS NOT ASSOCIATED WITH THE INVESTOR COMPANY AND ALSO MUCH BEFORE THE SEARCH AND SEIZURE IN CASE OF P RAVEEN JAIN HAS TAKEN PLACE. THE AO ALSO FAILED TO MAKE ANY FURTHER INQUIRIES WITH THE LENDER COMPANIES TO ESTABLISH THE GENUINENESS OF THE TRANSACTION AND ALSO FAILED TO CONSIDER THE VARIOUS EVIDENCES FILED BY THE ASSESSEE TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE LOANS. THE AO HAS NOT POINTED OUT ANY DEFECT /DEFICIENCIES IN THE EVIDENCES ADDUCED BY THE ASSESSEE. ADDITION HAS BEEN MADE U/S. 68 THE ACT BY SIMPLY RELYING OF THE STATEMENTS OF THIRD PARTIES WHICH WAS NOT ASSOCIAT ED W ITH INVESTOR COMPANY AND HAS NOT NAMED THE APPELLANT COMPANY AS BENEFICIARY. IN LIGHT /OF THE SAME, THE AO'S CONSIDERATION THAT THE LOAN ARE NOT GENUINE IS NOT CORRECT. THESE GROUNDS OF APPEAL ARE ALLOWED. 12. AGAINST THE ABOVE ORDER, THE REVENUE IS I N APPEAL BEFORE US R EGARDING THE ADDITION ON MERITS DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 13. THE ASSESSEE IS AGGRIEVED REGARDING THE LD. COMMISSIONER OF INCOME TAX (APPEALS)S UPHOLDING THE REOPENING U/S. 147 OF THE ACT. THE LD. COUN SEL OF THE 15 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. ASSESSEE SUBMITTED THAT THE REOPENING IN THIS CASE IS BAD IN LAW. HE SUBMITTED THAT THERE IS NO APPLICATION OF MIND BY THE ASSESSING OFFICER. HE SUBMITTED THAT NO ENQUIRY WHATSOEVER HAS BEEN DONE BY THE ASSESSING OFFICER IN THIS CASE. THE LD. CO UNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT THERE IS ALSO NO PROPER SANCTION/APPROVAL AS PER THE PROVISION OF SECTION 151(2) OF THE ACT BY THE HIGHER AUTHORITY PERMITTING THE REOPENING. DESPITE ASSESSEES OBJECTION IN THIS REGARD, THE SAME WAS NOT PROPERL Y RESPONDED BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE SA NCTION/SA TISFACTION OF HIGHER AUTHORITY WAS REACHED ON 3 0 .3.2015 ONLY AFTER REMAND REPORT WAS CALLED FROM THE ASSESSING OFFICER DURING APPELLATE PROCEEDINGS BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT ALL THE NECESSARY DOCUMENTARY EVIDENCES WERE FURNISHED BY THE ASSESSEE. T HE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE SEVERAL CASE LAWS INCLUDING ONE FROM ITAT HYDERABAD BENCH IN THE CASE OF M/S. KOMAL AGROTECH PVT. LTD. VS. ITO (IN ITA NO. 437/HYD/2016 DATED 25.11.2016) , WHEREIN CASE OF LOAN FROM THE SAME LENDER COMPANIES AS IN THE PRESENT ASSESSEES CASE AND I N WHICH THE SAME SEARCH AND STATEMENTS WERE INVOLVED, THE ITAT HYDERABAD BE NCH HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BOTH WITH REGARD TO THE REOPENING AS WELL AS MERITS OF THE ADDITION. THE LD. COUNSEL OF THE ASSESSEE REFERRED TO THE DECISION OF ITAT MUMBAI BENCH IN THE CASE OF SHRI HIRANCHAND KANUGA VS. DCIT (IN ITA NO S.4261 & 4262/MUM/2012 DATED 27.02.2015) , THAT T HE SATISFACTION GRANTED AFTER THAT COMMENCEMENT OF ASSESSMENT IS NOT VALID. HE FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAS NOT BEEN 16 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. PROVIDED WITH OPPORTUNITY TO CROSS EXAMINE THE PERSON WHOSE STATEMENT IS T HE BASIS OF ADDITION, THE ADDITION IS NOT SUSTAINABLE. FOR THIS PROPOSITION, HE PLACED RELIANCE UPON THE HONBLE APEX COURT DECISION IN THE CASE OF ANDAMAN TIMBER INDUSTRIES V. CCE [2015] 281 CTR 241 (SC) . 14. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTAT IVE RELIED UPON THE ORDERS OF THE RESPECTIVE AUTHORITY FOR SUPPORTING REVENUES STAND. 15. SHE FURTHER SUBMITTED THAT IF THERE IS SOME LACUNAE ASSESSING OFFICERS ENQUIRY, THE MATTER SHOULD BE SENT BACK TO HIM. 16. UPON CAREFUL CONSIDERATION, FIRST I PR OCEED TO TAKE UP THE ISSUE RAISED BY THE LD. COUNSEL OF THE ASSESSEE THA T THERE IS NO PROPER SANCTION OR APPROVAL AS PER THE PROVISION OF SECTION 151(2) OF THE I. T. ACT PERMITTING THE REOPENING. IN THIS CONNECTION, THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE IN THE CROSS O BJECTION MAY BE GAINFULLY REFERRED AS UNDER: 2 . T HERE IS NO MENTION OF APPROVAL/ SATISFACTION OF THE HIGHER AUTHORITY IS OBTAINED U/S. 151(2) OF THE I. T. ACT, 1961 IN THE NOTICE. EVEN THOUGH A SPECIFIC OBJECTION WAS RAISED ABOUT TH E SATISFACTION OF THE HIGHER AUTHORITY THE DISPOSAL OF OBJECTION ONLY STATES THAT SANCTION OF ISSUE OF NOTICE U/S. 149/151 OF THE I. T. ACT, 1961. WHOSE SATISFACTION IS OBTAINED IS NOT GIVEN AND WHEN OBTAINED IS NOWHERE MENTIONED, (SEE P. 179 - 182) HOWEVER, WHEN THE MATTER REACHED TO THE CIT(A), THE LEARNED CIT(A) CALLED FOR A REMAND REPORT. IN THE REMAND REPORT, THE LEARNED A.O. ATTACHED THE LETTER WHICH IS NOW PLACED BEFORE THE HON'BLE BENCH, THE LETTER EXPLAINS THE NON APPLICATION OF MIND BY THE JT. C.I.T . ALSO IN RECORDING HIS SATISFACTION. IN THE INSTANT CASE NEITHER IN THE NOTICE NOR ON THE REASONS RECORDED THE ACTION OF THE HIGHER AUTHORITY IS MEN TIONED. EVEN THOUGH A SPECIFIC OBJEC TION WAS RAISED. (PARA 2 OF OBJECTION AT PAGE 55) AND COPY OF SANCTION WAS REQUESTED 17 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. TO BE GIVEN TO THE ASSESSEE VIDE LETTER DT. 09.04.2015 & 27.04.2015, HE ONLY MAKES A PASSING REFERENCE AT P. 182 PARA (V) WHEREIN HE STATES THAT 'THE NOTICE U/S. 148 WAS ISSUED AFTER CONSIDERING THE TIME LIMIT AND SANCTION OF ISSUE OF NOTICE U/S. 149/151 OF THE I. T. ACT, 1961'. THE LETTER NOW PRODUCED DOES NOT SHOW ANY SATISFACTION BY THE JT. CIT. PARTICULARLY WHEN THE REASONS ARE RECORDED ON 30.03.2015 AND THE SAME DAY NOTICE IS ISSUED AND SERVED ON 31.03.2015. THE SANCTION/ APPROVAL IS ALSO DT. 30.03.2015. HENCE IT IS PRESUMED THAT NO REQUIRED SANCTION/ SATISFACTION IS OBTAINED FROM THE HIGHER AUTHORITIES AND HENCE THE ASSESSMENT IS VITIATED. RELIANCE IS PLACED: 1. C.I.T. V. SUNIAN WAMAN CHOUDHARY (2010) 321ITR 495 (BOM) 2. HIRA CHAND KANUGA V. D.C.I.T. 17. FROM THE ABOVE, IT TRANSPIRES THAT IT IS THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE THAT THERE IS NO MENTION OF APPROVAL/SATISFACTION OF HIGHER AUTHORITY OBTAINED U/S. 151(2) IN THE NOTICE FOR REOPENING. THAT THE ASSESS EE HAS RAISED OBJECTION TO THIS EFFECT VIDE LETTER DATED 09.04.2015 AND 27.4.2015 , H OWEVER, WHILE DISPOSING OFF THE OBJECTION OF THE ASSESSEE, THE ASSESSING OFFICER DID NOT PROPERLY ADDRESS THIS ASPECT. FURTHER, THE ASSESSEE HAS CONTENDED THAT WHEN THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CALLED FOR REMAND REPORT, A LETTER DATED 3 0 .12.2015 HAS BEEN PRODUCED. FROM THE CONTENTS OF THE SAID LETTER, IT HAS BEEN CONTENDED THAT THE REQUIRED SANCTION AS PER THE LAW IS NOT OBTAINED. 18. BEFORE PROCEEDING FURTH ER I MAY GAINFULLY REFER TO THE PROVISION OF SECTION 151 WHICH READ S AS UNDER: SANCTION FOR ISSUE OF NOTICE. 151. (1) IN A CASE WHERE AN ASSESSMENT UNDER SUB - SECTION (3) OF SECTION 143 OR SECTION 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF ASSISTANT COMMISSIONER OR DEPUTY COMMISSIONER, UNLESS T HE JOINT 18 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE : PROVIDED THAT, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NO SUCH NOTICE SHALL BE IS SUED UNLESS THE CHIEF COMMISSIONER OR COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY THE ASSESSING OFFICER AFORESAID, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. (2) IN A CASE OTHER THAN A CASE FALLING UNDER SUB - SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFI CER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR THE ISSU E OF SUCH NOTICE. EXPLANATION. FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT THE JOINT COMMISSIONER, THE COMMISSIONER OR THE CHIEF COMMISSIONER, AS THE CASE MAY BE, BEING SATISFIED ON THE REASONS RECORDED BY THE ASSESSING OFFICER ABOUT FITNESS OF A CASE FOR THE ISSUE OF NOTICE UNDER SECTION 148 , NEED NOT ISSUE SUCH NOTICE HIMSELF. 19. I MAY ALSO GAINFULLY REFER TO THE NOTICE FOR REOPENING IN THIS CASE WHICH READS AS UNDER: NOTICE UND ER SECTION 148 OF THE INCOME - T AX ACT, 1961 OFFICE OF THE WARD 10(1) (2), MUMBAI PAN: AA5CI7012C DATED : 30/03/2015 TO M /S IDM AGRO BIO TECH LTD, A/45, NANDJYOT INDUSTRIAL ESTATE, ANDHERI KURLA ROAD, SAKINAKA, SPEED POOL, ANDHERI (EAST), MUMBAI - 400 072. SIR/MADAM, 1. WHEREAS I HAVE REASONS TO BELIEVE THAT YOUR INCOME CHARGEABLE TO ~AX FOR THE ASSESSME NT YEAR 2008 - 09 HAS ESCAPED ASSESSMENT WITHIN THE WANING OF SECTION 147 OF THE INCOME TAX ACT, 1961. 