Huron Builders Pvt Ltd, New Delhi V. ITO WARD - 6(1), New Delhi

ITA 6251/DEL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8998 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 23-07-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUGANDHA SHARMA
• Assessee Lawyers: S K GARG
• Keywords: Tangible material; Fair market value; Difference of opinion; Capital receipt; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 133(6); 143(1); 205; 251; 192; 147; 68; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. NO.6251/DEL/2019 ASSESSMENT YEAR: 2013-14 HURON BUILDERS PVT. LTD., S-19, 2 ND FLOOR, STAR CITY, DISTRICT CENTRE, MAYUR VIHAR, NEW DELHI. VS. ITO WARD-6(1), NEW DELHI. TAN/PAN: AABCH6627E (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI S.K. GARG, ADV. & SHRI AKARSH GARG, ADV. RESPONDENT BY: MS. SUGANDHA SHARMA, SR.D.R. DATE OF HEARING: 09 09 2019 DATE OF PRONOUNCEMENT: 03 10 2019 O R D E R PER AMIT SHUKLA, J.M. THE APPELLANT NAMELY, M/S CHAURAN SALES PVT. LTD., LATER ON AMALGAMATED WITH HURON BUILDERS PVT. LTD. VIDE ORDER DATED 27.3.2018 PASSED BY NATIONAL COMPANY LA W TRIBUNAL (NCLT) NEW DELHI, HAD FILED THE PRESENT AP PEAL AGAINST APPELLATE ORDER DATED 18.4.2019, PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-2, NEW DELHI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 147/14(3) FOR THE ASSESSMENT YEAR 2013-14. I.T.A. NO.6251/DEL/2019 2 2. IN THE GROUNDS OF APPEAL, FOLLOWING GROUND S HAVE BEEN RAISED:- BECAUSE, (1) PROCEEDINGS UNDER SECTION 147 BY ISSUE OF NOTICE UN DER SECTION 148 DATED 30.03.2017 IN THE NAME OF CHAURAN SALES (P) LTD , HAVE NEITHER BEEN VALIDLY INITIATED, NOR CONCLUDED IN ACCORDANCE WITH THE PROVISIONS OF LAW, WITH THE CONSEQUENCE THAT THE ASSESSMENT ORDER DATED 29.12.2017 PASSED IN PURSUANCE THEREOF IS NULL AND VOID; (2) REASONS RECORDED AS HAD BEEN REFERRED TO AND RELIED UPON BY THE ASSESSING OFFICER FOR ISSUING NOTICE UN DER SECTION 148, COPY OF WHICH IS ENCLOSED AS ANNEXURE 1(A) HERETO, ARE WHOLLY DEFICIENT AND THE SAME ARE IRRELEVANT ALSO, IN MEETING THE REQUIREMENT OF LAW AS CONTAINED IN SECTION 147/ READ WITH SECTION 148 OF THE ACT; (3) OTHERWISE ALSO, THE ASSESSMENT ORDER DATED 29.12.2017 , RELEVANT EXTRACTS OF WHICH ARE ENCLOSED AS ANNEXURE I(B) HERETO, IS NULL AND VOID AS THE SAME HAD BEEN PASS ED IN VIOLATION OF THE DIRECTION GIVEN BY THE LD. JT. CIT, RANGE- 6, NEW DELHI; WITHOUT PREJUDICE TO THE AFORESAID I.T.A. NO.6251/DEL/2019 3 (4) DURING THE COURSE OF REASSESSMENT PROCEEDINGS F OR THE YEAR UNDER APPEAL, THE APPELLANT HAD FURNISHED DOCUMENTARY EVIDENCES, IN THE FORM OF: (A) APPLICATION FOR ALLOTMENT OF SHARES (IN THE APP ELLANT COMPANY) AS HAD BEEN RECEIVED FROM 15 SHARE APPLICANTS; (B) COPIES OF BANK STATEMENT MAINTAINED BY EACH ONE OF THE APPLICANTS, WHICH CONSTITUTED PROOF OF CREDITWORTHI NESS OF THE SHARE APPLICANTS (DULY TAKEN NOTE OF BY THE ASSESSING OFFICER); AND (C) INCOME TAX RETURNS FILED BY EACH ONE OF THE FIF TEEN APPLICANTS, FROM WHICH THEIR ANTECEDENTS, STOOD FUL LY ESTABLISHED AND THE ONUS, IF AT ALL THERE WAS ANY, UPON THE APPELLANT UNDER SECTION 68 OF THE ACT STOOD FULLY DISCHARGED AND NO ADDITION WAS CALLED FOR UNDER SECTION 68 OF THE ACT, EITHER ON FACTS OR IN LAW; (5) THE AUTHORITIES BELOW HAVE ERRED IN LAW AND ON FACTS IN MAKING/SUSTAINING ADDITION FOR SUMS AGGREGATING RS.6,26,00,000/- (AS HAD BEEN RECEIVED FROM FIFTEEN SHARE APPLICANTS), ANTECEDENTS OF ALL THE APPLICANT S BEING SELF-PROVED AS IS EVIDENT FROM THE REGULAR ASSESS MENT PROCEEDINGS/ ASSESSMENT ORDER FOR SUBSEQUENT ASSESSMENT YEAR 2014-15 WHEREIN APPELLANTS CLAIM F OR EXEMPTION FOR FORFEITURE OF THE SHARE APPLICATION MONEY (THAT HAD BEEN RECEIVED DURING THE YEAR), STOOD FUL LY I.T.A. NO.6251/DEL/2019 4 ACCEPTED (BY THE ASSESSING OFFICER HIMSELF) AFTER F ULL AND DUE ENQUIRIES; (6) THE ORDER APPEALED AGAINST IS CONTRARY TO THE F ACTS, LAW APPLICABLE THERETO AND PRINCIPLES OF NATURAL JUSTIC E. 2.1 THE AFORESAID GROUNDS CAN BE CLASSIFIED INTO TWO BROAD CATEGORIES, FIRSTLY , LEGAL GROUNDS CHALLENGING THE VALIDITY OF REOPENING U/S 147; AND SECONDLY , GROUNDS RELATING TO MERITS OF THE ADDITION OF RS.6.26 CRORES. WE WILL FIRST TA KE UP THE LEGAL GROUNDS BEING A LEGAL AND JURISDICTIONAL POINT . 3. BEFORE US LD. COUNSEL FOR THE APPELLANT, SRI SAN JAY KUMAR, FIRST OF ALL DREW OUR ATTENTION TO THE CHRON OLOGY OF RELEVANT DATES AND EVENTS PLACED IN THE PB AT PAGE 1, WITH REFERENCE TO THE DOCUMENTS ENCLOSED IN THE PB, WHIC H FOR BETTER APPRECIATION OF FACTS IS REPRODUCED HEREUNDE R: - SL. NO. DATE EVENTS (I) 30.03.2015 RETURN FOR THE ASSESSMENT YEAR 2014-15 WAS FILED. (II) -- AUDITED STATEMENTS OF ACCOUNT FOR THE FINANCIAL YEAR 2013-14, RELEVANT TO THE ASSESSMENT YEAR 2014-15 WERE FILED ON A REQUISITION BEING MADE BY THE I.T.A. NO.6251/DEL/2019 5 ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2014-15. (PB PAGE 25 TO 37 ) (III) 02.09.2016 REGULAR ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2014-15 WAS PASSED BY THE ASSESSING OFFICER. (PB PAGE 38 TO 41 ) (IV) 31.03.2017 NOT ICE UNDER SECTION 148 WAS ISSUED BY THE SAME ASSESSING OFFICER, FOR THE ASSESSMENT YEAR 2013-14 (YEAR UNDER APPEAL) (PB PAGE 23 ) (V) 11.12.2017 THE APPELLANT FILED LETTER OF DATE, WHICH CONTAINED REPRODUCTION OF REASONS RECORDED. (PB PAGE 45 ) (VI) 13. 12.2017 LETTER OF DATE FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF REASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2013-14. (PB PAGE 55 TO 66 ) (VII) 13.12.2017 PETITION UNDER SECTION 144A FILED BEFORE JT.CIT/ADDL.CIT FOR SEEKING DIRECTION ON VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 FOR THE ASSESSMENT YEAR 2013-14 (YEAR UNDER APPEAL). (PB PAGE 67 TO 70 ) I.T.A. NO.6251/DEL/2019 6 (VIII) 19.12.2017 REJOINDER SUBMITTED ON THIS DATE, BEFORE JOINT/ADDITIONAL CIT, NEW DELHI IN RESPONSE TO THE COMMENTS OF ASSESSING OFFICER (AS HAD BEEN CALLED FOR BY THE JOINT/ADDITIONAL CIT BEFORE DECIDING THE PETITION UNDER SECTION 144A). (PB PAGE 71 TO 89 ) (IX) 19.12.2017 COPY OF DIRECTIONS ISSUED UNDER SECTION 144A, WHICH DID NOT CONTAIN ANY ADVERSE VIEW ON THE ISSUE OF VALIDITY OF INITIATION OF PROCEEDINGS UNDER SECTION 147 FOR THE ASSESSMENT YEAR 2013-14 (YEAR UNDER APPEAL BEFORE THE HONBLE ITAT). (PB PAGE 90 TO 91 ) 4. MR. SANJAY KUMAR MADE PLEADINGS TO THE EFFECT THAT NOTICE UNDER SECTION 148 DATED 31.3.2017 [AS REFERR ED TO AT SL. NO.(IV) ABOVE] WAS WHOLLY DEFICIENT IN MEETING THE REQUIREMENT OF LAW RELATING TO REOPENING UNDER SECTION 147 AN D ACCORDINGLY THE PROCEEDINGS WERE WHOLLY ILLEGAL, AS NOT BEING IN ACCORDANCE WITH THE PROVISIONS OF LAW. IN SUPPOR T OF THIS CONTENTION, HE INVITED OUR ATTENTION TO THE SYNOPSI S OF THE CASE, WHEREIN AT PAGES 1 & 2, REASONS RECORDED (F OR INITIATION I.T.A. NO.6251/DEL/2019 7 OF PROCEEDING UNDER SECTION 147) WHICH HAS ALSO BEE N PLACED AT PAGES 2 TO 3 OF PB, READS AS UNDER: - REASONS RECORDED FOR REOPENING THE CASES U/S 147 OF THE IT ACT, 1961 IN THE CASE OF M/S CHAURAN SALES PVT. LTD PAN: AACCC7945D FOR A. Y. 2013-14. DURING THE COURSE OF ASSESSMENT PROCEEDINGS RELEVANT FOR A.Y. 2014-15 IT CAME TO NOTICE THAT RETURN FOR A.Y. 2013-14 HAS NOT BEEN FILED BY THE ASSESSEE COMPANY. AS PER COPY OF AUDITED ACCOUNTS SUBMITTED THERE IS NO OPERATIONAL INCOME AND THE EXPENSES INCURRED HAVE BEEN CLAIMED AS A BUSINESS LOSS. YET THERE IS LARGE INCREASE IN RESERVES AND SURPLUSES WHICH HAVE GONE TO 11,98,03,401/- AS AT 31.03.2013 AS AGAINST RS. 5,78,53,927/- AS ON 31.03.2012. THE SHARE CAPITAL HAS ALSO INCREASED FROM RS. 5,92,000/- TO 12,18,000/-. THE RECEIPT OF SHARE CAP ITAL AND LARGE SHARE PREMIUM MONEY COULD NOT BE INVESTIG ATED IN ABSENCE OF RETURN OF INCOME FILED BY THE ASSESSE E COMPANY. THE ASSESSEE APPEARS TO BE AN ENTRY OPERATOR AS THE CAPITAL AND SHARE PREMIUM HAVE BEEN INVESTED IN NON CURRENT ASSET WHICH ARE VALUED AT RS. 12,00,33, 150/- AS AT 31.03.2013. I HAVE REASONS TO BELIEVE THAT THE INCREASE IN SHARE CAPITAL AND SHARE PREMIUM ACCOUNT HAS ESCAPED ASSESSMENT AND THEREFORE NOTICE U/S 148 OF I.T.A. NO.6251/DEL/2019 8 THE I.T. ACT RELEVANT TO A.Y. 2013-14 IS PROPOSED T O BE ISSUED . NECESSARY SANCTION OF THE LD. ADDL. CIT, RANGE-6 IS SOLICITED HEREBY U/S 151 OF THE I.T. ACT BEFORE THE ISSUE OF NOTICE U/S 148 OF THE I.T. ACT 1961. (EMPHASIS IN BOLD IS OURS) 5. LD. COUNSEL VERY FAIRLY ADMITTED THAT RETURN FOR THE ASSESSMENT YEAR 2013-14 HAD NOT BEEN FILED UNDER SE CTION 139, AS EVEN ACCORDING TO THE ASSESSING OFFICER (AS HAD DULY BEEN NOTED BY HIM IN THE REASONS RECORDED ABOVE), THERE HAS BEEN NO OPERATING INCOME. HE SUBMITTED THAT EVEN TH EN, NOTICE UNDER SECTION 148 DATED 31.03.2017 HAD DULY BEEN COMPLIED WITH BY THE APPELLANT, BY FILING A LETTER, WHICH AMOUNTED TO FULL COMPLIANCE OF THE NOTICE UNDER SEC TION 148 DATED 31.03.2017, ALTHOUGH BELATEDLY. THEREBY, THE APPELLANT HAD DULY PARTICIPATED IN THE ASSESSMENT PROCEEDINGS (INITIATED IN TERMS OF NOTICE U/S 148 DATED 31.03.2017) AND CO PY OF REASONS RECORDED HAD BEEN MADE AVAILABLE TO THE A PPELLANT, ON ITS REQUISITION. ON RECEIPT OF COPY OF REASONS RECORDED, THE APPELLANT FILED DETAIL OBJECTIONS DATED 11.12.2017, (COPY APPEARING AT PAGES 42 TO 54 OF THE PB) WHICH WERE T O THE FOLLOWING EFFECT; I.T.A. NO.6251/DEL/2019 9 (A) NON-FILING OF RETURN, PARTICULARLY WHEN THERE WAS NO TAX LIABILITY (AS WAS THE CASE HERE) DID NOT AMOUNT TO INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT, AS FI NDS SUPPORT FROM EXPLANATION 2(A) ITSELF, AS APPEARING BELOW SECTION 147 READING AS UNDER:- EXPLANATION 2 FOR THE PURPOSE OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME- TAX. (B) RECEIPTS ON ACCOUNT OF SHARE CAPITAL AND LA RGE SHARE PREMIUM COULD NOT BE SUBJECT MATTER OF INVESTIGATIO N MERELY DUE TO NON-FILING OF RETURN FOR THE ASSESSME NT YEAR 2013-14. (C) RECEIPTS ON ACCOUNT OF SHARE APPLICATION MO NEY (INCLUDING PREMIUM) DID NOT, PER-SE , FALL IN THE CATEGORY I.T.A. NO.6251/DEL/2019 10 OF INCOME WHICH COULD BE SAID TO HAVE ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF TH E ACT. IN SUPPORT, VARIOUS CASE LAWS WERE RELIED UPON , PARTICULARLY FOLLOWING: - A JUDGMENTS RENDERED BY HONBLE SUPREME COU RT: I) CIT VS. STELLER INVESTORS LTD. REPORTED IN (2001) 251 ITR 263 II) CIT VS. SOPHIA FINANCE LTD. REPORTED IN (19 94) 205 ITR 98. B JUDGMENTS RENDERED BY HONBLE DELHI HIGH C OURT: I) CIT VS. STELLER INVESTORS LTD. REPORTED IN (1991 ) 192 ITR 287 II) CIT VS. OASIS HOSPITALITIES (P) LTD. REPORTED IN (2011) 333 ITR 119 III) CIT VS. DIVINE LEASING AND FINANCE LTD. REPORTED IN (2008) 299 ITR 268. IV) CIT VS. SFIL STOCK BROKING LTD. REPORTED IN (2010) 325 ITR 285 V) PR. CIT VS. N.C. CABLES LTD. REPORTED IN (2017) 391 ITR 11 C OTHER JUDGMENTS: (I) JAYA SECURITIES LTD. VS. CIT REPORTED IN (2008) 166 TAXMANN 6 I.T.A. NO.6251/DEL/2019 11 (II) CIT GHAZIABAD VS. SURYA PACKAGING PVT. LTD. (UNREPORTED JUDGMENT AND ORDER DATED 18.02.2013) (III) CIT VS. BANARAS SWARN KALA KENDRA PVT. LTD. (UNREPORTED JUDGMENT DATED 19.02.2013) (IV) CIT VS. JAY DEE SECURITIES & FINANCE LTD. (UNREPORTED JUDGMENT DATED 11.08.2011) (V) CIT VS. AL ANAM AGRO FOODS (P) LTD. (UNREP ORTED JUDGMENT DATED 17.10.2012). (D) AND OVER AND ABOVE ALL THIS, THE PROCEEDINGS HA D BEEN INITIATED ON THE GROUND THAT THE ASSESSEE COMPANY APPEARS TO BE AN ENTRY OPERATOR, AS CAPITAL AND SHA RE PREMIUM HAD BEEN INVESTED IN NON-CURRENT ASSETS; SUCH A GROUND FOR TAKING ACTION UNDER SECTION 147 W AS NOT PERMISSIBLE IN LAW. 6. IN THE SAID OBJECTIONS, AFTER DISCUSSING THE MA TTER IN DETAIL, SPECIFIC OBJECTIONS TO ALL THE COMPONENTS O F THE REASONS RECORDED HAD BEEN TAKEN WHICH HAD BEEN SUMMARIZED, IN THE FOLLOWING MANNER: - 5.2 IT IS STATED THAT THE REASONS RECORDED AS AF ORESAID ARE WHOLLY DEFICIENT IN MEETING THE REQUIREMENT OF LAW AS STATED HEREINAFTER; I.T.A. NO.6251/DEL/2019 12 PARA NO. CONTENTS OF PARA REPLY (I) DURING THE COURSE OF ASSESSMENT PROCEEDINGS RELEVANT FOR A.Y. 2014-15 IT CAME TO NOTICE THAT RETURN FOR A.Y. 2013-14 HAS NOT BEEN FILED BY THE ASSESSEE COMPANY. AS PER COPY OF AUDITED ACCOUNTS SUBMITTED THERE IS NO OPERATIONAL INCOME AND THE EXPENSES INCURRED HAVE BEEN CLAIMED AS A BUSINESS LOSS. YET THERE IS LARGE ON A CO NJOINT READING OF SUB-PARAS (I) AND (II), PARA PHRASING DONE BY US FOR THE SAKE OF CONVENIENCE, IT WOULD BE SEEN THAT IT HAS BEEN FOUND AS A FACT THAT AS PER THE AUDITED BALANCE SHEET THERE WAS A LOSS. FROM THIS IT FOLLOWS THAT THERE WAS NO OBLIGATION ON THE ASSESSEE TO FILE RETURN FOR THE ASSESSMENT YEAR 2013-14, UNDER REFERENCE HERE. THEREFORE, NO ADVERSE INFERENCE COULD HAVE BEEN DRAWN FROM THE FACT OF NON FILING THE RETURN UNDER I.T.A. NO.6251/DEL/2019 13 INCREASE IN RESERVES AND SURPLUSES WHICH HAVE GONE TO 11,98,03,401/- AS AT 31.03.2013 AS AGAINST RS. 5,78,53,927/- AS ON 31.03.2012. SECTION 139 OF THE ACT. AS REGARDS INCREASE IN SHARE CAPITAL AND GENERAL RESERVE, IT WAS ALSO NOT BY YOUR GOODSELF THAT SUCH INCREASE WAS ON ACCOUNT OF SHARE CAPITAL. IT IS SUBMITTED THAT INCREASE IN SHARE CAPITAL, PER SE LEAD TO A INFERENCE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT SO AS TO CALL FOR INITIATION OF PROCEEDINGS UNDER SECTION 147. IT IS A LAW WELL SETTLED THAT SHARE CAPITAL BY ITSELF IS A CAPITAL RECEIPT IN THE HANDS OF THE RECIPIENT AND IT IS NOT CHARGEABLE TO TAX AS SUCH, UNLESS IT IS FOUND (II) THE SHARE CAPITAL HAS ALSO INCREASED FROM RS. 5,92,000/- TO 12,18,000/-. THE RECEIPT OF SHARE CAPITAL AND LARGE SHARE PREMIUM MONEY COULD NOT BE INVESTIGATED IN ABSENCE OF RETURN OF INCOME FILED BY THE ASSESSEE COMPANY. I.T.A. NO.6251/DEL/2019 14 THE ASSESSEE APPEARS TO BE AN ENTRY OPERATOR AS THE CAPITAL AND SHARE PREMIUM HAVE BEEN INVESTED IN NON CURRENT ASSET WHICH ARE VALUED AT RS. 12,00,33,150/- AS AT 31.03.2013. THAT SOURCE OF CAPITAL SO RECEIVED REMAINED UNEXPLAINED. THERE IS NO EVEN A WHISPER IN THE REASONS RECORDED THAT SOURCE OF SHARE CAPITAL (AND SO ALSO SHARE PREMIUM WHICH IS A COMPONENT OF SHARE CAPITAL) WAS UNEXPLAINED. (III) I HAVE REASONS TO BELIEVE THAT THE INCREASE IN SHARE CAPITAL AND SHARE PREMIUM ACCOUNT HAS ESCAPED ASSESSMENT AND THEREFORE NOTICE U/S 148 OF THE I.T. ACT RELEVANT TO A.Y. BASED ON THE AFORESAID OBSERVATIONS WHICH WERE IN THE REALM OF SURMISES ONLY, IT CANNOT BE SAID THAT INCREASE IN SHARE CAPITAL AND SHARE PREMIUM ACCOUNT INCOME HAS ESCAPED ASSESSMENT. IT IS A NECESSARY INGREDIENT OF TAKING ACTION UNDER I.T.A. NO.6251/DEL/2019 15 2013 - 14 IS PROPOSE D TO BE ISSUED. S ECTION 147 THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THE REASONS RECORDED, NEITHER IN THE EARLIER SUB- PARAGRAPHS NOR IN THIS SUB-PARA IT HAS BEEN STATED THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AS STATED ABOVE, SHARE CAPITAL AND SHARE PREMIUM, PER-SE ARE NOT INCOME CHARGEABLE TO TAX. 7. IT WAS FURTHER CONTENDED BY THE LD. COUNSEL THA T THE APPELLANTS OBJECTION AS REFERRED TO IN ITS LETTER DATED 11.12.2017 (SUPRA) HAD NOT BEEN PROPERLY APPRECIATE D AND UNJUSTLY BEEN REJECTED BY THE ASSESSING OFFICER AND HAS PROCEEDED TO PASS THE ASSESSMENT ORDER EVEN THOUGH THERE WERE SERIOUS IRREGULARITIES / INFIRMITIES IN INITIA TION OF I.T.A. NO.6251/DEL/2019 16 PROCEEDINGS UNDER SECTION 147. THE PRIMARY REASON B EING, SAID VERY SUM OF RS.6.26 CRORES (WHICH REPRESENT PA RT VALUE OF THE CONSIDERATION FOR SALE OF SHARES) HAD BEEN T REATED AS CAPITAL RECEIPT IN THE ASSESSMENT YEAR 2014-15 PASS ED EARLIER UNDER SECTION 143(3) ON 02.09.2016 BY THE SAME ASSE SSING OFFICER, WHEREIN THE EVENT OF FORFEITURE OF THE SAI D VERY SUMS AGGREGATING RS.6.26 CRORES HAD TAKEN PLACE. THE EVE NT OF FORFEITURE WAS APPARENT FROM THE FACE OF THE BALANC E SHEET OF THE SUBSEQUENT YEAR, COPY OF WHICH APPEARS ON PAGES 25 TO 37 OF THE PAPER BOOK. 8. PROCEEDING FURTHER, IT WAS CONTENDED BY THE LD. COUNSEL THAT THE ASSESSING OFFICER INITIATED THE PROCEEDING S UNDER SECTION 147 BY ISSUE OF NOTICE UNDER SECTION 148 DA TED 31.03.2017 FOR THE ASSESSMENT YEAR 2013-14, WHEREAS THE SAME ASSESSING OFFICER HAD PASSED THE ASSESSMENT OR DER FOR THE SUBSEQUENT ASSESSMENT YEAR I.E. 2014-15 (WHEREI N THE EVENT OF FORFEITURE FELL) VIDE ORDER DATED 02.09.20 16, AFTER BEING FULLY AWARE OF THE EVENT OF FORFEITURE OF SUM S AGGREGATING RS.6.26 CRORES (REPRESENTING PART PAYMENT OF SHARE APPLICATION MONEY). HE HAD PRE-EXAMINED THE BALANC E SHEET I.T.A. NO.6251/DEL/2019 17 AS AT 31.3.2014 AND EVEN ENQUIRED INTO THE NATURE O F THE SUMS AGGREGATING RS.6.26 CRORES AS APPEARING UNDER THE HEAD SHARE FORFEITURE ACCOUNT, IN THE FOLLOWING M ANNER:- PARTICULARS AS AT 31.03.2014 AMOUNT (RS.) AS AT 31.03.2013 AMOUNT (RS.) SHARE CAPITAL AUTHORISED SHARE CAPITAL 2,00,000 EQUITY SHARES OF RS.10/- EACH 20,00,000 20,00,000 20,00,000 20,00,000 ISSUED & SUBSCRIBED SHARE CAPITAL 1,84,400 EQUITY SHARES OF RS.10/- EACH 18,44,000 18,44,000 18,44,000 18,44,000 PAID UP SHARE CAPITAL FULLY PAID UP 59,200 EQUITY SHARES OF RS.10/- EACH P.Y. (1,25,200 EQUITY SHARES OF RS.5/- 5,92,000 - 5,92,000 6,26,000 I.T.A. NO.6251/DEL/2019 18 EACH) SHARES FORFEITED ACCOUNT 6,26,000 - 12,18,000 12,18,000 9. IT WAS FURTHER SUBMITTED BY THE LD. COUNSEL THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, INITIATION OF PROCEEDINGS UNDER SECTION 147 COULD NOT BE SAID TO BE BASED ON RELEVANT AND TANGIBLE MATERIAL AND IN ANY CASE INITIATION OF PROCEEDINGS UNDER SECTION 147 WAS NOT BASED ON GOO D FAITH. FOR THIS PURPOSE, HE ALSO REFERRED TO AND RELIED UP ON THE APPELLANTS REJOINDER DATED 13.12.2017, (COPY APPEAR ING ON PAGES 71 TO 89 OF THE PB) TO THE DISPOSAL OF OBJECT IONS AS HAD BEEN MADE BY THE ASSESSING OFFICER. IN THE SAID REJ OINDER AND IN TERMS OF PARA 15 THEREOF, PRAYER HAD BEEN MADE T O THE EFFECT THAT YOUR GOODSELF BE PLEASED TO EXAMINE THE ASSESSEES RESPONSE TO THE ORDER DATED 13.12.2017 AS THE SAME WOULD HAVE A BEARING ON THE DIRECTION UNDER SECTION 144A AS HAS BEEN SOUGHT BY THE ASSESSEE SO THAT JUSTICE IS DONE BUT WAS OF NO AVAIL. LD. COUNSEL FURTHER INVITED OUR ATTENTION TO THE PETITION DATED 13.12.2017, WHEREIN DIRECTIONS UNDER SECTION 144A HAD BEEN SOUGHT FROM THE ADDL. CIT, VIDE PARA I.T.A. NO.6251/DEL/2019 19 7.1, WHICH READS AS UNDER: - P R A Y E R 8.1 IT IS PRAYED THAT YOUR GOODSELF BE PLEASED TO P ERUSE THE SUBMISSIONS MADE HEREINFORE AND EXAMINE VERACIT Y THEREOF SO THAT APPROPRIATE DIRECTIONS FOR COMPLETI ON OF ASSESSMENT, WHICH MAY STAND REASONS AND EQUITY, MAY BE ISSUED AND THE ASSESSMENT PROCEEDINGS GET CONCLU DED IN ACCORDANCE WITH THE PROVISION OF LAW. 10. BESIDES, THE LD. COUNSEL HAS ALSO REFERRED TO A ND RELIED UPON BEFORE US, ON CATENA OF CASE LAWS AS HAVE BEEN REFERRED TO IN PARA 5 HEREINFORE AND ALSO OTHER CASES DEALIN G WITH THE RULE OF FOLLOWING PRECEDENCE AND ALSO TO A NUMBER OF THE CASE FIRSTLY : INITIATION OF PROCEEDINGS UNDER SECTION 147 B Y ISSUE OF NOTICE UNDER SECTION 148 DATED 31.03.2017 WAS NOT VALID; SECONDL Y : AND/OR WITHOUT PREJUDICE TO THE ABOVE , IT WAS CONTENDED ON MERITS ALSO THAT THE ASSESSEES ONUS STOOD FULLY DISCHARGED AND NO ADDITION ON THIS SCOR E WAS CALLED FOR; THIRDLY : AND IN ANY , IN VIEW OF THE PROVEN FACT THAT SUMS I N QUESTION HAD FLOWN FROM WELL DEFINED SOURCES AND TH AT TOO BY WAY OF SHARE APPLICATION MONEY, THE SUBJECT MATTER OF ENQUIRY GETS SHIFTED TO THE SHARE APPLICA NTS THEMSELVES, WHOLLY UNCONNECTED WITH THE PRESENT ASSESSEE. I.T.A. NO.6251/DEL/2019 20 LAWS, AS MENTIONED IN THE REJOINDER DATED 19.12.201 7 AS ADDRESSED TO THE LD. JT. CIT, RANGE-6, NEW DELHI (C OPY OF WHICH APPEARS AT PAGES 71 TO 89 OF THE PB), IN CONT INUATION TO THE EARLIER PETITION SUBMITTED UNDER SECTION 144A O F THE ACT. IN SUCH REJOINDER, AS STATED BY HIM, THE APPELLANT HAD RIGHTFULLY DISTINGUISHED THE CASE LAWS, AS HAD BEEN REFERRED TO BY THE ASSESSING OFFICER IN THE DISPOSAL MADE BY HIM TO THE ASSESSEES OBJECTION DATED 13.12.2017. 11. SRI SANJAY KUMAR FURTHER SUBMITTED THAT ON THE I SSUE OF INITIATION OF PROCEEDINGS UNDER SECTION 147, THE AS SESSMENT ORDER DATED 29.12.2017 WAS IN VIOLATION OF THE DIRE CTION ISSUED BY THE ADDL. CIT ON A PETITION MOVED BY THE ASSESSEE/APPELLANT UNDER SECTION 144A. AFTER CONSID ERING THE SAID MATERIAL, THE ADL.CIT HAD AGREED WITH THE CONT ENTION BY THE APPELLANT (AS CONTAINED IN THE PETITION UNDER S ECTION 144A AND IN THE REJOINDER) AND ACCORDINGLY GAVE DIRECTIO NS ON SOME SPECIFIC ISSUES. IN SUPPORT OF THIS CONTENTION THE LD. COUNSEL REFERRED TO THE COPY OF ORDER UNDER SECTION 144A PL ACED AT PAGES 90 AND 91, OF THE PB. HE FURTHER SUBMITTED TH AT, IN COMPLIANCE WITH THE DIRECTIONS SO GIVEN BY THE ADDL . CIT, THE I.T.A. NO.6251/DEL/2019 21 ASSESSING OFFICER HAD REQUIRED THE APPELLANT TO PRO DUCE ITS DIRECTOR WHICH WERE DULY COMPLIED WITH BY IT, BY PR ODUCING SRI D.C. SAXENA (DIRECTOR OF THE APPELLANTS COMPAN Y) WHO GOT HIS STATEMENT RECORDED BY THE ASSESSING OFFICER. FR OM THE SAID STATEMENT, HE POINTED OUT THAT, IT WOULD BE SE EN THAT HE WAS NOT AN ENTRY OPERATOR, AS HAD BEEN ALLEGED IN THE REASONS RECORDED. SRI D.C. SAXENA WAS IN HIS 80S AND HAD RETIRED FROM THE SERVICES OF U.P. GOVERNMENT, LONG BACK AND IT WAS EXPLAINED BY HIM THAT HE HAD COME IN CONTACT WI TH THE INVESTORS/ SHARE APPLICANTS IN A GROUP MEETING. A LL SUCH PERSONS WHICH WERE 15 (FIFTEEN) IN NUMBER, WERE THE SHARE APPLICANTS AND ALL OF THEM HAD DEPOSITED PART OF AG REED SALE CONSIDERATION, AGGREGATING RS.6.26 CRORES, ALONG WI TH SHARE APPLICATIONS SUBMITTED BY ALL OF THEM. AS PER THE I NFORMATION GIVEN BY THEM IN RESPONSE TO SUMMON ISSUED UNDER SE CTION 133(6), THE SUMMON IN QUESTION AS HAD ORIGINATED FR OM THEIR RESPECTIVE BANK ACCOUNTS. ALL OF THEM WERE INCOME-T AX ASSESSEES, FULL INFORMATION ABOUT THEIR RESPECTIVE INCOME-TAX PARTICULARS HAD BEEN GIVEN BY THEM ON THE SPECIFIC ISSUES (AS HAD BEEN RAISED IN THE SUMMONS ISSUED BY THE ASSESS ING OFFICER). I.T.A. NO.6251/DEL/2019 22 13. COMING TO THE ORDER OF CIT(A), THAT HAD BEEN IM PUGNED BEFORE US, IT WAS POINTED OUT BY SRI SANJAY KUMAR TH AT SHE HAD REJECTED THE SAID GROUND VIDE PARAS 5, 6 AND 6. 1 WHICH ARE REPRODUCED HEREUNDER: - 5. SUBMISSION OF THE APPELLANT:- THE APPELLANT HAS MADE WRITTEN SUBMISSION DATED 25.02.2019 AND 03.04.2019 ALONGWITH PAPER BOOK. 6. DECISION :- I HAVE GONE THROUGH THE ASSESSMENT ORDER, GROUNDS OF APPEAL AND THE SUBMISSION FILED BY THE APPELLANT. GROUNDS OF APPEAL ARE ADJUDICATED AS UN DER: 6.1 GROUND NO.1, 2 & 3 :- THESE GROUNDS ARE DIRECTED AGAINST THE OPENING OF ASSESSMENT UNDER SE CTION 147. THE APPELLANT HAD NOT FILED ORIGINAL RETURN. THE AO HAS NOTICED THAT THERE IS INCREASE IN SHARE CAPITAL AND SHARE PREMIUM. IN VIEW OF THESE TWO FACTS, HE REOPENED ASSESSMENT. IN RESPONSE, THE APPELLANT SUBMITTED T HAT THERE WAS A LOSS AND, THEREFORE, THE RETURN WAS NOT FILED. IT IS PERTINENT TO MENTION HERE THAT IN THIS CASE, THE RE IS NO ALLEGATION AGAINST THE SHARE APPLICANT COMPANIES NO R ANY INFORMATION HAS BEEN RECEIVED AGAINST THE APPELLANT FROM ANY QUARTER. FROM THE SUBMISSIONS FILED BY THE APPE LLANT, REASONS RECORDED ARE QUOTED AS UNDER: ASSESSEE HAD NOT FILED RETURN. AS PER COPY OF AUD ITED ACCOUNTS, THERE WAS NO OPERATIONAL INCOME AND EXPEN SES I.T.A. NO.6251/DEL/2019 23 INCURRED HAVE BEEN CLAIMED AS BUSINESS CLASS. THER E IS LARGE INCREASE IN RESERVES AND SURPLUS. ON THE BASIS OF REASONS RECORDED, IT APPEARS THAT T HE AO HAS PERUSED THE AUDITED ACCOUNT AND WANTED TO EXAMI NE THE INTRODUCTION OF SHARE CAPITAL. SINCE NO RETURN HAD BEEN FILED, THE DECISION OF THE AO TO EXAMINE THE SHARE CAPITAL APPEARS JUSTIFIED. THE TECHNICAL GROUNDS DO NOT HA VE MUCH VALIDLY. THE GROUNDS ARE, THEREFORE, RULED AGAINST THE APPELLANT. 14. LD. COUNSEL ARGUED THAT, FROM A PERUSAL OF T HE SAME, IT CAN BE SEEN THAT THE LD. FIRST APPELLATE AUTHORITY DID NOT ACCEPT THE APPELLANTS CONTENTION FOR THE REASON TH AT IT APPEARS THAT THE AO HAD PERUSED THE AUDITED ACCOUNT S AND WANTED TO EXAMINE THE INTRODUCTION OF SHARE CAPITAL . SINCE NO RETURN HAD BEEN FILED THE DECISION OF THE AO TO EXA MINE THE SHARE CAPITAL APPEARS JUSTIFIED. THE TECHNICAL GROU NDS DO NOT HAVE MUCH VALIDITY. IN SHORT, NON-FILING OF RETURN UNDER SECTION 139, WAS THE CORE GROUND FOR REJECTION OF T HE APPELLANTS GROUND RELATED TO VERY VALIDITY OF INIT IATION OF PROCEEDINGS UNDER SECTION 147 FOR THE ASSESSMENT YE AR 2013- 14). HE SUBMITTED THAT ACTION UNDER SECTION 147 COU LD NOT BE SAID OR HELD TO BE MERE TECHNICAL GROUNDS AS SUCH G ROUNDS I.T.A. NO.6251/DEL/2019 24 HAD AFFECTED VERY JURISDICTION OF THE ASSESSING OFFI CER TO INITIATE PROCEEDINGS UNDER SECTION 147. 15. ON THE OTHER HAND, LD. SENIOR DR, APPEARING ON BEHALF OF REVENUE VEHEMENTLY OPPOSED THE ARGUMENTS PUT FOR TH BY THE LD. COUNSEL AND STRONGLY RELIED UPON THE ORDER OF THE CIT(A), ON THE ISSUE OF INITIATION OF PROCEEDINGS U NDER SECTION 147 AND SUBMITTED THAT SAME WAS VALID. SHE SUBMITT ED, THAT LAW RELATING TO TAKING ACTION UNDER SECTION 147 HAD UNDERGONE A COMPLETE CHANGE W.E.F. 1.4.1989 AND IN SUPPORT OF HER CONTENTION, SHE REFERRED TO AND RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ASSTT. CIT VS. RAJESH JHAVERI STOCK BROKERS P. LIMITED REPORTED IN (2007) 291 ITR 500 , WHEREIN IT HAD BEEN HELD BY THE HONBLE APEX COURT THAT AT THE STAGE OF INITIATION OF PROCE EDINGS UNDER SECTION 147, ALL THAT WAS NEEDED WAS EX-FACIE REAS ON TO BELIEVE ABOUT ESCAPEMENT OF INCOME CHARGEABLE TO T AX. THE ASSESSING OFFICER WAS NEITHER OBLIGED, NOR EXPECTED TO REFER ANY CONCLUSIVE EVIDENCE IN THIS RESPECT, WHILE INIT IATING THE PROCEEDINGS UNDER SECTION 147. IN THE INSTANT CASE ALSO THE ASSESSING OFFICER HAD ISSUED NOTICE UNDER SECTION 1 48 FOR EXAMINATION OF SUCH A HUGE SHARE CAPITAL WHICH COUL D NOT I.T.A. NO.6251/DEL/2019 25 TAKE PLACE, OWING TO NON-FILING OF RETURN UNDER SEC TION 139 BY THE ASSESSEE. IF NO RETURN HAS BEEN FILED, THEN AO WAS WITHIN HIS POWER TO EXAMINE THE SOURCE OF RECEIPTS UNDER T HE HEAD SHARE CAPITAL AND SHARE PREMIUM AND SUCH NOTICE WAS LIABLE TO BE HELD TO BE VALID IN THE EYES OF LAW AND HE WA S OBLIGED TO DO SO, AS PER PROVISO APPEARING BELOW SECTION 139 OF THE ACT. SUCH A NON-FILING OF RETURN AT THE ORIGINAL STAGE H AD EFFECTIVELY PREVENTED THE ASSESSING OFFICER TO MAKE ENQUIRIES A ND HE WAS NOT LEFT WITH ANY OPTION, BUT TO INITIATE PROCEEDIN GS UNDER SECTION 147. DECISION 16. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSE D THE RELEVANT MATERIAL REFERRED TO BEFORE US BY THE PART IES AND THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS. FROM THE CHRONOLOGY OF RELEVANT DATES AND EVENTS AS INCORPOR ATED IN FOREGOING PARA 3, IT IS SEEN THAT REGULAR ASSESSMEN T FOR THE ASSESSMENT YEAR 2014-15 (I.E., SUBSEQUENT YEAR) HAD BEEN COMPLETED UNDER SECTION 143(3) ON 02.09.2016. ALTH OUGH, THE ASSESSING OFFICER HAD NOT REFERRED TO THE EVENT OF FORFEITURE, BUT SUCH AN EVENT WAS WRIT-LARGE IN THE FINANCIAL S TATEMENTS I.T.A. NO.6251/DEL/2019 26 FOR THE FINANCIAL YEAR 2013-14, RELEVANT TO THE ASS ESSMENT YEAR 2014-15 WHICH HAD BEEN TAKEN NOTE IN THE REAS ONS RECORDED BY THE ASSESSING OFFICER. RELEVANT EXTRA CT OF THE INFORMATION FOR THE ASSESSMENT YEAR 2014-15 ARE AVA ILABLE ON RECORD, AS EXTRACT FROM THE FINANCIAL STATEMENTS FO R THE FINANCIAL YEAR 2013-14, WHICH HAVE BEEN REPRODUCED BY US IN PARA 8 HEREINFORE. IN OTHER WORDS, THE ASSESSING O FFICER HIMSELF, IN FULL AWARENESS OF THE EVENT OF FORFEITU RE THAT HAD TAKEN PLACE IN THE SUBSEQUENT ASSESSMENT YEAR (OWIN G TO NON- PAYMENT OF CALL MONEY BY THE SAME APPLICANT), HAD A CCEPTED THE SUMS IN QUESTION TO BE CAPITAL RECEIPT. IF TH E ASSESSING OFFICER HAS ACCEPTED THE FORFEITURE OF SHARES AS CA PITAL RECEIPTS IN A.Y. 2014-15, THEN HOW THE SAME SHARE APPLICATIO N MONEY RECEIVED IN THE A.Y. 21013-14 CAN BE TAXABLE INCOME , AS IT IS A LAW WELL SETTLED THAT SUCH CAPITAL RECEIPT CANNOT FALL IN THE CATEGORY OF INCOME CHARGEABLE TO TAX THAT HAD ESCAPED ASSESSMENT AS ENVISAGED IN SECTION 147 OF THE ACT, UNLESS FOUND OR HELD TO BE BOGUS. 17. IT IS ALSO NOT THE CASE OF THE AO THAT THE DEEM ING PROVISION CONTAINED IN SECTION 56(2)(VIIB) ARE APPL ICABLE, THAT I.T.A. NO.6251/DEL/2019 27 IS, THE MONEY RECEIVED FOR THE TRANSFER OF SHARES W AS MORE THAN THE FAIR MARKET VALUE THE SHARES. THEREFORE, E VEN IN RESPECT OF THE COMPONENT OF SHARE APPLICATION MONEY AND PREMIUM, IT COULD NOT BE SAID OR HELD THAT SUCH REC EIPTS HAD ESCAPED ASSESSMENT. IN ANY CASE, SUCH A GROUND HAD NOT BEEN MENTIONED IN THE REASONS RECORDED AND IT IS A LAW WELL SETTLED THAT THE REASONS RECORDED CANNOT BE SUPPL EMENTED AT A LATER STAGE. 18. IN THE INSTANT CASE, AS PER OBSERVATIONS MADE IN THE REASONS RECORDED BY THE AO TO THE EFFECT THAT AS PER THE AUDITED BALANCE SHEET FOR THE YEAR ENDING ON 31.0 3.2013 (RELEVANT TO THE ASSESSMENT YEAR 2013-14, UNDER APP EAL HERE) THERE WAS OPERATING LOSS. IN OUR CONSIDERED OPINION, PRESENCE OF OPERATING LOSS BY ITSELF COULD NOT BE E QUATED TO BE OBLIGATION OF THE APPELLANT TO FILE RETURN UNDER SE CTION 139. ALTHOUGH AS PER PROVISO BELOW SECTION 139, IT COULD BE SAID THAT THE ASSESSEE BEING A COMPANY SHOULD HAVE FILED ITS RETURN, BUT HERE THE ISSUE IS, IF IN THE PRESENCE O F OPERATING LOSS, AS HAD BEEN FOUND AND NOTED BY THE ASSESSING OFFICER HIMSELF IN THE REASONS RECORDED, WHETHER NON-FILI NG OF RETURN I.T.A. NO.6251/DEL/2019 28 COULD BE EQUATED WITH INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. IN OUR OPINION, EXPLANATION 2(A) APPEARING BELOW SECTION 147 (WHICH HAS BEEN INCORPORATED IN PARA 5 ABOVE) CLARIFIES THAT, WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE EVEN THOUGH HIS TOTAL INCOME IN RES PECT OF WHICH HE IS ASSESSABLE UNDER THE ACT DURING THE PRE VIOUS YEAR EXCEEDS THE MAXIMUM AMOUNT WHICH HAS NOT BEEN OFFER ED OR HAS NOT BEEN ASSESSED TO INCOME-TAX, THEN IT IS A D EEMED CASE OF INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSES SMENT. IN OTHER WORDS, IF THE ASSESSEE HAS NOT EARNED ANY INCOME OR THE INCOME EARNED IS BELOW TAXABLE LIMIT, THEN IT C ANNOT BE A CASE OF DEEMED ESCAPEMENT OF INCOME. THERE HAS TO B E AN INCOME WHICH EXCEEDS TAXABLE LIMIT. HERE IN THIS CA SE ADMITTEDLY ASSESSEE DID NOT HAD ANY PROFITS FROM OP ERATIONS AND NO INCOME WAS EARNED DURING THE YEAR, THEREFORE , IT CANNOT BE HELD THAT ASSESSEE WAS HIT BY EXPLANATION 2(A) . THE CONDITION PRECEDENT FOR REOPENING THE ASSESSMENT OR ASSESSING THE INCOME U/S 147 IS THAT THE AO MUST HA VE TANGIBLE MATERIAL BEFORE HIM TO ENTERTAIN REASON TO BELIEVE THAT, FIRSTLY , THAT IT IS IN THE NATURE OF INCOME WHICH IS I.T.A. NO.6251/DEL/2019 29 CHARGEABLE TO TAX UNDER THE ACT; AND SECONDLY , SUCH AN INCOME HAS ESCAPED ASSESSMENT. 19. BEFORE US, CATENA OF CASE LAWS HAS BEEN REFE RRED TO AND RELIED UPON BY THE LD. COUNSEL IN SUPPORT OF HIS CO NTENTION THAT REASONS RECORDED ARE NOT ONLY REQUIRED TO BE BASED ON RELEVANT AND TANGIBLE MATERIAL BUT THE SAME SHOULD HAVE BEEN FOUND TO BE HELD IN GOOD FAITH ALSO. HONBLE ALLAHA BAD HIGH COURT IN THE CASE OF INDRA PRASTHA CHEMICALS PVT. LTD. VS. CIT REPORTED IN (2004) 271 ITR 113, WHEREIN THEIR LORDSHIPS AFTER VISITING VARIOUS CASE LAWS DECIDED BY HONBLE SUPREME COURT, LIKE; SHEONATH SINGH VS. APPELLATE ASSTT. COMMISSIONER OF INCOME TAX REPORTED IN (1971) 82 IT R 147; ITO VS. LAKHMANI MEWAL DAS REPORTED IN (1976) 1043 ITR 437; AND GANGA SARAN & SONS PVT. LTD. VS. ITO REPO RTED IN (1981) 130 ITR 1, HELD AS UNDER: - THUS, IT IS WELL SETTLED THAT THE REASON TO BELIEVE UNDER SECTION 147 MUST BE HELD IN GOOD FAITH AND SHOULD HAVE A RATIONAL CONNECTION AND RELEVANT BEARING ON THE FORMATION OF THE BELIEF AND SHOULD NOT BE EXTRANEOUS OR IRRELEVANT. FURTHER, THIS COURT IN PROCEEDINGS UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA CAN SCRUTINIZE THE I.T.A. NO.6251/DEL/2019 30 REASONS RECORDED BY THE ASSESSING OFFICER FOR INITIATING THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT. THE SUFFICIENCY OF THE MATERIAL CANNOT BE GONE INTO BUT RELEVANCY CERTAINLY BE GONE INTO. 19. THE JUDGMENT OF HONBLE SUPREME COURT IN THE CA SE OF ASSTT. CIT VS. RAJESH JHAVERI STOCK BROKERS P. LIMI TED REPORTED IN (2007) 291 ITR 500 (AS HAD BEEN REFERRED TO AND HEAVILY RELIED UPON BY THE LD. SENIOR DR) IS ALSO O F NO AVAIL TO THE REVENUE AS THE LAW RELATING TO REOPENING HAD NO T BEEN CHANGED, IN RELATION TO EXISTENCE OF TANGIBLE MATER IAL AS A CONDITION PRECEDENT. THIS IS FULLY BORNE OUT FROM T HE SAID DECISION, ITSELF, AS CLARIFIED LATER ON BY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD. REPORTED IN (2013) 354 ITR 536 WHEREIN IT WAS OBSERVED (BY THE HONBLE COURT) AS UNDER: - CERTAIN OBSERVATIONS MADE IN THE DECISION OF RAJE SH JHAVERI (SUPRA) ARE SOUGHT TO BE RELIED UPON BY THE REVENUE TO POINT OUT THE DIFFERENCE BETWEEN AN ASSESSMENT AND AN INTIMATION. THE CONTEXT IN W HICH THOSE OBSERVATIONS WERE MADE HAS TO BE KEPT IN MIND . THEY WERE MADE TO POINT OUT THAT WHERE AN INTIMATI ON IS ISSUED UNDER SECTION 143(1) THERE IS NO OPPORTUNITY TO THE ASSESSING AUTHORITY TO FORM AN OPINION AND, THEREFO RE, I.T.A. NO.6251/DEL/2019 31 WHEN ITS FINALITY IS SOUGHT TO BE DISTURBED BY ISSU ING A NOTICE UNDER SECTION 148, THE PROCEEDINGS CANNOT BE CHALLENGED ON THE GROUND OF CHANGE OF OPINION. IT WAS NOT OPINED BY THE SUPREME COURT THAT THE STRICT REQUIREMENTS OF SECTION 147 CAN BE COMPROMISED. ON THE CONTRARY, FROM THE OBSERVATIONS (QUOTED BY US EARLI ER) IT WOULD APPEAR CLEAR THAT THE COURT REITERATED THAT SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED AN INTIMATION ISSUED UNDER SECTION 143(1) CAN BE SUBJE CTED TO PROCEEDINGS FOR REOPENING. THE COURT ALSO EMPHASISE D THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALI TY OF AN INTIMATION IS THAT THE ASSESSING OFFICER SHOULD HAV E REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT. IN OUR OPINION, THE SAID EXPRE SSION SHOULD APPLY TO AN INTIMATION IN THE SAME MANNER AN D SUBJECT TO THE SAME INTERPRETATION AS IT WOULD HAVE APPLIED TO AN ASSESSMENT MADE UNDER SECTION 143(3). THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CANNOT B E EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF THE SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELF-DEFEATING, BEC AUSE IF AN INTIMATION IS NOT AN ASSESSMENT THEN IT CAN NEVER BE SUBJECTED TO SECTION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN ASSESSMENT AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS NOBODYS CASE THAT AN INTIMATION CANNOT BE SUBJEC TED TO SECTION 147 PROCEEDINGS; ALL THAT IS CONTENDED BY T HE I.T.A. NO.6251/DEL/2019 32 ASSESSEE, AND QUITE RIGHTLY, IS THAT IF THE REVENUE WANTS TO INVOKE SECTION 147 IT SHOULD PLAY BY THE RULES O F THAT SECTION AND CANNOT BOG DOWN . IN OTHER WORDS, THE EXPRESSION REASON TO BELIEVE CANNOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AND ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED UNDER SECTION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT OF CHANGE OF OPINION IS NOT AVAILABLE TO HIM, IT WOU LD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON TH E GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE O R THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRONOUNCEMENTS. 20. NOW WE SHALL EXAMINE THE REASONS AS RECORDE D BY THE AO, WHETHER THEY MEET THE REQUIREMENT OF LAW, THAT IS, ARE BASED ON ANY TANGIBLE MATERIAL WHICH CAN LEAD TO FO RMATION OF REASON TO BELIEVE AND ARE IN GOOD FAITH AND IS NOT MERELY A I.T.A. NO.6251/DEL/2019 33 PRETENSE TO MAKE ROVING AND FISHING INQUIRY. OUR AN ALYSIS OF THE REASONS RECORDED BY THE AO ARE AS UNDER: - THE AO IN HIS REASONS RECORDED AT THE FIRST INSTA NCE RECORDS THAT, DURING THE COURSE OF ASSESSMENT PROCEEDINGS RELEVANT FOR A.Y. 2014-15 IT CAME TO NO TICE THAT RETURN FOR A.Y. 2013-14 HAS NOT BEEN FILED BY THE ASSESSEE COMPANY. AS PER COPY OF AUDITED ACCOUNTS SUBMITTED THERE IS NO OPERATIONAL INCOME AND THE EXPENSES INCURRED HAVE BEEN CLAIMED AS A BUSINESS LOSS ERGO, THE MATERIAL REFERRED TO BY THE ASSESSING OFFICER IN HIS REASONS RECORDED IS THE INFORMATION GATHERED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2014-15, FIRSTL Y, TO THE EXTENT THAT ASSESSEE HAS NOT FILED THE RETURN O F INCOME; AND SECONDLY, AS PER THE AUDITED ACCOUNTS SUBMITTED HE FOUND THAT THERE IS NO OPERATIONAL INC OME AND THE EXPENSES INCURRED HAVE BEEN CLAIMED AS A BUSINESS LOSS. NOW CAN THIS BE RECKONED AS REASON T O BELIEVE TO ACQUIRE JURISDICTION TO MAKE ASSESSMENT U/S 147. IN OUR OPINION IT CANNOT, AS DISCUSSED IN DETA IL IN THE FOREGOING PARAS THAT MERE NON-FILING OF RETURN ITSELF I.T.A. NO.6251/DEL/2019 34 IN THIS CASE WAS NOT SUFFICIENT TO RESORT TO SECTIO N147. MOREOVER, IF WE GO BY THE EVENT OF A.Y. 2014-15, TH EN THERE CANNOT BE ANY REASON TO BELIEVE THAT THE SHAR E APPLICATION MONEY AND LARGE SHARE PREMIUM CAN BE ADVERSELY VIEWED OR CAN BE HELD TO BE IN THE NATURE OF INCOME ESCAPING ASSESSMENT, AS IN THE A.Y. 2014-15, FORFEITURE OF SAME SHARE APPLICATION MONEY HAS BEEN HELD TO BE CAPITAL RECEIPT. THUS, THE ENTIRE PREMIS E OF ISSUING NOTICE U/S 148 TO EXAMINE THE SHARE APPLICA TION BASED ON ASSESSMENT PROCEEDINGS FOR A.Y. 2014-15 HA S NO LEGS TO STAND. AO IN THE OTHER PART OF THE REASONS OBSERVES THAT THERE IS LARGE INCREASE IN RESERVES AND SURPLUSES WHICH H AVE GONE TO 11,98,03,401/- AS AT 31.03.2013 AS AGAINST RS. 5,78,53,927/- AS ON 31.03.2012 AND THE SHARE CAPITAL HAS ALSO INCREASED FROM RS. 5,92,000/- TO 12,18,000 /-. INCREASE IN RESERVES AND SURPLUSES AND SHARE CAPITA L, ITSELF IS NOT THE INDICATIVE OF ANY INCOME CHARGEAB LE TO TAX ESCAPING ASSESSMENT, UNLESS THERE IS ANY MATERI AL OR EVIDENCE COMING ON RECORD THAT INCREASE IN RESERVES AND SURPLUSES AND SHARE CAPITAL IS DUE TO SOME BOGUS ME ANS I.T.A. NO.6251/DEL/2019 35 OR COLOURABLE TRANSACTION OR BY OF ANY ACCOMMODATIO N ENTRY. NO SUCH MATERIAL HAS BEEN BROUGHT ON RECORD NOR ANY ADVERSE REPORT BASED ON ANY INQUIRY PRECEDED BE FORE ISSUANCE OF NOTICE U/S 148. AO THEREAFTER IN HIS REASONS PROCEEDS MORE ON HIS HYPOTHESIS AND PRESUMPTIONS SANS ANY MATERIAL OR AN Y SUCH FINDING RECORDED BY HIM BASED ON ANY INQUIRY DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2014-15, WHICH IS EVIDENT FROM HIS FOLLOWING OBSERVATIONS: THE RECEIPT OF SHARE CAPITAL AND LARGE SHARE PREMIU M MONEY COULD NOT BE INVESTIGATED IN ABSENCE OF RETUR N OF INCOME FILED BY THE ASSESSEE COMPANY. THE ASSESSEE APPEARS TO BE AN ENTRY OPERATOR AS THE CAPITAL AND SHARE PREMIUM HAVE BEEN INVESTED IN NON CURRENT ASSET WHI CH ARE VALUED AT RS. 12,00,33,150/- AS AT 31.03.2013. I HAVE REASONS TO BELIEVE THAT THE INCREASE IN SHARE CAPITAL AND SHARE PREMIUM ACCOUNT HAS ESCAPED ASSESSMENT AND THEREFORE NOTICE U/S 148 OF THE I.T. ACT RELEVANT TO A.Y. 2013-14 IS PROPOSED TO BE ISSUED. I.T.A. NO.6251/DEL/2019 36 FROM THE ABOVE, IT IS QUITE CLEAR THAT AO SEEKS TO INVESTIGATE SHARE CAPITAL AND LARGE SHARE PREMIUM BECAUSE NO RETURN OF INCOME WAS FILED BY THE ASSESS EE. ONCE AGAIN JURISDICTION U/S 147 CANNOT BE RESORTED TO SIMPLY INVESTIGATE ANY ENTRY IN THE BOOKS OF ACCOUN T AND IT CANNOT BE PRETENSE TO GO BACK TO MAKE ASSESSMENT OR REASSESSMENT FOR THE ASSESSMENT YEAR WHICH GOT BARR ED BY THE STATUTE. THE COURTS HAVE TIME AND AGAIN HAVE ENVISAGED THAT THERE HAS TO BE MATERIAL HAVING RATI ONAL CONNECTION AND RELEVANT BEARING ON THE FORMATION OF THE BELIEF AND SHOULD NOT BE EXTRANEOUS OR IRRELEVANT. HERE THE AO PROCEEDS ON HIS SURMISE WHEN HE SAYS, ASSESSEE APPEARS TO BE AN ENTRY OPERATOR. DOES AO HAVE ANY MATERIAL OR INQUIRY TO BACK HIS SURMISE, ANSWER IS NO. THERE IS NO SUCH WHISPER IN THE REASONS RECORDED NO R THERE ANY REFERENCE TO ANY SUCH MATERIAL OR INQUIRY IN HIS ENTIRE ASSESSMENT ORDER THAT ASSESSEE HAS BEEN FOUND TO BE ENTRY OPERATOR OR BENEFICIARY OF ANY ACCOMMODATION ENTRY. THE BASIS FOR REASON TO BELIEV E CANNOT BE ON ANY SURMISES OR PRESUMPTION. THERE HAS TO SOME PRIMA FACIE MATERIAL HAVING SOME LIVE LINK NEX US I.T.A. NO.6251/DEL/2019 37 WITH THE FORMATION OF REASON TO BELIEVE, OTHERWISE, ANY WHIMS OR FANCY ENTERTAINED BY THE AO CAN LEAD TO REOPENING OF THE ASSESSMENT, WHICH TIME AND AGAIN H AS BEEN JUDICIALLY FROWNED AND WARNED BY THE COURTS. THUS, IN OUR OPINION THE AFORESAID REASONS ARE IN T HE REALM OF SURMISES AND CONJECTURES AND DO NOT CLOTHE THE ASSES SING OFFICER WITH JURISDICTION TO MAKE ANY ASSESSMENT OR REASSESSMENT U/S 147. 21. FURTHER, ALONG WITH THE SYNOPSIS OF THE CASE FILED BY THE APPELLANT, COPY OF STATEMENT ON OATH OF SRI D.C. SA XENA, DIRECTOR OF THE COMPANY (WHO HAD BEEN EXTENSIVELY E XAMINED BY THE ASSESSING OFFICER, IN RESPONSE TO THE DIRECT IONS GIVEN BY THE LD. JT. CIT) HAD BEEN APPENDED. FROM THE SAI D QUESTION-ANSWER, IT IS SEEN THAT SRI D.C. SAXENA HA D GIVEN ALL THE REQUISITE INFORMATION WHICH IF READ WITH THE IN FORMATION GIVEN BY THE SHARE APPLICANTS THEMSELVES IN COMPLIA NCE TO THE SUMMONS ISSUED BY THE AO TO EACH ONE OF THEM UNDER SECTION 133(6) WHICH HAS BEEN REFERRED TO IN THE ASSESSMENT ORDER ALSO, THE EXPLANATION AND EVIDENCES GIVEN BY THE AP PELLANT ASSESSEE STANDS FULLY CORROBORATED. AS PER THE INFO RMATION I.T.A. NO.6251/DEL/2019 38 GIVEN BY EACH ONE OF THEM, ALL OF THEM STOOD IDENTI FIED BY THEIR INCOME TAX PARTICULARS AND ENTRIES RELATED TO INVES TMENT MADE BY THEM IN PARTLY PAID SHARES IN THE APPELLANT COMP ANY HAD ORIGINATED FROM THE REALISATIONS MADE BY EACH ONE O F THEM FROM DEFINITE SOURCES. SO MUCH SO THAT EVEN SOURCE OF THE SOURCE HAD BEEN EXPLAINED BY THEM. RELEVANT EXTRACT OF THE SAID STATEMENT IS REPRODUCED HEREUNDER: - Q5 DO YOU CONFIRM THE RECEIPT OF THE SAME? A5. YES Q6 PLEASE STATE THAT AS TO HOW YOU CAME IN CONTRACT WITH THESE CONCERNS? A6 I CAME INTO CONTACT WITH THESE CONCERNS IN A GRO UP MEETING. Q7. DO YOU THE KNOW THE DIRECTORS OF THESE CONCERNS PERSONALLY? A7. YES I CAME TO KNOW ABOUT THEM, WHEN THESE CONCERNS DECIDED TO INVEST IN OUR COMPANY. I STILL REMEMBER FEW NAMES OUT OF THEM. Q8. PLEASE STATE WHETHER ANY BOARD MEETING OR NOTICE TO EXISTING SHARE HOLDERS WAS GIVEN WHILE DECIDING TO RECEIVE SHARE CAPITAL AND SHARE PREMIUM FROM THESE CONCERNS. A8. YES ALL THE STATUTORY REQUIREMENTS WERE COMPLETED AND REQUIRED MEETINGS WERE CONDUCTED TO I.T.A. NO.6251/DEL/2019 39 PASS THE NECESSARY RESOLUTIONS FOR RECEIVING ADDITI ONAL CAPITAL AND PREMIUM. Q9. PLEASE PROVIDE THE COPIES OF THE SAME. A9. SAME SHALL BE PROVIDED ON THE NEXT DATE. Q10. DO YOU WISH TO SAY ANYTHING ELSE? A10. NO THANKS. 22. HERE ON FACTS OF THE PRESENT CASE, NON-FILING OF RETURN UNDER SECTION 139 AND NON-APPEARANCE OF SUCH SHARE APPLICANTS, IN PERSON, COULD NOT JUSTIFY INITIATION OF PROCEEDINGS UNDER SECTION 147 AGAINST THE APPELLANT , FIRSTLY , THE SHARE APPLICATION MONEY FORFEITED IN THE SUBSEQ UENT YEAR HAS BEEN ACCEPTED TO BE CAPITAL RECEIPTS BY THE AO IN ORDER PASSED U/S 143(3); AND SECONDLY , IDENTITIES, GENUINENESS OF THE TRANSACTIONS AND THE CREDITWORTHINESS OF THE PE RSONS STOOD FULLY PROVED BY THE INFORMATION MADE AVAILABL E BY THEM TO THE ASSESSEE. 23. EVEN AT THE COST OF REPETITION, WE REITERATE THAT HERE IN THIS CASE REGULAR ASSESSMENT FOR THE ASSESSMENT YEA R 2014-15 (SUBSEQUENT YEAR) HAD BEEN COMPLETED ON 02.09.2016 U/S 143(3). IN THE ASSESSMENT SO MADE, THE ASSESSING OF FICER HAD ACCEPTED THE ACT OF FORFEITURE OF THE SHARE APPLICA TION MONEY AND PREMIUM AGGREGATING TO RS.6.26 CRORES, AS CAPI TAL I.T.A. NO.6251/DEL/2019 40 RECEIPT AND DID NOT PROCEED TO TAX THE SAME, BY TR EATING IT OTHERWISE. IT IS NOTEWORTHY THAT SUCH FORFEITURE RE LATED TO THE SAME SHARE APPLICATION MONEY AGGREGATING RS.6.26 CR ORES AS HAD BEEN RECEIVED DURING THE YEAR UNDER APPEAL BEFO RE US I.E. ASSESSMENT YEAR 2013-14. AFTER HAVING ACCEPTED THE FORFEITED AMOUNT AS CAPITAL RECEIPT, THERE REMAINED NO JUSTIF ICATION WHATSOEVER FOR INITIATION OF PROCEEDINGS UNDER SECT ION 147 FOR THE ASSESSMENT YEAR 2013-14 AND THAT TOO AFTER A LA PSE OF MORE THAN SIX MONTHS. 24. THE LD. CIT(A) HAD JUSTIFIED THE INITIATION OF PROCEEDINGS U/S 147 ON THE SHORT GROUND THAT, AO HAS PERUSED THE AUDITED ACCOUNTS AND WANTED TO EXAMINE THE INTRODUC TION OF SHARE CAPITAL. SINCE NO RETURN HAD BEEN FILED THE D ECISION OF AO TO EXAMINE THE SHARE CAPITAL APPEARS JUSTIFIED. THE TECHNICAL GROUNDS DO NOT HAVE MUCH VALIDITY. THE GROUNDS ARE THEREFORE RULED AGAINST THE APPELLANT. FIRST OF ALL, AS DISCUSSED IN DETAIL HEREIN ABOVE THAT IT IS A TRITE AND LAW WELL SETTLE D THAT AO CAN ACQUIRE JURISDICTION TO REOPEN THE ASSESSMENT OR TO ASSESS THE INCOME U/S 147, WHEN HE HAS REASON TO BELIEVE THA T INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND SUCH R EASON TO I.T.A. NO.6251/DEL/2019 41 BELIEVE SHOULD BE BASED ON TANGIBLE MATERIAL COMING ON RECORD HAVING LIVE LINK NEXUS WITH INCOME ESCAPING ASSESSMENT. PROVISION OF SECTION 147 CANNOT BE INVO KED MERELY FOR SELECTION OF CASE FOR SCRUTINY SO AS TO EXAMINE AND ASSESSING ANY INCOME OR CLAIM OR CARRYING OUT ANY R OVING AND FISHING INQUIRY. FOR THIS PURPOSE, THE STATUTE HAS EMPOWERED AO UNDER DIFFERENT SECTIONS LIKE 142(1), 143(2), ET C. CONDITIONS FOR ACQUIRING JURISDICTION FOR MAKING ASS ESSMENT OR REASSESSMENT U/S 147 ARE DIFFERENT AND CANNOT BE EQUATED WITH SELECTION OF A CASE FOR SCRUTINY ASSESSMENT. D ECISION OF THE AO TO EXAMINE THE SHARE CAPITAL DOES NOT AND CA NNOT CONSTITUTE TANGIBLE MATERIAL SO AS TO JUSTIFY INITIA TION OF PROCEEDINGS UNDER SECTION 147, ESPECIALLY WHEN SAME SHARE CAPITAL WHEN IT WAS FORFEITED STANDS ACCEPTED BY TH E SAME AO. FURTHER, NON-FILING OF RETURN AS STATED ABOVE CANNO T JUSTIFY THE INVOKING OF SECTION 147 AS CONDITION PRECEDENT AS GIVEN IN THE SECTION MUST BE SATISFIED AS DISCUSSED BY US IN THE FOREGOING PARAGRAPHS. 25. TO SUM UP, OUR CONCLUSION IS THAT INITIATION OF PROCEEDINGS UNDER SECTION 147 ARE HIT BY COMPLETE L ACK OF I.T.A. NO.6251/DEL/2019 42 REQUISITE REASON TO BELIEVE ON BASED ON TANGIBLE MATERIAL/EVIDENCE. IN THE REASON RECORDED, THERE IS NOT EVEN WHISPER THAT THE SHARE APPLICATION MONEY (ALONGWITH PREMIUM) WAS BOGUS IN NATURE. THE AUTHORITIES BELOW HAVE SIMPLY JUSTIFIED THE INITIATION OF PROCEEDINGS UNDER SECTION 147 ON THE GROUNDS THAT THERE WAS NON-FILING OF RET URN UNDER SECTION 139, OWING TO WHICH THE INTRODUCTION OF SHA RE CAPITAL COULD NOT BE EXAMINED AND FOR SUCH AN EXAMINATION O NLY ACTION UNDER SECTION 147 WAS NECESSARY. IN OUR CON SIDERED OPINION, THE REASONS RECORDED WERE NOT BASED ON COR RECT AND LEGAL PREMISE AND SUCH REASONS RECORDED SUFFER FR OM COMPLETE LACK OF JURISDICTION. EVEN AT THE COST OF REPETITION, WE HOLD THAT, ALTHOUGH SUFFICIENCY OF REASONS CANNO T BE GONE INTO, BUT VERY EXISTENCE OF REQUISITE REASON TO BEL IEVE CAN BE EXAMINED AND THAT TOO LAWFULLY IN THE APPELLATE PRO CEEDINGS. ON SUCH AN EXAMINATION, WE FIND THAT THERE DID NOT EXIST ANY MATERIAL, MUCH LESS TANGIBLE MATERIAL FOR HOLDING V ALIDITY OF REASON TO BELIEVE. ACCORDINGLY, VERY INITIATION O F PROCEEDINGS UNDER SECTION 147 IS HELD INVALID AND ACCORDINGLY T HE ASSESSMENT ORDER DATED 29.12.2017 PASSED UNDER SECT ION 147 IS LIABLE TO BE QUASHED AND WE HOLD SO. I.T.A. NO.6251/DEL/2019 43 26. IN THE RESULT THE APPEAL IS ALLOWED ON THIS PRE LIMINARY ISSUE AND THE ASSESSMENT ORDER DATED 29.12.2017 IS QUASHED. SINCE THAT ASSESSMENT ORDER HAS BEEN QUASHED, WE DI D NOT CONSIDER IT NECESSARY TO ADJUDICATION THE GROUND RE LATED TO MERITS OF ADDITION OF RS.6.26 CRORES, AS HAD BEEN R ECEIVED FROM FIFTEEN SHARE APPLICANTS AND IS KEPT OPEN. 27. IN THE RESULT APPEAL OF THE APPELLANT IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 RD OCTOBER, 2019. SD/- SD/- [ANADEE NATH MISSHRA] [AMIT SHUKLA] [ACCOUNTANT MEMBER] JUDICIAL MEMBER DATED: 3 RD OCTOBER, 2019 PKK: