Pushp Steels & Mining (P) Ltd., Delhi V. ITO, Ward- 20(2), New Delhi

ITA 6094/DEL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4064 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL; SULEKHA VERMA
• Keywords: Reopening of assessment; Unexplained cash credit; Depreciation; Principle of natural justice; Opportunity of cross examination; Period of limitation; Source of fund; Tangible material; Difference of opinion; Valuation report; Accommodation entries; Competent authority; Assessment record; Change of opinion; Reassessment proceedings
• Section: 147; 131; 68; 148; 56(2)(vii)(b); 154; 15; 139; 143(3); 142(1); 133(6); 205

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6094/DEL/2018 ASSESSMENT YEAR : 2008-09 PUSHP STEELS & MINING (P) LTD. 751, KUNDEWALAN STREET, AJMERI GATE, DELHI 110 006 (PAN: AADCP2925K) VS. ITO, WARD 20(2), NEW DELHI (ASSESSEE) ( RESPONDENT) ASSESSEE BY : SH. SURESH KUMAR GUPTA, CA DEPARTMENT BY : SMT. SULEKHA VERMA, CIT(DR) & SH. SURENDER PAL, SR. DR. ORDER PER L.P. SAHU, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE LD. CIT(A)-7, NEW DELHI ON 12.09.2018 IN RELATION TO THE ASSESSME NT YEAR 2008-09 ON THE FOLLOWING GROUNDS:- 1. THE IMPUGNED ASSESSMENT IS INVALID AND WITHOUT JURI SDICTION AS THE SAID ASSESSMENT IS COMPLETED WITHOUT COMPLYING WITH LEGAL REQUIREMENTS OF THE PROVISIONS OF SECTION 147/148 O F THE INCOME TAX ACT, THEREFORE, SUCH ASSESSMENT IS VOID AB INITO AN D LIABLE TO BE QUASHED. 1.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN REJECTING THE CON TENTION OF THE ASSESSEE THAT THE ORDER PASSED BY LD. AO IS BAD BOT H IN THE EYES OF 2 LAW AND ON FACTS AS THE SAME HAS BEEN REOPENED ON T HE BASIS OF REASONS WITHOUT THERE BEING ANY SPECIFIC ALLEGATION OF THE FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AND PARTICULAR MATERIAL FACT HAVING BEARING ON COMPUTATION OF INCOME, AS THE SAME HAS B EEN REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF RELEVA NT ASSESSMENT YEAR AND THE ASSESSMENT HAS ALREADY BEEN MADE UNDER SECT ION 143(3). 1.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS IGNORED THE CONTENTION OF THE ASSESSEE THAT IN THE ABSENCE OF ANY COGENT MATERIAL AVAILABLE WITH THE AO, THE SATISFACTION OF THE AO THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS BASED O N CHANGE OF OPINION ON THE ISSUE ALREADY ADJUDICATED IN THE ORI GINAL PROCEEDINGS U/S. 143(3) OF THE ACT. 1.3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS NOT APPRECIATED THE CONTENTION OF THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER APPROVAL BY T HE PR. CIT, DELHI-7, NEW DELHI AND THE SAID APPROVAL WAS MECHANICAL AND WITHOUT APPLICATION OF MIND BY THE ABOVE AUTHORITY IN AS MU CH AS THERE IS NO DATE OF SATISFACTION BY THE EITHER OF THE AUTHORITI ES MENTIONED IN THE PERFORMA OF OBTAINING SANCTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF TH E AO IN NOT ADMITTING THE EVIDENCES DURING APPEAL PROCEEDING IGNORING T HE FACT THAT THOSE 3 EVIDENCES WERE VITALLY IMPORTANT FOR ADJUDICATING T HE ISSUE OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND HAS ACTED AGAINST THE PRINCIPLES OF NATURA L JUSTICE IN NOT ALLOWING THE OPPORTUNITY OF CROSS EXAMINATION OF THE PERSON WHOSE TESTIMONY IS RELIED ON THE AO TO DRAW ADVERSE INFERENCE AND ALSO IGNORING THE FACT THAT THE AO HAS HIMSELF RECORDED THE FACT IN PARA 7.1 AT PAGE 10 OF THE IMPUGNED ASSESSMENT ORDER THAT DUE TO PAUCITY OF T IME THE OPPORTUNITY COULD NOT BE ALLOWED TO THE ASSESSEE TO CROSS EXAMI NE THE WITNESS AND SUCH OPPORTUNITY BE ALLOWED BY THE LD. CIT(A) IS SO DESI RED BY THE ASSESSEE. 4. THE LD. CIT(A) HAS ERRED IN LAW IN NOT ADMITTIN G ADDITIONAL GROUND UNDER WHICH THE LEGALITY OF THE ORDER OF ASSESSMENT UNDE R APPEAL WAS CHALLENGED ON THE GROUND OF THE ORDER BEING PASSED BEYOND THE PERIOD OF LIMITATION PRESCRIBED U/S. 153(1) OF THE I.T. ACT. 5. THE LD. CIT(A) HAS UPHELD THE REJECTION OF EXPLA NATION IN RESPECT OF CASH CREDIT OF RS. 12,45,00,000/- BY THE AO, SIMPLY DRAW ING ADVERSE INFERENCE AGAINST THE ASSESSEE FOR NON-PRODUCTION OF DIRECTOR OF THE INVESTING COMPANY WITHOUT CONSIDERING THE FACT THAT THERE IS NO ADVERSE MATERIAL EMERGING AGAINST THE INVESTOR COMPANIES SPECIFICAL LY WITH REGARD TO THEIR ACTUAL EXISTENCE PARTICULARLY WHEN THE DEPARTMENT D ID NOT BLINKER DURING THE PROCESS OF MERGER OF THE COMPANIES BEFORE THE H ONBLE HIGH COURT OF CALCUTTA. 4 6. WITHOUT PREJUDICE TO GROUND NO. 5, THE LD. CIT(A ) HAS NOT CONSIDERED THE SUBMISSION OF ASSESSEE THAT THE CORRECT AMOUNT OF F RESH CASH CREDIT WHICH COULD BE ADDED U/S. 68 OF THE ACT IS RS. 9,85,00,0 00/- INSTEAD OF RS. 12,45,00,000/- ADDED IN THE IMPUGNED ASSESSMENT ORD ER. 7. THAT THE ABOVE SAID ADDITIONS HAVE BEEN MADE BY INDULGING IN SURMISES CONJECTURE AND WITHOUT BRINGING ANY ADVERSE MATERIA L ON RECORD. 8. THAT THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING ABOVE SAID ADDITION IGNORING THE FACT THAT THE SAME HAS BEEN MADE ON THE BASIS OF THE MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WITHOUT PROVIDING COPY OF THE SAME AND PROVIDING OPPORTUNIT Y TO REBUT THE SAME. 9. THE ASSESSEE CRAVES LEAVE TO ADD, DELETE, MODIFY / AMEND THE ABOVE GROUNDS OF APPEAL WITH THE PERMISSION OF THE HONBL E APPELLATE AUTHORITY. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.9.2008 FOR THE ASSESSMENT YEAR 2008-09 DECLARING INCOME OF RS. 3,3 2,390/-. THE ASSESSING OFFICER PASSED THE ORDER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN S HORT ACT) ON 31.3.2016, BY ASSESSING THE INCOME AT RS. 4,12,390/-. THE ORDER WAS RECTIFIED U/S. 154 OF THE ACT AND DETERMINING THE ASSESSED INCOME AT RS. 8,84,600/-. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT, NEW DELHI. TH E JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT, NEW DELHI VIDE HIS LETTER INTIMATED TH AT DURING THE COURSE OF INVESTIGATION IN COAL SCAM MATTER IN WHICH THE ASSESSEE WAS ACCUSED OF BE ING INVOLVED THEY HAVE FOUND CERTAIN INFORMATION REGARDING ISSUE OF SHARES BY THE ASSESS EE COMPANY. IT WAS INFORMED THAT THE ASSESSEE HAD ISSUED SHARES OF ITS GROUP COMPANIES AND FAMILY MEMBERS AT DIFFERENT RATES. ON 28.2.2008 5 SHARES WERE ISSUED AT A PREMIUM OF RS. 40/- HOWEVER , SHARES WERE ISSUED AT PREMIUM OF RS. 490/- ON 31.3.2008 AND 24.12.2009. THE INVESTIGATION WAS STATED TO BE MONITORED BY THE HONBLE SUPREME COURT OF INDIA. THE CASE OF THE ASSESSEE W AS REOPENED U/S. 147 OF THE ACT AND THE NOTICE U/S. 148 OF THE WAS ISSUED TO THE ASSESSEE O N 29.3.2015. ORDER U/S. 143(3)/147 OF THE ACT WAS PASSED ON 31.3.2016, REASSESSING THE INCOME AT RS. 12,54,84,600/- AFTER DISALLOWANCE OF RS. 12,45,00,000/- U/S. 68 OF THE ACT ON ACCOUNT OF UNE XPLAINED CASH CREDIT. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 12.09.2018 HAS DISMISSED THE APPEAL OF THE ASSESSEE AND AGAINS T WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 3. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HAS STATED THAT THE ASSESSMENT MADE BY THE AO IS INVALID AND WITHOUT JURISDICTION AS THE S AID ASSESSMENT IS COMPLETED WITHOUT COMPLYING WITH LEGAL REQUIREMENTS OF THE PROVISIONS OF SECTIO N 147/148 OF THE INCOME TAX ACT, THEREFORE, SUCH ASSESSMENT IS VOID AB INITO AND LIABLE TO BE QUASHED. HE FURTHER SUBMITTED THAT LD. CIT(A) HAS NOT CONSIDERED THE CONTENTION OF THE ASSESSEE THAT THE ORDER PASSED BY AO IS BAD BOTH IN THE EYES OF LAW AND ON FACTS AS THE SAME HAS BEEN R EOPENED ON THE BASIS OF REASONS WITHOUT THERE BEING ANY SPECIFIC ALLEGATION OF THE FAILURE ON PA RT OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AND PARTICULAR MATERIAL FACT HAVING BEARING ON COMPUTAT ION OF INCOME, AS THE SAME HAS BEEN REOPENED AFTER A PERIOD OF FOUR YEARS FROM THE END OF RELEVA NT ASSESSMENT YEAR AND THE ASSESSMENT HAS ALREADY BEEN MADE UNDER SECTION 143(3). IT WAS FURT HER SUBMITTED THAT IN THE ABSENCE OF ANY COGENT MATERIAL AVAILABLE WITH THE AO, THE SATISFAC TION OF THE AO THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IS BASED ON CHANGE OF OPINIO N ON THE ISSUE ALREADY ADJUDICATED IN THE ORIGINAL PROCEEDINGS U/S. 143(3) OF THE ACT. IT WA S FURTHER SUBMITTED THAT THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER APPROVAL BY T HE PR. CIT, DELHI-7, NEW DELHI AND THE SAID APPROVAL WAS MECHANICAL AND WITHOUT APPLICATION OF MIND BY THE ABOVE AUTHORITY IN AS MUCH AS 6 THERE IS NO DATE OF SATISFACTION BY THE EITHER OF T HE AUTHORITIES MENTIONED IN THE PROFORMA OF OBTAINING SANCTION. LD. COUNSEL FOR THE ASSESSEE H AS FURTHER SUBMITTED THAT LD. CIT(A) HAS CONFIRMED THE ACTION OF THE AO IN NOT ADMITTING THE EVIDENCES DURING APPEAL PROCEEDING IGNORING THE FACT THAT THOSE EVIDENCES WERE VITALLY IMPORTANT FOR ADJUDICATING THE ISSUE OF UNEXPLAINED CASH CREDIT U/S. 68 OF THE ACT. IT WAS THE FURTHER CONTENTION THAT LD. CIT(A) HAS ACTED AGAINST THE PRINCIPLES OF NATURAL JUSTICE IN NOT AL LOWING THE OPPORTUNITY OF CROSS EXAMINATION OF THE PERSON WHOSE TESTIMONY IS RELIED ON THE AO TO D RAW ADVERSE INFERENCE AND ALSO IGNORING THE FACT THAT THE AO HAS HIMSELF RECORDED THE FACT IN P ARA 7.1 AT PAGE 10 OF THE IMPUGNED ASSESSMENT ORDER THAT DUE TO PAUCITY OF TIME THE OPPORTUNITY C OULD NOT BE ALLOWED TO THE ASSESSEE TO CROSS EXAMINE THE WITNESS AND SUCH OPPORTUNITY BE ALLOWED BY THE LD. CIT(A) IS SO DESIRED BY THE ASSESSEE. IT WAS THE FURTHER CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT LOWER AUTHORITIES ERRED IN NOT ADMITTING ADDITIONAL GROUND UNDER WHI CH THE LEGALITY OF THE ORDER OF ASSESSMENT UNDER APPEAL WAS CHALLENGED ON THE GROUND OF THE OR DER BEING PASSED BEYOND THE PERIOD OF LIMITATION PRESCRIBED U/S. 153(1) OF THE I.T. ACT. ON MERIT OF THE CASE, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT LD. CIT(A) HAS UPHELD THE R EJECTION OF EXPLANATION IN RESPECT OF CASH CREDIT OF RS. 12,45,00,000/- BY THE AO, SIMPLY DRAW ING ADVERSE INFERENCE AGAINST THE ASSESSEE FOR NON-PRODUCTION OF DIRECTOR OF THE INVESTING COM PANY WITHOUT CONSIDERING THE FACT THAT THERE IS NO ADVERSE MATERIAL EMERGING AGAINST THE INVESTOR C OMPANIES SPECIFICALLY WITH REGARD TO THEIR ACTUAL EXISTENCE PARTICULARLY WHEN THE DEPARTMENT D ID NOT BLINKER DURING THE PROCESS OF MERGER OF THE COMPANIES BEFORE THE HONBLE HIGH COURT OF CALC UTTA. IT WAS FURTHER SUBMITTED THAT THE ADDITION WAS MADE IGNORING THE FACT THAT THE SAME H AS BEEN MADE ON THE BASIS OF THE MATERIAL COLLECTED AT THE BACK OF THE ASSESSEE WITHOUT PROVI DING COPY OF THE SAME AND PROVIDING OPPORTUNITY TO REBUT THE SAME. ON MERITS OF THE CA SE, HE SUBMITTED THAT THE AO HAS SIMPLY 7 DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE FOR NON-PRODUCTION OF DIRECTOR OF THE INVESTING COMPANY WITHOUT CONSIDERING THE FACT THAT THERE IS NO ADVERSE MATERIAL EMERGING AGAINST THE INVESTOR COMPANIES SPECIFICALLY WITH REGARD TO THEI R ACTUAL EXISTENCE PARTICULARLY WHEN THE DEPARTMENT DID NOT BLINKER DURING THE PROCESS OF ME RGER OF THE COMPANIES BEFORE THE HONBLE HIGH COURT OF CALCUTTA. IT WAS FURTHER SUBMITTED T HAT LD. CIT(A) HAS NOT CONSIDERED THE SUBMISSION OF ASSESSEE THAT THE CORRECT AMOUNT OF F RESH CASH CREDIT WHICH COULD BE ADDED U/S. 68 OF THE ACT IS RS. 9,85,00,000/- INSTEAD OF RS. 12,4 5,00,000/- ADDED IN THE IMPUGNED ASSESSMENT ORDER AND THE ADDITIONS HAVE BEEN MADE BY INDULGING IN SURMISES CONJECTURE AND WITHOUT BRINGING ANY ADVERSE MATERIAL ON RECORD. IN SUPPORT OF HIS AFORESAID CONTENTIONS, HE RELIED UPON THE FOLLOWING CASE LAWS:- - CIT VS. EICHER LTD. 294 ITR 310 (DELHI). - CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 IT R 191 (SC) - CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC) - CIT VS. FEATHER FOAM ENTERPRISES (P) LTD. (2008 ) 2967 ITR 342 (DEL.) - SHEONATH SINGH VS. ACIT (1971) 82 ITR 147 (SC) - DALMIA (P) LTD. VS. CIT & ANR. 64 DTR 417 - BOMBAY STOCK EXCHANGE LTD. VS. DCIT WRIT PETITIO N NO. 2468 OF 2001 VIDE ORDEDR DATED 12.6.2014. - FENNER INDIA LTD. VS. DCIT 241 ITR 672 (MAD.) - WEL INTERTRADE (P) LTD. VS. ANR. VS. ITO 8 - CIT VS. ITRATHRAM AHUJA (HUF) (2008) 6DTR 335 (DEL .) - PR. CIT VS. MEENAKSHI OVERSEAS P LTD. 395 ITR 677 ( DEL.) - PR. CIT VS. G&G PHARMA INDIA LTD. 384 ITR 147 (DEL. ) - PR. CIT VS. N.C. CABLES LTD. 391 ITR 11 DATED 11.1. 2017 - CIT VS. S. GOYANKA LIME AND CHEMICALS LTD. ITA NO. 82 TO 89/2012 DATED 15.10.2014. - CIT VS. ORISSA CORPORATION (P) LTD. 159 ITR 78 - CIT VS. SOPHIA FINANCE LTD. (1994) 205 ITR 0098 (DE L.) - CIT VS. MAKHNI AND TYAGI P LTD. (2004) 267 ITR 433 (DEL.) - CIT VS. LOVELY EXPORT 299 ITR 268 (SC) - CIT VS. GANGOUR INVESTMENT LTD. ITA NO. 34/2007 - CIT VS. PRADEEP GUPTA 207 CTR 115 - CIT VS. DIVINE LEASING & FINANCE LTD. CC 375/2008 - CIT VS. ANSHIKA CONSULTANTS PVT. LTD. ITA NO. 467/2 014 VIDE ORDER DATED 16.4.2015. 4. ON THE CONTRARY, LD. CIT(DR) RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW AND ON THE ISSUE OF NON-DISCLOSURES/INCORRECT DISCLOSURE OF MA TERIAL, SHE SUBMITTED THAT THE FACT OF ACCEPTANCE OF SHARE APPLICATION MONEY WITH SHARE PR EMIUM WAS SOMETHING WAS NOT DISCLOSED TO THE DEPARTMENT BY THE ASSESSEE IN THE ORIGINAL PROC EEDINGS COMPLETED U/S 143(3) OF THE ACT. ON THE ISSUE OF NON-APPLICATION OF MIND U/S 151, SHE RELIED ON SEC 292B OF THE ACT AS PER WHICH ANY MISTAKE OR DEFECT OR OMISSION IN THE ROI, ASSESSMEN T, NOTICE, SUMMON OR OTHER PROCEEDINGS WILL NOT BE VALID WILL NOT INVALIDATE THE ASSESSMENT AND THE PROCEEDINGS. ON THE NATURE OF APPROVAL, THE LD. CIT(DR) HAS RELIED ON THE JUDGMENT OF MRS S ONIA GANDHI TO SUPPORT THE NATURE OF 9 SATISFACTION ARRIVED AT BY THE PR. CIT U/S 151 AND ON THE ISSUE OF APPLICATION OF MIND BY THE AO AT THE TIME OF INITIATION OF PROCEEDINGS U/S 147, THE LD. CITDR EMPHASISED THAT AT THE POINT OF RECORDING REASON, PRIMA FACIE BELIEF IS REQUIRED TO BE FORMED RELYING ON RAJESH JHAVERI JUDGMENT. ON THE ISSUE OF LIMITATION MATTER, THE LD. CIT DR S UBMITTED THAT U/S 153B, THE LIMITATION IS REGARDING COMPLETION OF ASSESSMENT AND NOT SERVICE OF THE ORDER BEFORE THE PRESCRIBED DATE. IT WAS ALSO SUBMITTED THAT SINCE, THE POST OFFICE IS O PEN TILL NORMAL WORKING HOURS, THE AO WAS IN NO POSITION TO GET THE ORDER/SLASH DEMAND NOTICE DISPA TCHED ON OR BEFORE 31.03.2016. ON THE ISSUE OF CROSS EXAMINATION LD CITDR EMPHASIZED THAT RULE OF INDIAN EVIDENCE ACT DOES NOT APPLY TO ASSESSMENT PROCEEDINGS AND THEREFORE THE AUTHORITIE S BELOW AND HAD NO OBLIGATION TO ALLOW THE CROSS EXAMINATION OF THE WITNESS WHEN THE WITNESS W AS THE WITNESS OF THE ASSESSEE. IN THAT CASE THE RESPONSIBILITY TO PRESENT THE WITNESS LIES ON T HE ASSESSEE. HOWEVER, ON THE ISSUE OF MERITS, LD. CIT(DR) SUBMITTED THAT THE ISSUE OF SHARES AT DIFFE RENT PREMIUM IS NOT IN ACCORDANCE WITH THE COMPANIES ACT AND ALSO THE INCOME TAX ACT. SHE FURT HER SUBMITTED THAT IN THIS CASE NEITHER THE GENUINENESS OF THE TRANSACTION NOR THE CREDITWORTHI NESS OF THE COMPANIES, THE ONUS OF WHICH RESTED ON THE ASSESSEE HAS BEEN DISCHARGED. THE EXP LANATION REGARDING THE AMOUNTS CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAS CORRECTL Y BEEN FOUND TO BE UNSATISFACTORY BY THE AO AND AMOUNT CREDITED WAS CORRECTLY CONSIDERED AS UN EXPLAINED AND ACTION OF THE AO OF MAKING THE ADDITION OF RS. 12,45,00,000/- U/S. 68 OF THE A CT WAS RIGHTLY UPHELD BY THE LD. CIT(A), WHICH DOES NOT NEED ANY INTERFERENCE. IN SUPPORT OF HER CONTENTION, SHE RELIED UPON THE FOLLOWING CASE LAWS:- - CIT VS. PARAMOUNT COMMUNICATION (P) LTD. (2017-TI OL-253-SC- IT) - INDU LATA RANGWALA VS. DCIT (2017 80 TAXMANN.COM 102 (DELHI) 10 - THAKORBHAI MANGANBHAI PATEL VS. ITO (2017) 78 TAX MANN.COM 201 SC - ARAVALI INFRAPOWER LTD. VS. DCIT (2017-TIOL-42-SC -IT). - YOGENDRAKUMAR GUPTA VS. ITO (51 TAXMANN.COM 383) SC - RAYMOND WOOLEN MILLS LTD. VS. ITO & ORS. 236 ITR 34 - RK MALHOTRA ITO VS. KASTURBA LALBAHI (1977) 109 I TR 537 (SC) - CIT VS. PVS BEEDIES (P) LTD. (1999) 103 TAXMAN 29 4 (SC) - ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. (2 007) 161 TAXMAN 316 (SC) - YUVRAJ VS. UNION OF INDIA 315 ITR 84 SC - ANKIT FINANCIAL SERVICSE LTD. VS. DCIT (2017) 78 TAXMANN.COM 58 (GUJARAT) - PEE AAR SECURITIES LTD. VS. DCIT ITA NO. 4978/DEL /2014 DATED 23.8.2018 - SONIA GANDHI VS. ACIT OTHERS WP 8482/2018 CM AP PEAL 32580-32582/2018 ORDER DATED 10.9.2018. - PCIT VS. MEENAKSHI OVERSEAS PVT. LTD. ITA NO. 651 /2015 OF DELHI HIGH COURT. ORDER EDATED 11.1.2016. - PR. CIT VS. MATCHLESS GLASS SERVICSE (P) LTD. 65 TAXMANN.COM 310 (DELHI) - ONASIS AXIES P LTD. VS. CIT 44 TAXMANN.COM 408 (D ELHI) - CIT VS. N. TARIKA PROPERTIES PVT. LTD. 40 TASXMAN N.COM 525 (DELHI). 11 - CIT VS. NIPUN BUILDERS & DEVELOPERS P LTD. 30 TAX MANN.COM 292 (DELHI) - CIT VS. MAF ACADEMY P LTD. 42 TAXMANN.COM 377 (DE LHI) - CIT VS. TITAN SECURITIES LTD. 32 TAXMANN.COM 306 (DELHI) - CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD. - CIT VS. YOUTH CONSTRUCTION (P) LTD. 44 TAXMANN.CO M 364 (DELHI) - CIT VS. ULTRA MODERNS EXPORTS P LTD. 40 TAXMANN.C OM 458 (DELHI) - CIT VS. NR PORTFOLIO P LTD. 29 TAXMANN.COM 291 (D ELHI) - CIT VS. FROSTAIR P LTD. 26 TAXMANN.COM 11 (DELHI) - BEUTEX INDIA (P) LTD. VS. CIT 18 TAXMANN.COM 9 (D ELHI) - CIT VS. P. MOHANKALA DATED 15.5.2007 (SC) - PR. CIT VS. BIKRAM SINGH 85 TAXMANN.COM 104 - CIT VS. PRECISION FINANCE P LTD. 208 ITR 465. - CIT VS. DURGA PRASAD MORE, (1971) 82 ITR 540 (SC) - SUMATI DAYAL 214 ITR 801 (SC), - SOMNATH MAINI 306 ITR 414 (P&H) - MC DOWELL & CO. LTD. 154 ITR 147 (SC) - ASHOK MAHENDRU & SONS (HUF) VS. CIT 173 TAXMANN.C OM 178 - HERSH WIN CHADHA VS. DCIT (ITA NOS. 3088 TO 2098 & 3107/DEL/2005) - DHAKESHWARI COTTON MILLS LTD. VS. CIT (1954) 26 I TR 775 (SC) - SS GADGIL V. LAL & CO. (1964) 53 ITR 231 (SC). 12 - CIT VS. JAY ENGINEERING WORKS LTD. (1978) 113 ITR 389 (DELHI HC) - NOKIDA INDIA P LTD. VS. DDIT 59 TAXMANN.COM 212 - GTC INDUSTRIES LTD. VS. ACIT 65 ITD 380. - SANJAY BIMALCHAND JAIN VS. ITO IN ITA NO. 61/NAG/ 2013 VIDE ORDER DATED 18.7.2016. - DISHA N. LALWANI VS. ITO IN ITA NO. 6398MUM/2012 VIDE ORDER DATED 22.3.2017. - ITO VS. SHAMIM M. BHARWONI (2016) 69 TAXMANN.COM 65 - MK RAJESHWARI VS ITO IN ITA NO. 1723/BANG./2018 O RDER DATED 12.10.2018. - ABHIMANYU SOIN VS. ACIT IN ITA NO. 951/CHD/2016 O RDER DATED 18.4.2018. - DINESH KUMAR KHANDELWAL HUF VS. ITO IN ITA NO. 58 & 59/NAG/2015 ORDER DATED 24.8.2016. - USHA CHANDRESH SHAH VS. ITO IN ITA NO. 6858/MUM/2 011 ORDER DATED 26.9.2014. - CIT VS. SMT. JASVINDER KAUR 357 ITR 638 ORDER DAT ED 12..6.2013. (GAUHATI HIGH COURT) - ITO VS. SOHAIL FINANCIALS LTD. ITA NO. 4867/DEL/2 011, ITAT, DELHI ORDER DATED 28.9.2018. - RAMANAND AGARWALLA VS. CIT 151 ITR 216 ORDER DATE D 23.9.2013 HONBLE GAUHATI HIGH COURT. 13 - CIT VS. TO ABRAHAM CO. 333 ITR 182 ORDER DATED 6. 1.2011 = HONBLE KERALA HIGH COURT. 5. IN REPLY, TO THE CONTENTION OF THE LD. CIT(DR) O N THE ISSUE OF NON-DISCLOSURES/INCORRECT DISCLOSURE OF MATERIAL FACTS IN VIEW OF APPLICABILI TY OF PROVISO TO SEC 147, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THE AO HAS ACCEPTED THE CLAIM O F SHARE APPLICATION MONEY FROM VARIOUS PARTIES U/S 68 OF IT ACT AND SUCH ACCEPTANCE BY THE AO OF THE SHARE APPLICATION MONEY WHICH IS RECEIVED AT DIFFERENT RATES OF PREMIUM, IS THE FACT SPECIFICALLY COMING TO THE KNOWLEDGE OF THE AO IN ORIGINAL PROCEEDINGS. HE FURTHER STATED THAT THE BALANCE SHEET OF THE ASSESSEE AT PAGE 12 AND ITS SCHEDULES A & B AT PAGE 14 OF THE PAPER BOO K WAS BEFORE THE AO ON THE BASIS OF WHICH THE ASSESSMENT PROCEEDINGS WERE INITIATED AND COMPL ETED. FURTHER, THE NOTICE U/S 142(1) DATED 30.04.2010 AND THE QUESTIONNAIRE ENCLOSED THEREWITH AT PAPER BOOK AT PAGE 27 IN ITEM NO.4 CLEARLY REQUIRES THE ASSESSEE TO SUBMIT DETAIL OF S HARE CAPITAL/SHARE PREMIUM. THERE IS NO FORCE IN THE ARGUMENT OF THE LD CITDR THAT THIS FACT IS NOT IN THE KNOWLEDGE OF THE AO IN THE ORIGINAL PROCEEDINGS. ON THE CONTENTION OF THE LD. CIT(DR), ON THE ISSUE OF NON-APPLICATION OF MIND U/S 151, HE STATED THAT THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF SMT. KALPANA SHATILAL HARAIA CASE (JUDGMENT COMPILATION PB 136-137) IN PA RA 8 (PB 136) HELD THAT MISTAKE OR ERROR COMMITTED BY AO WHILE TAKING SANCTION IS NOT THE IS SUE, THE ISSUE IS DUE APPLICATION OF MIND BY THE AUTHORITY GRANTING SANCTION U/S 151. THEREFORE, THE PROTECTION U/S 151 IS NOT AVAILABLE. REGARDING THE RELIANCE PLACED ON SONIA GANDHI JUDGM ENT, THE ASSESSEES COUNSEL SUBMITTED THAT THE HONBLE SUPREME COURT JUDGMENT ON THE ISSUE NEE D BE FOLLOWED IN PREFERENCE TO THE JUDGMENT OF JURISDICTION OF HIGH COURT. HE FURTHER SUBMITTED THAT THE SONIA GANDHI JUDGMENT FOLLOWS THE MEEANKSHI OVERSEAS JUDGMENT PASSED IN 1 1.01.2016 AND THE HONBLE DELHI HIGH 14 COURT IN THE SUBSEQUENT DECISION IN N.C. CABLE P LT D DATED 11.01.2017 SUPPORTS THE CASE OF THE ASSESSEE. ON THE CONTENTION OF LD. CIT(DR) ON THE I SSUE OF APPLICATION OF MIND BY THE AO AT THE TIME OF INITIATION OF PROCEEDINGS U/S 147, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RELIED ON NUMBER OF AUTHORITIES WHICH SAYS IN PARA 23 AND 16 OF THE SYNOPSIS WHICH REQUIRES THAT THE AO SHOULD APPLIED HIS INDEPENDENT MIND AND THERE SHOULD BE LIVE NEXUS SLASH RATIONAL CONNECTION BETWEEN THE INFORMATION AVAILAB LE AND THE BELIEF OF ESCAPEMENT OF INCOME FORMED. IT WAS FURTHER SUBMITTED THAT THE RAJESH J HAVERIS CASE APPLIES TO THE REASSESSMENT PROCEEDINGS INITIATED IN THE CASE WHERE NO ASSESSME NT IS MADE U/S 143(3). ON THE ISSUE OF NON APPLICATION OF MIND U/S. 151, LD. COUNSEL FOR THE A SSESSEE REPLIED THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT KALPANA SHATILAL HARAIA CA SE (JUDGMENT COMPILATION PB 136-137) IN PARA 8 (PB 136) HELD THAT MISTAKE OR ERROR COMMITTE D BY AO WHILE TAKING SANCTION IS NOT THE ISSUE, THE ISSUE IS DUE APPLICATION OF MIND BY THE AUTHORITY GRANTING SANCTION U/S 151. THEREFORE, THE PROTECTION U/S 151 IS NOT AVAILABLE. ON THE CON TENTION OF LD. CIT(DR), ON THE ISSUE OF CROSS EXAMINATION, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS CORRECT THAT STRICT RULE OF EVIDENCE ACT ARE NOT APPLICABLE TO THE REASSESSMENT PROCEEDI NGS BUT THAT DOES NOT MEAN THAT THE AO IS ENTITLED TO USE THE EVIDENCE IN COMPLETE DISREGARD TO THE PRINCIPLES OF NATURAL JUSTICE BY DENYING OPPORTUNITY OF CROSS EXAMINATION OF THE WITNESS. TH E RULE OF AUDI ALTERAMPARTEM IS APPLICABLE TO THE ASSESSMENT PROCEEDINGS ALSO WHICH ARE QUASI JUD ICIAL PROCEEDINGS. IN SUPPORT OF ABOVE PROPOSITION OF LAW, THE JUDGMENTS ARE CITED ON PAGE 24 OF THE SYNOPSIS. HE SUBMITTED THAT LD. CITDR IS NOT CORRECT IN SUBMITTING THAT SH SANTOSH KUMAR SHAH WAS THE WITNESS OF THE ASSESSEE. HOWEVER, THE SAID PERSON WAS THE WITNESS OF THE DEP ARTMENT WHOSE STATEMENT IS RELIED BY THE AO TO TAKE THE ADVERSE VIEW AGAINST THE ASSESSEE. IN R EPLY, TO THE CONTENTION OF THE LD. CIT(DR), LD. COUNSEL FOR THE ASSESSEE SUBMITTED ON THE LIMITATIO N ISSUE THAT THE TERM USED IN SEC 153B IS 15 MAKING AN ORDER OF ASSESSMENT BEFORE THE PRESCRIBED DATE AND IN VIEW OF THE JUDGMENTS OF THE KERALA HIGH COURT IN THE CASES OF CAGIT VS KAPPUMALAI ESTATE 234 ITR 187 (KER) AND ANOTHER JUDGMENT REPORTED IN 69 STC 62 AND OTHER DECISIONS OF 327 STC 303 (AP) AND 93 STC 406 (SC), THE ORDER TO MAKE THE ASSESSMENT IS COMPLETE AND EF FECTIVE ONCE THE SAME GOES BEYOND THE CONTROL OF AUTHORITY CONCERNED. IT WAS ALSO SUBMITT ED ON BEHALF OF THE ASSESSEE THAT THE ASSESSING OFFICER IN ANY CASE SHOULD HAVE TAKEN CARE TO PASS THE ORDER BEFORE THE LIMITATION DATE IN THE MANNER THAT HE IS ABLE TO GET THE PROCESS COMPLETED BY POSTING THE ASSESSMENT ORDER/DEMAND NOTICE. WITHOUT PREJUDICE TO ABOVE, THE LD. CIT DR IS NOT CORRECT IN SAYING THAT THE POST OFFICE IS OPEN IN OFFICE HOURS ONLY FOR ACCEPTING SPEED POST BUT THIS FACILITY IS AVAILABLE ROUND THE CLOCK IN DELHI. THEREFORE THE ASSESSING OFFICER HAD TIME TO GET THE SPEED POST ARTICLE HANDED OVER TO SPEED POST AUTHORITY TILL 12.0 CLOCK AT NIGHT. HOWEVER, ON THE CONTENTION OF THE LD. CIT(DR) THAT THE ISSUE OF SHARES AT DIFFERENT PREMIUM IS NOT IN ACCO RDANCE WITH THE COMPANIES ACT AND ALSO THE INCOME TAX ACT, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THE ISSUE OF THE SHARES TO THE EXISTENCE SHAREHOLDERS WERE AT THE LOWER RATE OF PR EMIUM AND THIS FACT HAS BEEN DISCUSSED BY THE LD. CIT(A) ON PAGE 14 IN PARA 8.29 AND 8.30 AND AS PER THE DECISION OF MUMBAI BENCH IN SUDHIRMENON HUF 148 ITD 260, THE ISSUE OF SHARES TO EXISTING SHAREHOLDERS AT LOWER PREMIUM CANNOT BE COMPARED WITH THOSE ISSUED TO NEW SHAREHO LDERS AT HIGHER PREMIUM. THERE IS NO VIOLATION OF INCOME TAX LAW AS APPLICABLE TO AY 200 8-09 (PRIOR TO INTRODUCTION OF SEC 56(2)(VII)(B) W.E.F FROM 01.04.2013) AS WELL AS THE COMPANIES ACT AS THERE IS NO BAR UNDER THE COMPANIES ACT TO ISSUE SHARES AT DIFFERENT PREMIUM. THE LD. CITDR DID NOT PINT TO ANY PARTICULAR SECTION OF COMPANIES ACT AND INCOME TAX ACT FOR VIOLATION OF SHARE PREMIUM. THE ISSUE OF SHARE AT RS.490 PREMIUM TO OUTSIDE ENTITIE S IS BASED ON DCF VALUATION REPORT DATED 16.06.2006 AS PER WHICH VALUE OF SHARE IS ESTIMATED AT RS.436 PER SHARE. THE AO ACKNOWLEDGES 16 THE ABOVE DCF REPORT IN PARA 8 AT PAGE 15 OF THE AS SESSMENT ORDER. IT WAS FURTHER SUBMITTED THAT THERE IS ALLEGATION THAT THE NOTICES U/S 133(6) ISS UED BY THE AO TO SHARE APPLICANT COMPANY HAVE RECEIVED BACK UNSERVED FROM POSTAL AUTHORITIES AND THIS FACT SHOW THOSE COMPANIES ARE DUMMY PAPER COMPANIES, SHIFTING ONUS BACK TO THE ASSESSEE . THE ASSESSEE ALSO DID NOT DISCLOSE THE CURRENT ADDRESSES OF THE SHARE APPLICANTS. IN REPLY , LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ORIGINAL PROCEEDINGS, THE NOTICES U/S 133(6) WERE I SSUED, SERVED AND COMPLIED WITH. FROM PERUSAL OF THE ASSESSMENT ORDER, THERE IS NO MENTION BY THE AO THAT HE HAS EVER DURING REASSESSMENT PROCEEDINGS ISSUED NOTICES U/S 133(6) TO THE SHARE APPLICANT COMPANIES. SO THE QUESTION OF NON- SERVICE OF THE SAME DOES NOT ARISE. THE LD CIT(A) O N PAGE 23 (OF PARA 6.8) MENTIONS THE ABOVE FACT. THE MENTION OF THIS FACT BY LD CIT(A) NOTHING BUT ASSUMPTION OF FACTS BASED ON PERCEPTION. THE ABOVE FINDING OF THE LD. CIT(A) NEED BE EXPUNGE D AND QUASHED IN ABSENCE OF ANY SUPPORTING MATERIAL ON RECORD. THE ALLEGATION OF TH E LD CITDR THAT ASSESSEE DID NOT DISCLOSE THE LATEST ADDRESSES SUFFERS FROM VICE OF NON-VERIFICAT ION OF FACTS. THE FACT THAT TWO COMPANIES NAMELY M/S WELTEX AND MILAN WERE MERGED IN M/S JAIS RI W.E.F 01.04.2009 IS ON RECORD OF THE AO AND DEALT IN PARA 4 AT PAGE 4 OF THE ASSESSMENT ORDER, THE COMPANY M/S JAISRI CAME TO BE A LEGAL ENTITY AND THE SUMMON U/S 131 WAS ISSUED TO T HE COMMON DIRECTOR SH. SULEKH CHAND JAIN. THIS FACT IS ALSO NOTED IN ABOVE PARA. IN VIEW OF T HESE FACTS, THE ABOVE ALLEGATION OF NON FURNISHING OF ADDRESSES IS BASELESS AND FARFETCHED. HE FURTHER SUBMITTED THAT THE LD. CIT(A) HAS RELIED ON VARIOUS JUDGMENTS IN SUPPORT OF CONTENTIO N THAT IN CASE OF SO CALLED ENTRY PROVIDER COMPANIES, ENTIRE ONUS IS ON THE ASSESSEE TO PROVE THAT THE CASH CREDIT BY WAY OF SHARE CAPITAL IS AN UNACCOUNTED MONEY INTRODUCED IN THE BOOKS OF ACC OUNT IN THE GARB OF SHARE CAPITAL. HOWEVER, THE ASSESSEE HAS SUBMITTED IN THE WRITTEN SYNOPSIS, VARIOUS AUTHORITIES WHICH SAY THAT THE AO SHOULD CONSIDER THE EVIDENCE PRODUCED IN SUPPORT OF CASH CREDIT AND CHARGING OF HIGHER PREMIUM 17 IS NO GROUND FOR INVOKING SEC 68 OF IT ACT AND ALSO FAILURE TO COMPLY WITH THE SUMMON BY THE SHARE APPLICANT COMPANIES IS NO GROUND FOR TAKING A DVERSE VIEW. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY C ONSIDERED THE CASE LAWS AND THE RELEVANT DOCUMENTS AVAILABLE ON RECORD, ESPECIALLY THE IMPUG NED ORDER, WRITTEN SUBMISSIONS AND THE REJOINDER OF THE ASSESSEES COUNSEL AND THE CASE LA WS CITED BY BOTH THE PARTIES. FROM THE ASSESSMENT ORDER, WE FIND THAT ASSESSEE FILED ITS RETURN OF INCOME ON 30.9.2008 FOR THE ASSESSMENT YEAR 2008-09 DECLARING INCOME OF RS. 3,3 2,390/-. THE ASSESSING OFFICER PASSED THE ORDER U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN S HORT ACT) ON 31.3.2016, BY ASSESSING THE INCOME AT RS. 4,12,390/-. THE ORDER WAS RECTIFIED U/S. 154 OF THE ACT AND DETERMINING THE ASSESSED INCOME AT RS. 8,84,600/-. SUBSEQUENTLY, I NFORMATION WAS RECEIVED FROM THE JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT, NEW DELHI. TH E JOINT DIRECTOR, DIRECTORATE OF ENFORCEMENT, NEW DELHI VIDE HIS LETTER INTIMATED TH AT DURING THE COURSE OF INVESTIGATION IN COAL SCAM MATTER IN WHICH THE ASSESSEE WAS ACCUSED OF BE ING INVOLVED THEY HAVE FOUND CERTAIN INFORMATION REGARDING ISSUE OF SHARES BY THE ASSESS EE COMPANY. IT WAS INFORMED THAT THE ASSESSEE HAD ISSUED SHARES OF ITS GROUP COMPANIES AND FAMILY MEMBERS AT DIFFERENT RATES. ON 28.2.2008 SHARES WERE ISSUED AT A PREMIUM OF RS. 40/- HOWEVER , SHARES WERE ISSUED AT PREMIUM OF RS. 490/- ON 31.3.2008 AND 24.12.2009. THE INVESTIGATION WAS STATED TO BE MONITORED BY THE HONBLE SUPREME COURT OF INDIA. THE CASE OF THE ASSESSEE W AS REOPENED U/S. 147 OF THE ACT AND THE NOTICE U/S. 148 OF THE WAS ISSUED TO THE ASSESSEE O N 29.3.2015. ORDER U/S. 143(3)/147 OF THE ACT WAS PASSED ON 31.3.2016, REASSESSING THE INCOME AT RS. 12,54,84,600/- AFTER DISALLOWANCE OF RS. 12,45,00,000/- U/S. 68 OF THE ACT ON ACCOUNT OF UNE XPLAINED CASH CREDIT. WE NOTE THAT AO WHILE RECORDING THE REASONS FOR THE BELIEF THAT INCOME HA S ESCAPED ASSESSMENT HAS RECORDED THE REASONS AS UNDER: - 18 19 11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT: IN THIS CASE INFORMATION HAS BEEN RECEIVED FROM THE JOINT DIRECTOR, DIRECTORATE OF J ENFORCEMENT NEW DELHI VIDE HIS LETTER NO. ECIR/05/ DLZO/2014/ AD(DR) /10956 DATED ' 01.2015 ADDRESSED TO THE CIT-7, NEW DELHI INTIMATIN G THAT DURING THE COURSE OF INVESTIGATION IN 'COAL SCAM' MATTER' IN WHICH THE A SSESSEE ACCUSED OF BEING INVOLVED THEY HAVE FOUND CERTAIN INFORMATION REGARDING ISSUE OF SHARES BY THE ASSESSEE COMPANY. IT HAS BEEN INFORMED THAT THE ASSESSEE HAD ISSUED SHARES TO ITS GROUP COMPANIES AND FAMILY MEMBERS AT DIFFERENT RATES . ON 28.02.2008 SHARES WERE ISSUED AT A PREMIUM OF RS.490/- HOWEVER SHARES WERE ISSUED AT A PREMIUM OF RS.490/- ON 31/03/2008 AND 24/12/2009. THE INVESTIGATION IS ST ATED TO BE MONITORED BY TIRE HON'BLE SUPREME COURT THE INFORMATION RECEIVED FROM DIRECTORATE OF ENFORC EMENT HAS BEEN CONSIDERED WITH REFERENCE TO THE RETURN OF INCOME AVAILABLE ON RECO RD. IT IS NOTICED THAT THESE SHARES WERE ISSUED AT EXORBITANTLY HIGH PREMIUM OF RS.490/- PER SHARE TO KOLKATTA BASED COMPANIES AS PER THE FOLLOWING DETAILS. REMAINING INVESTMENT AT A PREMIUM OF RS.40 PER SHARES WAS RECEIVED FROM DIRECTORS, PROMOTERS AND THEIR F AMILY MEMBERS DURING THE YEAR. 20 6.1 AFTER PERUSING THE AFORESAID REASONS RECORDED, ON GENERAL PERCEPTION OF THE AO REGARDING KOLKATA C OMPANIES PROVIDING ACCOMMODATION ENTRIES 21 AFTER PERUSING THE AFORESAID REASONS RECORDED, WE FIND THAT THE REASONS RECORDED IS BASED ON GENERAL PERCEPTION OF THE AO REGARDING KOLKATA C OMPANIES PROVIDING ACCOMMODATION ENTRIES WE FIND THAT THE REASONS RECORDED IS BASED ON GENERAL PERCEPTION OF THE AO REGARDING KOLKATA C OMPANIES PROVIDING ACCOMMODATION ENTRIES 22 TO THE BENEFICIARIES. WE FURTHER NOTE THAT THE INF ORMATION IS AS PER THE DIRECTORATE OF ENFORCEMENT COMMUNICATION DID NOT REVEAL THAT ANY NEW FACTS/ MATERIAL OR EVIDENCE INDICATING THE STATE OF AFFAIRS, CONTRARY TO WHAT WAS ALREADY ON RECORD, DULY EXAMINED BY THE COMPETENT AUTHORITY. THIS INFORMATION WAS NEITHER A FRESH MAT ERIAL NOR DID IT INDICATE THE ESCAPEMENT OF INCOME BY THE ASSESSEE IN ONE WAY OR THE OTHER. THE RE IS NO MATERIAL FORWARDED WITH THE ABOVE INFORMATION WHICH COULD HELP THE AO TO REACH SUCH A PRIMA FACIE BELIEF. WE NOTE THAT THE AO COMMUNICATED WITH THE DIRECTOR OF INCOME TAX (INVES TIGATION) KOLKATTA REQUIRING THE LATER TO INVESTIGATE INTO THE AFFAIRS OF THESE COMPANIES. THE PARA 3 OF THE LETTER READ AS UNDER :- 3. YOU ARE REQUESTED TO KINDLY INVESTIGATE INTO AFF AIRS OF THESE COMPANIES AND INFORM ANY ADVERSE INFORMATION REGARDING THE IDENTI TY, CREDITWORTHINESS AND SOURCE OF FUNDING OF THESE COMPANIES, WHICH MAY ENABLE THIS OFFICE TO TAKE APPROPRIATE REMEDIAL MEASURES IN THE CASE OF M Y ASSESSEE AT THE EARLIEST. KINDLY APPRECIATE THAT THE TIME LIMIT FO R TAKING REMEDIAL ACTION U/S 148 OF THE ACT IS 31.03.2015 . 6.2 IT IS NOTED THAT THE COMMUNICATIONS BY THE AO T O TWO DIFFERENT AUTHORITIES CLEARLY INDICATES THAT THE AO WAS NOT IN A POSITION TO FORM A BELIEF OF ESCAPEMENT OF INCOME TILL THE LAST COMMUNICATION ON 02.03.2015 MADE WITH DI (INV). FU RTHER IN THE REASON RECORDED THE AO DOES NOT DISCUSS ANY FEEDBACK RECEIVED BY HIM AS A RESUL T OF ABOVE COMMUNICATIONS WHICH IMPLIES THAT THE AO REMAINED AS DEFICIENT IN THE INPUT AS H E WAS BEFORE UNTIL RECORDING OF REASONS ON 27.03.2015. THE MOOT AND IMPORTANT QUESTION IS WHAT SPECIFIC MATERIAL WAS GATHERED BY THE AO TO FILL IN THE BLANKS FOUND BY THE AO IN THE ABOV E INFORMATION. THE AO HAD NO FRESH TANGIBLE MATERIAL TO SUPPORT THE BELIEF, WHICH IS REQUIRED T O BE BASED ON THE REASONS TO BE RECORDED, TO VEST HIM WITH THE POWER OF INVOKING REASSESSMENT PROCEE DINGS U/S 147 OF THE ACT. THE AO HAD PRACTICALLY THE SAME MATERIAL AND EVIDENCES WHICH W ERE PLACED BEFORE HIM IN ORIGINAL ASSESSMENT. IN THE ABSENCE OF ANY SPECIFIC FRESH M ATERIAL LEADING TO THE AOS THE PRIMA FACIE 23 BELIEF OF THE ESCAPEMENT OF INCOME, THE CONSEQUENT ACTION OF THE AO IS MERELY CHANGE OF OPINION OR REVIEW OF THE EARLIER DECISION, WHICH IS NOT PER MITTED IN THE GARB OF REASSESSMENT. THIS VIEW IS FORTIFIED BY THE JUDGMENT IN CIT VS EICHER LTD.294 ITR 310 (DELHI), WHERE THE JURISDICTIONAL HIGH COURT HELD AS UNDER :- ------IF THE ENTIRE MATERIAL HAD BEEN PLACED BY TH E ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME WHEN THE ORIGINAL ASS ESSMENT WAS MADE AND THE ASSESSING OFFICER APPLIED HIS MIND TO THAT MATE RIAL AND ACCEPTED THE VIEW CANVASSED BY THE ASSESSEE, THEN MERELY BECAUSE HE DID EXPRESS THIS IN THE ASSESSMENT ORDER, THAT BY ITSELF WOULD NOT G IVE HIM A GROUND TO CONCLUDE THAT INCOME HAS ESCAPED ASSESSMENT AND, TH EREFORE, THE ASSESSMENT NEEDED TO BE REOPENED. 6.2.1 THE HONBLE SUPREME COURT OF INDIA IN THE CA SE OF ITO VS. TECHSPAN INDIA PRIVATE LIMITED AND ANOTHER IN THE HEADS NOTES HAS OBSERVE D AS UNDER:- REASSESSMENT CONDITIONS PRECEDENT GENERAL PRINC IPLES EXEMPTION EXPORT OF COMPUTER SOFTWARE ASSESSEE HAVING INCOME FROM SO FTWARE DEVELOPMENT AND HUMAN RESOURCE DEVELOPMENT CLAIMING EXEMPTION IN RESPECT OF INCOME FROM SOFTWARE DEVELOPMENT BUT CLAIMING COMMON EXPENSES SHOW CAUSE NOTICE ISSUED IN ORIGINAL ASSESSMENT PROCEEDINGS WITH REGARD TO A LLOCATION OF COMMON EXPENSES AND ASSESSMENT MADE THEREAFTER QUESTION TO WHAT E XTENT DEDUCTION TO BE ALLOWED UNDER SECTION 10A WELL CONSIDERED IN ORIGINAL ASS ESSMENT PROCEEDINGS NOTICE FOR REASSESSMENT ON GROUND DEDUCTION UNDER SECTION 10A ALLOWED IN EXCESS MERELY A CHANGE OF OPINION ON FACTS ALREADY AVAILA BLE IN ORIGINAL ASSESSMENT PROCEEDINGS REASSESSMENT NOT PERMISSIBLE INCOME TAX ACT, 1961 AS SS. 10A, 147, 148. 6.3 THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC) [AFFIRMING CIT VS. KELVINAT OR OF INDIA LTD. [2002] 256 ITR 1 (DELHI) (FB)] J. KAPADIA HELD THAT THE CONCEPT OF CHANGE O F OPINION MUST BE TREATED AS AN IN-BUILT TEST TO 24 CHECK ABUSE OF POWER BY ASSESSING OFFICER AND THAT THE REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BELIEF. 6.4 COMING TO THE OTHER OBSERVATION WHICH IS SO CAL LED MATERIAL IN SUPPORT OF FORMATION OF BELIEF UNDER SECTION 147, THE AO HAS RELIED ON THE GENERAL PERCEPTION AIDED BY HIS PERSONAL BELIEF UNSUPPORTED BY ANY MATERIAL ON RECORD TERMING THE C OMPANIES IN KOLKATTA TO BE ENTITIES ENGAGED IN THE ACCOMMODATION ENTRY PROVIDING ACTIVITY. THE ABOVE PERCEPTION DEHORS THE SPECIFIC MATERIAL IS A WITCH HUNT WHICH IS NOT PERMITTED IN LAW WHEN IN ORIGINAL PROCEEDINGS AFTER CONDUCTING NECESSARY ENQUIRY, THE AO HAS ACCEPTED THE SHARE CAPITAL CONTRIBUTION BY THE THREE COMPANIES AS EXPLAINED CREDIT. THE A.O. HAS ERRED I N LAW AND ON FACTS IN INITIATING THE PROCEEDINGS U/S. 147 OF THE I T ACT, 1961 FOR THE R EASONS BASED ON MERE SUSPICION AND THE NOTICE ISSUED U/S. 148 IS ILLEGAL AS SUCH. RELIANCE IN THI S REGARD IS PLACED ON THE RATIO DECIDED IN SHEO NATH SINGH V ACIT (1971) 82 ITR 147 (SC). IN THE AFOREMENTIONED CASE, THE HON'BLE APEX COURT HAS HELD THAT THE A.O CAN ACT ON DIRECT OR CI RCUMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. IT IS TRITE LAW THAT P ROCEEDINGS U/S 147 OF THE ACT CANNOT BE INITIATED EITHER ON THE BASIS OF MERE SUSPICION OR FOR MAKING FISHING OR ROVING ENQUIRIES THE INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT ON THIS GROUND W AS HELD TO BE ILLEGAL AND BAD IN LAW. 6.5 THE LAST LIMB OF THE BASIS CITED IN THE REASONS IS THE JUDGMENT OF THE KOLKATTA BENCH OF ITAT IN THE CASE OF BISHAKA SALES. CONSIDERING THE BACK GROUND OF THE CASE IN THE JUDGMENT, THE AO TOOK A VIEW THAT THERE ARE PAPER COMPANIES IN KO LKATTA WHICH ARE IN THE ACTIVITIES OF PROVIDING ACCOMMODATION ENTRIES TO THE PARTIES WHER E OWNERSHIP IS CHANGED BY INDUCTING THE ASSOCIATES OF DIRECTORS OF THE BENEFICIARY COMPANIE S. AGAIN THE AO IS ACTING ON PERCEPTION BASED ON THE ACTIVITIES DONE BY NUMBER OF COMPANIES IN KO LKATA MEANING THEREBY THAT ALL THE COMPANIES IN KOLKATTA WHERE THERE IS CHANGE OF OWNE RSHIP ARE PAPER COMPANIES ENGAGED IN THE 25 ACCOMMODATION BUSINESS WHICH IS NOT WHAT IS INDICA TE IN THE INFORMATION/ JUDGMENT OF KOLKATTA BENCH CITED BY HIM. THE AO FAILED TO CONSIDER THIS NON SPECIFIC INPUT BY APPLYING THE SAME ON THE ASSESSEE BY LINKING THE SHARE APPLICANT COMPANI ES TO THE COMPANY DEALT BY THE ITAT IN THE CASE OF BISHAKA SALES. IN THE ABSENCE OF SUCH NEXUS OR LINKAGE ESTABLISHED BY THE AO WITH THE FACTS OF THE ASSESSEE COMPANY OR THE SHAREHOLDER CO MPANIES, THE COGNIZANCE OF SUCH A JUDGMENT AMOUNTS TO ACTING ON MERE SUSPICION AND NOTHING MO RE. ANY ACTION ON SUCH BASIS IS NOTHING BUT AN EXERCISE IN THE NATURE OF CARRYING A ROVING ENQU IRY IN ORDER TO CARRY INVESTIGATION, MUCH SHORT OF A BELIEF WHICH IS THE REQUIREMENT OF LAW. THE AO IS NOT ENTITLED TO ACT ON SUSPICION BUT ACT WITH THE PRIMA FACIE BELIEF OF ESCAPEMENT OF INCOME . 6.6 THE ASSESSMENT OF THE ASSESSEE FOR THE ASSESSM ENT YEAR UNDER CONSIDERATION WAS ORIGINALLY COMPLETED U/S 143 (3) OF THE IT ACT ON 24.08.2012. FURTHER THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ABOVE ASSESSMENT YEAR. BY VIRTUE OF PROVISO TO SECTION 147, THE INITIATION OF REASSESSM ENT PROCEEDINGS IS NOT VALID UNLESS THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO EITHER MAKE A RETURN U/S 13 9 OR IN RESPONSE TO NOTICE U/S 142(1) OR 148 OF THE IT ACT OR TO DISCLOSE FULLY AND TRULY MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THE ASSESSMENT YEAR UNDER REFERENCE. THE ASSESSEE HAD O BJECTED TO REASSESSMENT PROCEEDINGS ON THE GROUND THAT UNDER PROVISO TO SECTION 147 ON PAG E 16 TO 17 THAT THE ASSESSEE HAD FALTERED IN DISCLOSING FULLY OR TRULY ANY SPECIFIC MATERIAL FAC TS NECESSARY FOR ASSESSMENT. THE PERUSAL OF THE REASONS WILL REVEAL THAT THERE IS JUST A WHISPER IN THE REASONS OF THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY OR MATERIAL FACTS. THE OBJ ECTIONS OF THE ASSESSEE BEFORE THE AO VIDE LETTER DATED 02.11.2015 ARE ON PAGES 40-44 AND THE REFEREN CE MAY BE MADE TO PARA 2.1 ON PAGE 40 OF THE PAPER BOOK WHERE THE ASSESSEE HAD OBJECTED TO T HE ASSUMPTION OR JURISDICTION BY THE AO 26 BASED ON PROVISO TO SECTION 147. THE AO VIDE LETTE R DATED 07.12.2015 PAPER BOOK PAGES 45- 53 HAS CONSIDERED THE ABOVE OBJECTIONS OF THE ASSES SEE IN ON PAGE 47WHERE THE AO HAS GIVEN A FINDING THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS THE AMOUNT OF RS 9,31,00,000/- HAS ESCAPED A SSESSMENT. HERE IT IS EXTREMELY IMPORTANT TO NOTE THAT ALTHOUGH THE AO IS NOT ALLOWED TO SUPPLEM ENT REASON AT LATER STAGE BY FILLING IN THE GAPS BUT AT THAT STAGE ALSO THE AO WAS NOT ABLE TO FIRST POINT OUT IN IDENTIFYING WHICH MATERIAL FACTS WERE NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY AND HOW THOSE FACTS HAD BEARING ON THE COMPUTATION OF INCOME AT THE FIRST STAGE OF ASSESSM ENT. THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD, DURING THE ORIGINAL ASSESSMENT PROCEEDING COMP LETED U/S 143(3) OF THE ACT VIDE ORDER DATED 24.08.2012 (PAPER BOOK PAGE 25-26), HAD DISCLOSED A LL FACTS IN RELATION TO THE SO CALLED ESCAPED INCOME OF RS. 9,31,00,000/-, AS PER THE REASON RECO RDED. IN THE ABSENCE OF ANY SUCH ALLEGATION BY THE AO IN THE REASON RECORDED WHICH ARE SUPPOSEDLY DONE BY THE AO AFTER REFERRING TO THE ORIGINAL ASSESSMENT RECORDS AND ALSO THE INFORMATIO N PASSED ON BY THE DIRECTORATE OF ENFORCEMENT, THE REOPENING ON THE ACCOUNT NEED BE Q UASHED. IF THE AO IS NOT ABLE TO MAKE OUT ANY CASE, IN SUPPORT OF HIS ACTION OF REOPENING OF THE CONCLUDED ASSESSMENT, OF THE FAILURE OF THE ASSESSEE IN DISCLOSING ANY PARTICULAR MATERIAL FACT S OR IDENTIFYING SUCH MATERIAL FACTS WHICH HAD BEARING ON THE ASSESSMENT ON THE PARTICULAR INCOME, THE ACTION OF REOPENING OF REASSESSMENT IS THEREFORE INVALID AND NEED BE QUASHED. A SIMPLE STA TEMENT OF FAILURE OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS, AS IS DONE IN TH E ORDER DISPOSING OFF THE OBJECTION, LEAVES THE COMPLIANCE BY THE AO MIDWAY. IT FALLS SHORT OF THE REQUIREMENT OF THE PROVISO AND THEREFORE FAILS TO ADDRESS THE DEMANDS OF THE ABOVE PROVISO. . THE HONBLE DELHI HIGH COURT IN THE CASE OF DALMIA (P) LTD V CIT & ANR64 DTR 417 HELD THAT THE ONUS IS ON THE REVENUE TO SHOW THAT THE ASSESSEE HAD STATED INCORRECT FACTS AND WRONG MATER IAL FACTS RESULTING IN THE AO PROCEEDING ON 27 THE BASIS OF SUCH FACTS. IT WAS HELD BY THE COURT T HAT THE REASON RECORDED AND THE DOCUMENTS ON RECORD ARE OF PARAMOUNT IMPORTANCE AND WILL HAVE TO BE EXAMINED TO DETERMINE WHETHER THE STAND OF THE REVENUE IS CORRECT. IT WAS FURTHER EMPHASIZE D THAT FAILURE TO MAKE FULL AND TRUE DISCLOSURE MATERIAL FACTS IS A PRECONDITION WHICH SHOULD BE SA TISFIED IF REOPENING IS AFTER FOUR YEARS OF END OF THE ASSESSMENT YEAR. IT WAS HELD BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF WELINTERTRADE (P) LTD. &ANR. VS. ITO (2009) 308 ITR 22 (DEL) THAT WHERE ASSESSEE HAVING FULLY AND TRULY DISCLOSED ALL THE MATERIAL FACTS NECESSAR Y FOR THE ASSESSMENT AS REQUIRED BY THE AO THE PRECONDITION FOR INVOKING THE PROVISO TO S. 147 WAS NOT SATISFIED AND THEREFORE AO ACTED WHOLLY WITHOUT JURISDICTION IN ISSUING NOTICE U/S. 148 BEY OND FOUR YEARS PERIOD MENTIONED IN S. 147. THE JUDGMENT OF THE HONBLE CHENNAI HIGH COURT IN THE C ASE OF FENNER INDIA LTD V DCIT 241 ITR 672(MAD) ALSO SUBSCRIBED TO THE ABOVE JUDICIAL PROP OSITION PROPOUNDED BY THE HONBLE DELHI HIGH COURT IN HARYANA ACRYLIC MANUFACTURING CASE (S UPRA). THE JUDGMENT OF THE MUMBAI HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. V/S R.B. WADKAR, ASSISTANT COMMISSIONER OF INCOME TAX AND OTHERS, REPORTED IN [2004] 268 ITR 332 IS C ATEGORICAL ON THE OBLIGATION OF THE AO TO IDENTIFY THE MATERIAL FACTS WHICH WERE NOT DISCLOSE D BY THE ASSESSEE AND ALSO TO PROVE THAT THOSE FACTS WERE RELEVANT FOR COMPUTATION OF INCOME. THE OBSERVATIONS OF THE HONBLE COURT ON THE ABOVE ISSUE ARE REPRODUCED AS UNDER: --------- HE MUST DISCLOSE IN THE REASONS AS TO WHICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECES SARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH VITAL LINK BETWEEN THE REASONS AND EVIDENCE. THAT VITAL LINK ISTHE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CONCLUDED ASSESSMENT. -------. 6.7 THE HONBLE BOMBAY HIGH COURT IN BOMBAY STOCK E XCHANGE LTD. VS DCIT IN WRIT PETITION NO. 2468 OF 2001 (DATE OF ORDER 12.06.2014 ) HELD THAT BALD STATEMENT THAT ASSESSEE HAS FAILED TO MAKE A FULL & TRUE DISCLOSURE OF MATERIAL FACTS IS NOT SUFFICIENT. DETAILS MUST BE GIVEN AS 28 TO WHICH FACT WAS NOT DISCLOSED. IT IS TRUE THAT TH E REASONS FOR INITIATING RE-ASSESSMENT PROCEEDINGS DO IN FACT STATE THAT THERE WAS A FAILURE ON THE P ART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY A LL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. 6.8 THE OBSERVATIONS OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF M/S SWAROVSKI INDIA PVT. LTD V. DEPUTY COMMISSIONER OF INCOME TAX, W.P.(C) 1909/2013 DECIDED ON 08.08.2014 ARE ALSO RELEVANT ON THE ISSUE OF IDENTIFYING SPECIFICA LLY THE MATERIAL FACTS HAVING BEARING ON THE ASSESSMENT NOT DISCLOSED TRULY AND FULLY BY THE ASS ESSEE IN REOPENING OF ASSESSMENT PROCEEDINGS; 12. IT IS CLEAR THAT THE ESCAPEMENT OF INCOME BY IT SELF IS NOT SUFFICIENT FOR REOPENING THE ASSESSMENT IN A CASE COVERED BY THE F IRST PROVISO TO SECTION 147 OF THE SAID ACT UNLESS AND UNTIL THERE IS FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERI AL FACTS NECESSARY FOR ASSESSMENT. IN THE PRESENT CASE, IT HAS NOT BEEN SP ECIFICALLY INDICATED AS TO WHICH MATERIAL FACT OR FACTS WAS/WERE NOT DISCLOSED BY THE PETITIONER IN THE COURSE OF ITS ORIGINAL ASSESSMENT UNDER SECTION 143 (3) OF THE SAID ACT. 6.9 WE FIND THAT THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS TIRATHRAM AHUJA (HUF) (2008) 6DTR 335 (DEL.) IS ALS O CITED TO HIGHLIGHT THE PROPOSITION THAT CONDITIONS LAID DOWN IN PROVISO TO SECTION 147 NEED BE STRICTLY FULL FILLED AS THIS POWER IS AN EXCEPTIONAL POWER AND IN THE ABSENCE OF STRICT COMP LIANCE OF CONDITIONS OF PROVISO, THE EXERCISE OF POWER HELD TO BE UNSUSTAINABLE IN LAW. 6.10 WE ALSO NOTE THAT THE ORDER IS BAD IN LAW BEC AUSE THE REASON RECORDED ARE VAGUE AND WITHOUT APPLICATION OF MIND AND ARE BASED ON THE IN FORMATION OF THE ENFORCEMENT DIRECTORATE WITH NO INCRIMINATING MATERIAL WHICH IS COMING TO T HE POSSESSION OF THE AO FOR THE FIRST TIME AND WHICH WAS NOT THERE WITH HIM AT THE TIME OF ORIGINA L PROCEEDINGS. IN THE REASONS RECORDED IN INSTANT CASE THE AO HAS NOT REFERRED TO ANY SPECIFI C ADVERSARIAL MATERIAL (STATEMENT ETC.) AND ALSO 29 HAS NOT DESCRIBED EXACT NATURE OF TRANSACTION IN TH E REASONS AND HAS USED SHARE APPLICATION / SHARE CAPITAL / UNSECURED LOANS ETC. IN THE REASONS AND H AS MISERABLY FAILED TO BRING DURING ENTIRE REOPENING PROCEEDINGS ANY SPECIFIC TANGIBLE MATERIA L WHICH ESTABLISHED ASSESSEE IS BENEFICIARY OF ACCOMMODATION ENTRIES, WHICH ALL ARE SUFFICIENT TO NULLIFY THE EXTANT REOPENING ACTION. EVEN THERE IS NO ANNEXURE/ENCLOSURE TO REASONS TO CORROBORATE THE SAME. NO REFERENCE AND DETAILS OF INVESTIGATION WING INFORMATION IS AVAILABLE. THERE IS NO LIVE NEXUS / RATIONAL CONNECTION BETWEEN INVESTIGATION WING INFORMATION AND BELIEF THAT ASSE SSEES CERTAIN INCOME HAS ESCAPED ASSESSMENT. THE NON-APPLICATION OF MIND IS EVIDENT IN THE CONTRADICTION CONTAINED IN THE FORM FILED FOR RECORDING THE REASON AND FOR OBTAINING AP PROVAL U/S 151 (PB 37). IN THE PERFORMA, THE ITEM NO.7 THERE IS MENTION OF APPLICABLE SECTION 14 7 R.W. EXPLANATION 2(C)(I) IMPLYING THAT THE CASE IS OF INCOME BEING UNDER ASSESSED BUT IN ITEM NO.9(B), THE AO SAYS THAT IT IS NEITHER A CASE OF UNDER ASSESSMENT OR ASSESSMENT AT LOW RATE OF EX CESSIVE RELIEF OR ALLOWING EXCESSIVE LOSS OF DEPRECIATION. THERE IS ALSO FURTHER CONTRADICTION T HAT IN REPLY TO ITEM NO.8, DATE OF FILLING OF RETUR N AND FACT OF FILLING OF RETURN IS MENTIONED WHICH IS NOT REQUIRED TO BE MENTIONED WHEN THE CASE WAS NOT OF THE ASSESSMENT FOR THE FIRST TIME. THESE CONTRADICTION INDICATE THAT NEITHER THE AO NOR THE AUTHORITIES PROVIDING SANCTION THAT ADDL CIT, R ANGE-20 AND PR C IT-7, DELHI HAVE APPLIED THEIR RESPECTIVE MINDS IN NOT QUESTIONING THE ABOV E CONTRADICTIONS. THE DATE OF RECORDING REASON IS ALSO NOT MENTION AND ALSO THE DATE OF SANCTION U /S 151 AND THESE MATERIAL FACTS INDICATE THAT THE SANCTION PROVIDED BY THE AUTHORITIES IS MECHANICAL AS RECORDING OF REASON. IN THE IDENTICAL CIRCUMSTANCES, THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SMT KALPANA SHANTILAL HARIAVS ACIT W.P.(L) NO.3063/2017 DATED 22.12.2017(PB 136-1 37) QUASHED THE REASSESSMENT PROCEEDINGS. THE JURISDICTIONAL DELHI HIGH COURT IN YUM! RESTAURANTS ASIA PTE LTD VS DDIT IN WP(C) NO. 614/2014 DATED 31.08.2017(PB 138-140) HAS ALSO CONSIDERED THE GLARING MISTAKES IN 30 THE PERFORMA FOR APPROVAL AS THE VALID GROUND FOR Q UASHING THE ASSESSMENT ON THE PREMISE OF NON- APPLICATION OF MIND BY ALL THE AUTHORITIES INVOLVED IN THE PROCESS OF RECORDING REASONS AND PROVIDING SATISFACTION U/S 151. 6.11 WE ALSO NOTE THAT THE ACTION OF THE AO HAS BEEN TAKEN MECHANICALLY ON THE BASIS OF ALLEGED REPORT OF ENFORCEMENT DEPARTMENT. THE MERE RECORDING/ FORMULATION OF REASONS ON THE BASIS OF REPRODUCTION OF INFORMATION FROM INVESTIG ATION WING AND, ISSUING NOTICE FOR INITIATION OF RE-ASSESSMENT PROCEEDINGS DOES NOT CONSTITUTE APPL ICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND. HENCE, THE PROCEEDINGS ARE WIT HOUT JURISDICTION. IT IS SETTLED LAW THAT AO CANNOT ACT MECHANICALLY ON THE BASIS OF REPORT OF E NFORCEMENT DIRECTORATE AND TO SHOW THAT THE AO HAS APPLIED HIS MIND, HE MUST DISTINCT ALL THOS E MATERIALS AND HE MUST ALSO SHOW THAT WHAT WAS MATERIAL ON RECORD. HENCE, INITIATION OF PROCEE DINGS IS ALSO BASED ON NON-APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND. THIS VI EW IS FORTIFIED BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT V. G&G PHA RMA INDIA LTD. REPORTED AT 384 ITR 147 (DEL), WHEREIN IT HAS BEEN HELD AS UNDER:- TODAY WHEN THE CASE WAS CALLED OUT, MR. SAWHNEY P RODUCED BEFORE THE COURT THE VERY SAME LETTER OF THE AO DATED 15TH SEP TEMBER 2010 WHICH HAS BEEN REPRODUCED IN ITS ENTIRELY IN THE IMPUGNED ORDER OF THE ITAT. HE SUBMITTED THAT THE AO WAS HIMSELF PRESENT IN THE CO URT AND FURTHER EFFORTS WOULD BE MADE TO LOCATE THE MATERIALS ON THE BASIS OF WHICH THE AO FORMED HIS OPINION REGARDING REOPENING OF THE ASSES SMENT. THE COURT WAS NOT PREPARED TO GRANT FURTHER TIME FOR THIS PURPOSE SINCE IT WAS NOT CLEAR THAT THE MATERIALS WERE, IN FACT, AVAILABLE WITH TH E DEPARTMENT. 31 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENT RIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION EN TRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE C ONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED H IS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TEND ERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER 2004 AND W AS PROCESSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: 'IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATI ON ENTRIES'. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW E XPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND T O THE MATERIALS IN 32 ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 6.11 IT IS FURTHER NOTED THAT THE APPROVAL GRANTED BY THE COMPETENT AUTHORITY IS A MECHANICAL APPROVAL AND ACTION HAS BEEN TAKEN MECHANICALLY BEC AUSE ON PERUSING THE REASONS RECORDED, IT DEMONSTRATES THAT PR. CIT HAS WRITTEN YES, IT IS A FIT CASE FOR THE ISSUE OF NOTICE U/S. 148. WHICH ESTABLISHES THAT THE COMPETENT AUTHORITY HAS NOT RECORDED PROPER SATISFACTION / APPROVAL, BEFORE ISSUE OF NOTICE U/S. 148 OF THE I.T. ACT. TH EREAFTER, THE AO HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION AL LEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF ENFORCEMENT. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, WE ARE OF THE CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. OUR AFORESAID VIEW IS FORTIFIED BY THE FOLLOWING DECISIONS:- (A) HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. M/S NC CABLES LTD. IN ITA NO. 335/2015 HAS HELD AS UNDER:- 11. SECTION 151 OF THE ACT CLEARLY STIPULATES THAT THE CIT(A), WHO IS THE COMPETENT AUTHORITY TO AUTHORIZE THE REASSESSMENT N OTICE, HAS TO APPLY HIS MIND AND FORM AN OPINION. THE MERE APPENDING OF THE EXPRESSION APPROVED SAYS NOTHING. IT IS NOT AS IF THE CIT(A) HAS TO RECORD ELABORATE REASONS FOR AGREEING WITH THE NOTING PUT UP. AT THE SAME TIME, SATISFACTION HAS TO BE RECORDED OF THE GIVEN CASE WHICH CAN BE R EFLECTED IN THE BRIEFEST POSSIBLE MANNER. IN THE PRESENT CASE, THE EXERCISE APPEARS TO HAVE BEEN RITUALISTIC AND FORMAL RATHER THAN MEANINGFUL, WHIC H IS THE RATIONALE FOR THE SAFEGUARD OF AN APPROVAL BY A HIGHER RANKING O FFICER, FOR THESE REASONS, THE COURT IS SATISFIED THAT THE FINDINGS BY THE ITAT CANNOT BE DISTURBED. 33 (B). HONBLE HIGH COURT OF MADHYA PRADESH IN THE CASE OF CIT VS. S. GOYANKA LIME & CHEMICALS LTD. REPORTED IN (2015) 56 TAXMANN.COM 390 (MP) HAS HELD AS UNDER:- 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND WE FIND THAT W HILE ACCORDING SANCTION, THE JOINT COMMISSIONER, INCOME TAX HAS ON LY RECORDED SO YES, I AM SATISFIED. IN THE CASE OF ARJUN SINGH VS. ASSTT. D IT (2000) 246 ITR 363 (MP), THE SAME QUESTION HAS BEEN CONSIDERED BY A COORDINA TE BENCH OF THIS COURT AND THE FOLLOWING PRINCIPLES ARE LAID DOWN:- THE COMMISSIONER ACTED, OF COURSE, MECHANICALLY IN ORDER TO DISCHARGE HIS STATUTORY OBLIGATION PROPERLY IN THE MATTER OF RECORDING SANCTION AS HE MERELY WROTE ON THE FORMAT YES, I AM SATISFIED WH ICH INDICATES AS IF HE WAS TO SIGN ONLY ON THE DOTTED LINE. EVEN OTHERWISE ALSO, THE EXERCISE IS SHOWN TO HAVE BEEN PERFORMED IN LESS THAN 24 HOURS OF TIME WHICH ALSO GOES TO INDICATE THAT THE COMMISISONER DID NOT APPL Y HIS MIND AT ALL WHILE GRANTING SANCTION. THE SATISFACTION HAS TO BE WITH OBJECTIVITY ON OBJECTIVE MATERIAL 8. IF THE CASE IN HAND IS ANALYSED ON THE BASIS OF THE AFORESAID PRINCIPLE, THE MECHANICAL WAY OF RECORDING SATISFACTION BY THE JOI NT COMMISSIONER, WHICH ACCORDS SANCTION FOR ISSUING NOTICE UNDER SEC TION 148, IS CLEARLY UNSUSTAINABLE AND WE FIND THAT ON SUCH CONSIDERATIO N BOTH THE APPELLATE AUTHORITIES HAVE INTERFERED INTO THE MATTER. IN DOI NG SO, NO ERROR HAS BEEN COMMITTED WARRANTING RECONSIDERATION. ( C.) HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. S. GOYANKA LIME & CHEMICAL LTD. REPORTED IN (2015) 64 TAXMANN. COM 313 (SC) IN THE HEAD NOTES HAS HELD THAT SECTION 151, READ WITH SECTION 148 OF INCOME TAX A CT, 1961 INCOME ESCAPING ASSESSMENT SANCTION FOR IS SUE OF NOTICE (RECORDING OF SATISFACTION) HIGH COURT BY IMPUGNED ORDER HELD T HAT WHERE JOINT COMMISSIONER RECORDED SATISFACTION IN MECHANICAL MA NNER AND WITHOUT 34 APPLICATION OF MIND TO ACCORD SANCTION FOR ISSUING NOTICE UNDER SECTION 148, REOPENING OF ASSESSMENT WAS INVALID WHETHER SPECI AL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO BE DISMISSED HELD, YES (IN FAVOUR OF THE ASSESSEE). 7. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, WE FIND THAT CASE LAWS RELIED BY THE LD. CIT(DR) ON THE LEGAL ISSUE ARE DISTINGUISHED ON FAC TS, HENCE, DOES NOT SUPPORT THE CASE OF THE REVENUE. HOWEVER, THE CASE LAWS DISCUSSED BY US IN THIS ORDER, AS AFORESAID ARE DIRECTLY APPLICABLE ON THE ISSUES RAISED IN GROUND NO. 1. T HEREFORE, RESPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID ON THE ISSUES OF LEGAL GROUNDS, WE ARE OF THE CONSIDERED VIEW THAT PROCEEDINGS INITIATED BY INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT BY THE AO AND UPHELD BY THE LD. CIT(A) ARE NONEST IN LAW AND WITHOUT JURISDICTION, HENCE, THE RE-ASSESSMENT IS QUASHED. SINCE WE HAVE ALREADY QUASHED THE RE-ASSESSMENT, THE OTHE R GROUNDS HAVE BECOME ACADEMIC AND ARE THEREFORE NOT ADJUDICATED AND ACCORDINGLY, THE ASSE SSEES APPEAL IS ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED ORDER PRONOUNCED ON 07-02-2019. SD/- SD/- [H.S. SIDHU] [L.P. SAHU] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 07-02-2019 SRBHATNAGAR COPY FORWARDED TO: 1. ASSESSEE 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.