2. I , THEREFORE, PROPOSE TO ASSESS/RE - ASSESS THE INCOME FOR THE SAID ASSESSMENT YEAR AND I HEREBY REQUIRE YOU TO DELIVER TO ME WITHIN 30 DAYS FROM 19 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. THE SER VICE - OF THIS NOTICE, A RETURN IN THE PRESCRIBED FORM OF YOUR INCOME FOR THE SAID ASSESSMENT YEAR. 3. THIS NOTICE IS BEING ISSUED AFTER OBTAINING THE NECESSARY SAT ISFACTION OF THE COMMISSIONE R OF INCOME TAX _____________ THE CENTRAL BOA RD OF DIRECT TAXES. SD/ - SIGNATURE OF OFFICER NAME: _____________ SEAL. DESIGNATION: NOTE: 1. IF Y OU FEEL ANY DIFFICULTY IN THE MATTER OF FILING IN THE RETURN, FORM OR DESIRE CLARIFICATION ON ANY OTHER MATTER PERTAINING TO YOUR INCOME TAX LIABILITY, YOU MAY CONTACT THE : PUBLIC RELATION OFFICER INCOME - TAX OFFICER, WARD 10(1)(2) 2 . THE PRESCRIBED FORM IN THE CASE O F COMPANIES IS FORM NO. 1. IN THE CASE OF ASSESSEE OTHER THAN COMPANIES THE PRESCRIBED FORM IS ORDINARILY FORM NO. 2. HOWEVER, IF THE ASS ESSEE HAS NO INCOME TO DECLARE OTHER THAN WHAT IS CHARGEABLE UNDER ONE OR MORE OF THE HEADS; SALARIES' AND 'INCOME FROM OTHER SOURCES', CONFINED SHARES FROM FIRMS, ASSOCIATION OF PERSONS, OR BODIES OF INDIVIDUAL OR IS CHARGEABLE UNDER THE HEAD ' INCOME FROM HOUSE PROPERTY', OR/AND 'CAPITAL GAINS', HE MAY FURNISH RETURN IN FORM NO. 3 A BLANK FORM NO.______ IS ENCLOSED HEREWITH. IF THIS IS NO T SUITABLE TO YOUR CASE YOU MAY EXCHANGE IT FOR THE APPROPRIATE FORM FROM T H E INCOME - TAX OFFICER. 20. IN LETTER DATED 0 9.04.2015, WHICH WAS RECEIVED AT THE INCOME TAX OFFICE ON 13.04.2015, THE ASSESSEE HAS WHILE MAKING THE OBJECTION TO THE NOTICE INTER ALIA SUBMITTED AS UNDER: WE FURTHER HAVE TO SUBMIT THAT IT APPEARS FROM THE NOTICE NECESSARY SANCTION FOR THE ISSUE OF NOT ICE AS PROVIDED U/S . 151(2) OF THE INCOME TAX ACT, 1961 HAS NOT BEEN COMPLIED WITH. SECTION 151(2) PROVIDES 'IN A CASE OTHER THAN A CASE FALLING UNDER SUB SECTION (1), NO NOTICE SHALL BE ISSUED U/S . 148 BY THE ASSESSING OFFICER, WHO IS BELOW THE RANK OF JO INT COMMISSIONER AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH G OFFICER, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE'. WE MAY MENTION THAT OUR A SSESSMENT INVOLVED FOR RE - OPENING IS ASSESSMENT YEAR 2008 - 09 WHICH IS BEING RE - O PENED BY YOUR NOTICE DATED 30.03.2015, THE 20 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. PROVISIONS OF SECTION 151(2) ARE CLEARLY ATTRACTED AS IT IS A CASE OF RE - OPENING OF THE ASSESSMENT AFTER THE EXPIRY OF THE 4 YE A RS FR OM THE END OF THE RELEVANT ASSESSMENT YEAR. FROM THE NOTICE IT APPEARS THAT NECESSARY SANCTION AS REQUIRED U/S 151(2) HAS NOT BEEN OBTAINED AND THEREFORE THE NOTICE ISSUED BY YOUR GOOD SELF IS NOT VALID AND BAD IN LAW AND IS THEREFORE TO BE CANCELLED AND W ITHDRAWN. WE MAY MENTION THAT PARA 3 OF THE NOTICE STATES 'THIS NOTICE IS BEING ISSUED AFTER OBTAINING THE NECESSARY SATISFACTION OF THE COMMISSIONER OF INCOME TAX THE CENTRAL BOARD OF DIRECT TAXES' BUT THIS DOES NOT REVEAL THAT YOU HAVE OBTAINED A NY SANCTION AS PROVIDED U/S. 151(2) AND HENCE IN OUR HUMBLE SUBMISSION, THE ISSUANCE OF NOTICE IS NOT VALID AND VOID AB - INITIO AND WE OBJECT TO THE RE - OPENING OF THE ASSESSMENT. WE FURTHER HAVE TO SUBMIT THAT INCASE YOUR GOODSELF HAS OBTAINED NECESSARY SAN CTION AS PROVIDED U/S 151(2) WE REQUEST YOU TO KINDLY GIVE US THE COPY OF THE SAME IN ORDER TO ENABLE US TO MAKE FURTHER SUBMISSION ON THE AUTHORITY AND JURISDICTION FOR THE ISSUANCE OF NOTICE U/S. 148. 21. AGAIN IN LETTER DATED 14.07.2015 RECEIVED AT THE INCOME TAX OFFICE WHILE SUBMITTING THE OBJECTIONS TO REOPENING, THE ASSESSEE HAS INTER ALIA MENTIONED AS UNDER: IN THIS RESPECT WE HUMBLY HAVE TO SUBMIT THAT AS SUBMITTED BY US VIDE OUR LETTERS DATED 09.04.2015 AND 27.04.2015 (COPIES ENCLOSED) WE HAVE REQ UESTED YOUR GOOD SELF TO GIVE US THE COPY OF THE SANCTION OBTAINED BY YOU AS PROVIDED U/S. 151(2) OF THE ACT. HOWEVER, WE HAVE NOT RECEIVED THE COPY OF SUCH SANCTION OBTAINED BY YOU FOR THE ISSUANCE OF THE NOTICE U/S. 148 AND HENCE IT APPEARS THAT NECESSAR Y PROVISIONS OF THE LAW REQUIRING PRIOR SANCTION FOR THE ISSUE OF NOTICE AS PROVIDED U/S. 151(2) OF THE INCOME TAX ACT, 1961 HAS NOT BEEN COMPLIED WITH, AND THEREFORE, IN OUR HUMBLE SUBMISSION THE NOTICE ISSUED BY YOUR GOOD SELF FOR THE RE - OPENING OF THE A SSESSMENT IS NOT A VALID NOTICE AND THEREFORE WE OBJECT THE REOPENING OF OUR ASSESSMENT U/S. 148. 22. WHILE DISPOSING OFF THE ASSESSEES OBJECTIONS, THE ASSESSING OFFICER HAS NOT PROVIDED THE ASSESSEE WITH SANCTION/APPROVAL LETTER U/S. 151(2) OR THE DETAI LS THEREOF . HE HAS ONLY ADDRESSED THE ISSUE BY OBSERVING AS UNDER: THE NOTICE U/S. 148 WAS ISSUE AFTER CONSIDERING THE TIME LIMIT AND SANCTION OF ISSUE OF NOTICE U/S. 149/151 OF THE I. T. ACT, 1961. THE REASON FOR REOPENING HAD ALREADY BEEN PROVIDED VIDE T HIS OFFICE LETTER DTD. 1.7.2005. 21 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. 23. THEREAFTER, WHEN THE ASSESSEE RAISED THIS ISSUE BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ASKED FOR A REPORT IN THIS REGARD. THE ASSESSING OFFICER GAVE A LENGTHY REMAND REPORT DETAILING THE PROVISIONS OF LAW AND CONCLUDED AS UNDER: 7. IN VIEW OF THE ABOVE, IN THIS CASE THE NOTICE U/S. 148 WAS CORRECTLY ISSUED ON 30.03.2015 AFTER GETTING PRIOR SANCTION U/S. 151(2) OF THE I. T. ACT, 1961 FROM THE JT. CIT, RG. 10(1), MUMBAI. THUS, THE ASSESSEE COMPANY HAS TAKEN ERRONEOUS GROUND OF APPEAL FOR REOPENING WITHOUT OBTAINING PRIOR SANCTION FROM THE CIT AS REQUIRED U/S. 151(2). THE GROUND OF APPEAL TAKEN IS APPLICABLE W.E.F. 1.6.2016. 24. THE SATISFACTION/APPROVAL LETTER DAT ED 3 0 .03.2015 HAS BEEN PRODUCED WHICH READS AS UNDER: NO. JCIT RG. 10(1)/APPROVAL FOR ISSUE OF NOTICE/2014 - 15 DATE:30.03.2015 TO, THE INCOME TAX OFFICER - 10(1)(2), MUMBAI. SUB: ADMINISTRATIVE APPROVAL FOR ISSUE OF NOTICE U/S. 148 IN THE CASE OF M/S. IDM AGRO BIO TECH LTD., A.Y. 2008 - 09 REF: NO. ITO - 10(1)92)/148 PROP/2014 - 15 DATED 30.03.2015 WITH REFERENCE TO THE ABOVE, SANCTION IS HERBEY ACCORDED U/S. 151(2) FOR ISSUE OF NOTICE U/S. 148 OF THE ACT IN THE ABOVE MENTIONED CASE FOR A.Y. 2009 - 10. SD/ - (GANESH BARE) JOINT COMMISSIONER OF INCOME TAX, RANGE - 10(1), MUMBAI 2 5 . IN THIS REGARD, THE LD. COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF UNITED EL ECTRICAL CO. PVT. LTD. VS. CIT 258 22 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. ITR 317 AND THE DECISION OF ITAT IN THE CASE OF SHRI HIRACHAND KANUGA VS. THE DCIT (IN ITA NOS. 4261 & 4262/MUM/2002 VIDE ORDER DATED 27.02.2015). I MAY GAINFULLY REFER TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE C ASE OF UNITED ELECTRIC COMPANY P. LTD. (SUPRA) , WHICH READ AS UNDER : 12. HON'BLE DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL CO. PVT. LTD. VS CIT 258 ITR 317 HAS HELD THAT 'THE PROVISO TO SUB - SECTION (1) OF SECTION!51OF THE ACT PROVIDES THAT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, NOTICE UNDER SECTION 148 SHALL NOT BE ISSUED UNLESS THE CHIEF COMMISSIONER OR THE COMMISSIONER, AS THE CASE MAY BE, IS SATISFIED, ON THE REASONS RECORDED BY THE ASSESSING OFFICER CONCER NED, THAT IT IS A FIT CASE FOR THE ISSUE OF SUCH NOTICE. THESE ARE SOME IN - BUILTS SAFEGUARDS TO PREVENT ARBITRARY EXERCISE OF POWER BY AN ASSESSING OFFICER TO FIDDLE WITH THE COMPLETED ASSESSMENT'. THE HON'BLE HIGH COURT FURTHER OBSERVED THAT 'WHAT DISTURB S US MORE IS THAT EVEN THE ADDITIONAL COMMISSIONER HAS ACCORDED HIS APPROVAL FOR ACTION UNDER SECTION 147 MECHANICALLY. WE FEEL THAT IF THE ADDITIONAL COMMISSIONER HAD CARED TO GO THROUGH THE STATEMENT OF THE SAID PARTIES, PERHAPS HE WOULD NOT HAVE GRANTED HIS APPROVAL, WHICH WAS MANDATORY IN TERMS OF THE PROVISO TO SUB - SECTION (1) OF SECTION 151 OF THE ACT AS THE ACTION UNDER SECTION 147 WAS BEING INITIATED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE POWER VESTED IN THE COMMISSIONER TO GRANT OR NOT TO GRANT APPROVAL IS COUPLED WITH A DUTY. THE COMMISSIONER IS REQUIRED TO APPLY HIS MIND TO THE PROPOSAL PUT UP TO HIM FOR APPROVAL IN THE LIGHT OF THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER. THE SAID POWER CANNOT BE EX ERCISED CASUALLY AND IN A ROUTINE MANNER. WE ARE CONSTRAINED TO OBSERVE THAT IN THE PRESENT CASE THERE HAS BEEN NO APPLICATION OF MIND BY THE ADDITIONAL COMMISSIONER BEFORE GRANTING THE APPROVAL'. 2 6 . FROM THE ABOVE, IT TRANSPIRES THAT NO NOTICE OR REOPEN ING HAS TO BE ISSUED , U NDER THESE PROVISIONS, UNLESS THE COMMISSIONER IS SATISFIED ON THE REASONS RECORDED BY THE ASSESSING OFFICER , I.E., IT IS A FIT CASE FOR THE ISSUE OF NOTICE WHICH MENTIONS THAT SATISFACTION OF THE C OMMISSION ER IS PARAMOUNT FOR WHICH IT IS EXPEC TED FROM THE 23 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. C OMMISSIONER TO APPLY HIS MIND AND EXERCISE DUE DILIGENCE BEFORE ACCORDING SANCTION TO THE REASONS RECORDED BY THE ASSESSING OFFICER. 2 7 . IN THE PRESENT CASE, I NOTE THAT DESPITE ASSESSEES SPECIFIC OBJECTION, THE COPY OF THE SAID APPROVAL AND SATISFACTION OR THE DETAILS THEREOF WAS NOT SUBMITTED TO THE ASSESSEE BY THE ASSESSING OFFICER . THE ASSESSING OFFICER BL ANDLY RESPONDED TO THE ASSESSEES OBJECTION BY STATING THAT THE NOTICE U/S. 148 WAS ISSUED AFTER CONSIDERING THE TIME LIMI T AND SATISFACTION OF ISSUE OF NOTICE U/S. 149/151 OF THE ACT. T HE ASSESSING OFFICER DID NOT MENTION THE DATE OF SUCH SATISFACTION OR SPECIFIED THE AUTHORITY, I.E., JOINT COMMISSIONER OF INCOME TAX WHO GAVE THE APPROVAL/SATISFACTION . IT WAS ONLY DURING THE REMAND PROCEEDING BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT THE ASSESSING OFFICER CAME UP WITH THE AFORESAID DETAILS AND LETTER OF APPROVAL WAS SUBMITTED. IN MY CONSIDERED OPINION, IN VIEW OF THE ABOVE DISCUSSION, THE REOPENING IN THIS CASE LAC KS JURISDICTION ON TWIN COUNTS. FIRSTLY, THE ASSESSEE HA S NOT BEEN PROPERLY INTIMATED ABOUT ANY SUCH SATISFACTION /APPROVAL DESPITE REQUEST IN THE OBJECTION TO REOPENING FILED BEFORE THE ASSESSING OFFICER REPEATEDLY. SECONDLY, IN THE REMAND PROCEEDINGS BEFO RE THE LD. COMMISSIONER OF INCOME TAX (APPEALS), A SANCTION/APPROVAL LETTER DATED 30 .03.2015 WHICH IS OF THE SAME DATE AS THE DATE OF NOTICE FOR REOPENING HAS BEEN SUBMITTED. TH IS SATISFACTION/APPROVAL IS OF JOINT COMMISSIONER OF INCOME TAX (APPEALS). IN R EPLY, TO ASSESSEES OBJECTION, THE ASSESSING OFFICER NEVER GAVE ANY SUCH DETAIL. THIS GIVES CREDENCE TO THE SUBMISSION 24 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. OF LD. COUNSEL OF THE ASSESSEE THAT DUE APPROVAL/SATISFACTION WAS NOT OBTAINED IN THIS CASE BEFORE ISSUE OF NOTICE OF REOPENING. HENCE, T HE SEQUENCE OF EVENTS AND DISCUSSION HEREINABOVE MAKE IT CLEAR THAT THE SATISFACTION/APPROVAL HAS NOT BEEN DULY OBTAINED AS ENVISAGED IN THE ACT AND AS MANDATED IN THE CASE LAWS REFERRED BY THE LD. COUNSEL OF THE ASSESSEE HEREINABOVE. IN SUCH SITUATION , WH EN THE REOPENING PROCEEDINGS VI S - A - VIZ COMPLIANCE WITH SECTION 151 OF THE I. T. ACT HAS NOT BEEN DULY MET WITH , T HE REOPENING PROCEEDINGS DESERVE TO BE DECLARED AS VOID - AB - INITIO AND THE SAME IS DECLARED VOID - AB - INITIO AS SUCH. 2 8 . SINCE, I HAVE HELD THE REOPENING TO BE BAD ON THE AFORESAID GROUND, THE ADJUDICATION ON OTHER ASPECTS OF THE CHA LLENGE OF REOPENING IN THE CROSS OBJECTION IS ONL Y OF ACADEMIC INTEREST. HENCE, I AM NOT ENGAGING IN THE SAME. 2 9 . FURTHERMORE, SINCE THE REOPENING HAS BEEN QUASHED , THE ADJUDICATION ON MERITS IN THE REVENUES APPEAL IS NOW ONLY OF ACADEMIC INTEREST AND, HENCE, THE REVENUES APPEAL IS DISMISSED AS INFRUCT U OUS. 30 . IN THE RESULT, THE REVENUES APPEAL IS DISMISSED AS INFRUCTUOUS AND THE CROSS OBJECTION OF THE ASSESSE E IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.12.2017 SD/ - (S HAMIM YAHYA ) MUMBAI ; DATED : 04.12.2017 / ACCOUNTANT MEMBER 25 ITA NO. 5805 & CO NO. 260 /MUM/2017 (A.Y. 2008 - 09) ITO VS. IDM AGRO BIO TECH LTD. . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI