DCIT CIR 6(3)(1), MUMBAI V. IDEAL INTERNATIONAL P.LTD, MUMBAI

ITA 6348/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 6793 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 27-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Tangible material; Valuation report; Revised return; Reason to believe; Reassessment proceedings
• Section: 143(3); 68; 148

Judgement Text

IN THE INC OME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE HONBLE SH. R. C. SHARMA, AM & HONBLE SH. SANDEEP GOSAIN, JM ./ I.T.A. NO . 6348 /MUM/201 6 ( / ASSESSMENT YEAR: 2009 - 10 ) DCIT - 6(30(1) R. NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 / VS. IDEAL INTERNATIONAL PVT. LTD. 36/40, MALALAXMI BRIDGE, ACADE MAHALAXMI, MUMBAI - 4000 34 ./ ./ PAN NO. AA BCI1527J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI ABI RAMA KARTHIKEYAN , DR / RESPONDENTBY : SHRI HARIDAS BHAT , AR / DATE OF HEARING : 2 5.09 .2018 / DATE OF PRONOUNCEMENT : 21.12.2018 / O R D E R PER SANDEEP GOSAIN, J UDICIAL MEMBER : THE P RESENT APPE AL FILED BY THE REVENUE IS AGAINST THE ORDER OF LD. CIT (APPEAL) 12, MUMBAI DATED 26.08 .16 F OR AY 20 09 - 10 ON THE GROUNDS MENTIONED HEREIN BELOW: - 2 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. 1 . 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS FAILED TO APPRECIATE THE FACTS THAT ASSESSES COMPANY HAD RECEIVED A SUM OF RS.3,50,00,000/ - ON ACCOUNT OF SHARE APPLICATION MONEY/SHARE CAPITAL AND SHARE PREMIUM DURING THE F.Y. 2008 - 09 RELEVANT TO A. Y. 2009 - 10 AND AS THERE WAS NO ASSESSMENT DONE FOR THIS PERIOD EARLIER, THE A.O. HAD REASONABLE CAUSE TO BELIEVE THAT THE SUM SO INTRODUCED BY WAY OF CREDIT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE OVER AND ABOVE THE INTRINSIC V ALUE OF SHARES WAS NOT EXPLAINED AND HENCE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND HE CONSIDERED IT FIT TO REOPEN THE ASSESSMENT U/S147 OF THE I. T. ACT'. 2 . 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE THAT THERE WAS NO TANGIBLE MATERIAL WITH THE A.O. WHICH IS ESSENTIAL REQUIREMENT FOR REOPENING AND THUS, HAS FAILED TO APPRECIATE THAT THE A.O. HAD NO OCCASION TO EXAMINE THE TRANSACTION RELATED TO SHARE APPLICATION / CA PITAL/ PREMIUM MONEY OF RS.3,50,00,000/ - HENCE, EARIIER, NO OPINION HAD BEEN FORMED ON THIS ISSUE AND THE BASIC PRESUMPTION THAT THE DATA FURNISHED BY THE ASSESSEE BEING ARBITRARY AND BEREFT OF ANY MERIT GIVES RISE TO SUFFICIENT GROUND TO 3 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. BELIEVE THAT INCO ME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT'. 3 . THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (APPEALS) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 4 . THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR TO SUBMIT ADDITIONAL NE W GROUND, WHICH MAY BE NECESSARY 2 . THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS PRIVATE LIMITED COMPANY AND ENGAGED IN DEALING IN TRADING OF LISTED SECURITIES AND FILED ITS RETURN OF INCOME FOR THE YEAR UND ER CONSIDERATION WAS FILED ON 27.09.09 DECLA RING TOTAL INCOME OF RS 81,04,850/ - AND THEREAFTER REVISED RETURN OF INCOME WAS FILED ON 17.08.10 DECLARING TOTAL INCOME OF RS. 82,83,791/ - . SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND AFTER SERVING STATUTORY NOTICES AND PROVIDING OPPORTUNITY OF HEARING, ASSESSMENT ORDER U/S 143(3) OF THE I.T. ACT WAS PASSED THEREBY ASSESSING TOTAL INCOME AT RS. 90,05,350/ - . LATER ON, THE CASE WAS REO PENED BY SERVING NOTICE U/S 148 OF THE I.T. ACT ON 28.03.14 AND THEREAFTER REJECTING OBJECTIONS 4 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. FILED BY THE ASSESSEE AGAINST REOPENING, ORDER OF ASSESSMENT U/S 143(3) R.W.S 147 OF THE I.T. ACT, WAS PASSED ON 19.03.15 THEREBY MAKING ADDITIONS U/S 68 OF THE I.T. ACT. AGGRIEVED BY THE ORDER OF AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A) AND LD. CIT(A) AFTER CONSIDERING THE CASE OF BOTH THE PARTIES, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. NOW BEFORE US, THE REVENUE HAS PREFERRED THE PRESENT APPEAL BY RAISING THE ABOVE GROUNDS. GROUND NO. 1 & 2 3 . THESE GROUNDS RAISED BY THE REVENUE ARE INTER - CONNECTED AND INTER RELATED AND RELATES TO CHALLENGING THE ORDER OF LD. CIT (A) IN REJECTING THE ORDER OF RE - OPENING PASSED BY AO AND ALSO BY DELETING THE ADDITIONS, THEREFORE WE THOUGHT IT FIT TO DISPOSE OF THE SAME BY THIS COMMON ORDER. 4 . LD. DR APPEARING ON BEHALF OF THE DEPARTMENT RELIED UPON THE ORDER PASSED BY AO WITH REGARD TO RE - OPENING OF ASSESSMENT AND SUBMITTED THAT L D. CIT (A) HAD FAILED TO APPRECIATE THE FACTS 5 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. THAT ASSESSES COMPANY HAD RECEIVED A SUM OF RS.3,50,00,000/ - ON ACCOUNT OF SHARE APPLICATION MONEY/SHARE CAPITAL AND SHARE PREMIUM DURING THE F.Y. 2008 - 09 RELEVANT TO A. Y. 2009 - 10 . IT WAS ALSO SUBMITTED THAT THERE WAS NO ASSESSMENT DONE FOR THIS PERIOD EARLIER, THEREFORE IN SUCH CIRCUMSTANCES, THE A.O. HAD REASONABLE CAUSE TO BELIEVE THAT THE SUM SO INTRODUCED BY WAY OF CREDIT IN TH E BOOKS OF ACCOUNTS OF THE ASSESSEE OVER AND ABOVE THE INTRINSIC VALUE OF SHARES WAS NOT EXPLAINED AND HENCE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND HE CONSIDERED IT FIT TO REOPEN THE ASSESSMENT U/S147 OF THE I. T. ACT. IT WAS FURTHER SUBMITT ED THAT THE LD.CIT(A) HAD ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE THAT THERE WAS NO TANGIBLE MATERIAL WITH THE A.O. WHICH IS ESSENTIAL REQUIRE MENT FOR REOPENING AND THUS, HAD FAILED TO APPRECIATE THAT THE A.O. HAD NO OCCASION TO EXAMINE THE TRANSACTION RELATED TO SHARE APPLICATION / CAPITAL/ PREMIUM MONEY OF RS.3,50,00,000/ - AND IN THIS WAY, EARL IER, NO OPINION HAD BEEN FORMED ON THIS ISSUE AND THE BASIC PRESUMPTION THAT THE DATA FURNISHED BY THE ASSESSEE BEING 6 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ARBITRARY AND BEREFT OF ANY MERI T GIVES RI SE TO SUFFICIENT REASONS TO BELIEVE THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT '. 5. ON THE OTHER HAND LD. AR REITERATED THE SAME ARGUMENTS AS WERE RAISED BY HIM BEFORE LD. CIT(A) AND THUS RELIED UPON THE ORDER PASSED BY LD. CIT(A). 6. WE HAVE HEARD THE COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSE D THE MATERIAL PLACED ON RECORD, JUDGMENT CITED BY THE PARTIES AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE THE ORDERS PASSED BY LD. CIT(A). THE LD. CIT(A) HAS DEALT WITH THE ABOVE GROUNDS RA ISED BY THE ASSESEE IN PARA NO.6 (6.1 TO 6.4) OF ITS ORDER. THE OPERATIVE PORTION IS CON TAINED IN PARA NO. 6(6.2 TO 6.4) OF ITS ORDER AND THE SAME IS REPRODUCED BELOW: - 6.2 I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT. IT IS SEEN THAT THE AO HAS REOPENED THE ASSESSMENT WITHIN FOUR YEARS FROM THE END OF THE ASSESSMEN T YEAR. THE AO REOPENED THE ASSESSMENT WHICH WAS COMPLETED U/S 143(3) OF THE 7 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ACT. IT IS SEEN THAT THERE WAS NO NEW INFORMATION RECEIVED SUBSEQUENTLY TO FORM THE BELIEF FOR REOPENING THE ASSESSMENT . THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE SAME FACT S WHICH WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT. IN THE ORIGINAL ASSESSMENT YEAR, THE AO HAS VERIFIED THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND BALANCE SHEET ALONG WITH ALL ANNEXURES WHICH WAS SUBMITTED BY THE APPELLANT ON 05.09.201 1. IT IS ALSO SEEN THAT THE APPELLANT HAS SUBMITTED, DURING ORIGINAL ASSESSMENT PROCEEDINGS, VIDE LETTER DATED 5.11.2011, DETAILS OF NEW SHARES ALLOTTED DURING A.Y. 2009 - 10 ALONG WITH BANK STATEMENT OF THE APPELLANT REFLECTING THE AMOUNT RECEIVED FROM THE SHARE HOLDERS FOR ISSUE OF FRESH SHARE CAPITAL. THE AO HAS NOT DENIED THIS FACT IN THE ASSESSMENT ORDER. HENCE, THE INTRINSIC VALUE OF THE SHARE CAN ROUGHLY BE CALCULATED BUT IT IS SEEN THAT THE AO, WITHOUT POINTING OUT AS TO HOW THERE WAS NO INTRINSIC VAL UE RECORDED THE REASON FOR REOPENING. EVEN AT THE TIME OF REASSESSMENT PROCEEDINGS, THE AO, AT PAGE 5 OF THE ORDER, HAS STATED THAT 'ON PERUSAL OF THE SHARE VALUATION REPORT IT IS SEEN THAT THE VALUE ARRIVED BY FOLLOWING NET ASSETS VALUE METHOD WAS RS 408. WHICH IS NOT CONSIDERED AS ACCEPTABLE SINCE WHILE ADOPTING NET ASSETS VALUE METHOD INVESTMENT IN SHARE AND MUTUAL FUND IS TOTALLY IGNORED WHICH IS WRONG AND BASELESS AND UNJUSTIFIABLE WITHOUT ANY EXPLANATION THEREFORE NAV METHOD 8 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ADOPTED BY THE ASSESSEE IS REJECTED'. THE AO, FOR REJECTING THE NAV METHOD HAS NOT GIVE A REASONABLE GROUND. IT IS NECESSARY ON THE PART OF. THE AO TO PROVE THAT THE NAV VALUE ADOPTED BY THE APPELLANT IS LESS THAN IT. BUT, AS OBSERVED, IT IS SEEN THAT IF THE AO'S VIEW IS ACCEPTED T HEN THE INTRINSIC. VALUE WILL BE INCREASED AND NOT REDUCED WHICH CLEARLY INDICATES THAT THE AO AT THE TIME OF RECORDING THE REASON HAS NOT QUANTIFIED THE INTRINSIC VALUE WHICH WAS ITSELF THE BASE FOR REOPENING THE ASSESSMENT. 6.3 ON PERUSAL OF THE REASON R ECORDED, IT IS SEEN THAT THE AO HAS REOPENED THE ASSESSMENT TO VERIFY THE SHARE APPLICATION / SHARE PREMIUM RECEIVED WHICH WAS NOT VERIFIED AT THE TIME OF ORIGINAL ASSESSMENT. THE AO HAS NOT MENTIONED ON WHICH BASIS OR AS TO HOW HE FORMED THE BELIEF THAT I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE BASIC REQUIREMENT FOR REOPENING THE ASSESSMENT IS 'REASON TO BELIEVE'. BUT, AT THE TIME OF RECORDING THE REASON FOR REOPENING, THE AO HAS NOT RECORDED AS TO HOW HE HAS A REASON TO BELIEVE THAT INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASON RECORDED MERELY INDICATES THAT THE AO WANTS TO VERIFY THE SHARE APPLICATION / SHARE PREMIUM MONEY RECEIVED AND NOTHING MORE. HENCE, I FIND FORCE IN THE ARGUMENT OF THE APPELLANT. THE WORDS 'REASON TO BELIEVE ' SUGGEST THAT THE BELIEF MUST BE THAT OF AN 9 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE HON'BLE SUPREME COURT IN THE CASE OF SHEO NATH SINGH REPORTED IN 82 ITR 147 HELD AS UNDER : - ' THE REA SONS RECORDED FOR THE ITO'S BELIEF WERE (1) THE ASSESSEE WHO WAS AT THE RELEVANT TIME A MANAGING DIRECTOR IN ABOUT A DOZEN LIMITED COMPANIES ALONG WITH 'OBEROIS' WAS BELIEVED TO HAVE MADE SOME SECRET PROFITS WHICH WERE NOT OFFERED FOR ASSESSMENT, AND (2) T HE ASSESSEE WAS BELIEVED TO HAVE RECEIVED A SUM OF RS. 22 LAKHS FROM 'OBEROIS' AND THIS SUM OR AT LEAST PART OF WHICH REPRESENTED INCOME WHICH HAD ESCAPED ASSESSMENT. IT WAS ABUNDANTLY CLEAR THAT THE TWO REASONS WHICH HAD BEEN GIVEN FOR THE BELIEF WHICH WA S FORMED BY THE /TO HOPELESSLY FAILED TO SATISFY THE REQUIREMENTS OF THE STATUTE. THE WORDS REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THE /TO MAY ACT ON DIRECT OR CIRCUMSTAN TIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE /TO WOULD BE ACTING WITHOUT ACTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY TH E SECTION. THE 10 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. COURT CAN ALWAYS EXAMINE THIS ASPECT THOUGH THE DECLARATION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. THERE WAS NO MATERIAL OR FACT WHICH HAD BEEN STATED IN THE REASONS FOR STARTING PROCEEDINGS IN THE INSTANT CASE ON WHICH ANY BELIEF COULD BE FOUNDED OF THE NATURE CONTEMPLATED BY SECTION 34(1 A). THE SO - CALLED REASONS WERE STATED TO BE BELIEFS THUS LEADING TO AN OBVIOUS SELF - CONTRADICTION. HENCE, THE REQUIREMENTS OF SECTION 34(1 A) WERE NOT SATISFIED AN D, THEREFORE, THE NOTICES WHICH HAD BEEN ISSUED WERE WHOLLY ILLEGAL AND INVALID. IN THE RESULT, THE APPEAL WAS ALLOWED.' 6.4 RELIANCE PLACED BY THE UNDERSIGNED ON THE ABOVE MENTIONED HON'BLE SUPREME COURT ORDER TO ALLOW THIS GROUND OF APPEAL SINCE IT IS IDENTICAL TO THE CASE HERE. FURTHER, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHUCHANDNDANI HEALTHPARKS (P) LTD REPORTED IN 68 TAXMANN.COM 91 HELD THAT IN THE ABSENCE OF REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT EVEN IN THE CASE WHERE ASSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S 143(1), THE ASSESSMENT IN NOT VALID. HENCE, UNDER THIS FACTS, IT CAN BE VERY WELL CONCLUDED THAT THE REOPENING OF THE ASSESSMENT IS ONLY 11 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ON THE GUESS WORK AND MERE CHANGE IN OPINION. THEREFORE, I DO NOT FIND MERIT IN REOPENING OF THE ASSESSMENT. HENCE/GROUND NO 1 &2 OF THE APPEAL IS ALLOWED ON THE BASIS OF ABOVE DISCUSS ION. 7. AFTER HAVING GONE THROUGH THE FACTS OF THE PRESENT CASE AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES, WE FIND FROM THE RECORDS THAT THE AO HAD REOPENED THE COMPLETED ASSESSMENT U/S 143(3) OF THE I.T. ACT WITHIN FOUR YEARS FROM THE END OF TH E ASSESSMENT YEAR. ADMITTEDLY, THERE WAS NO NEW INFORMATION RECEIVED . THE ASSESSMENT WAS REOPENED ON THE BASIS OF THE SAME FACTS WHICH WERE AVAILABLE AT THE TIME OF ORIGINAL ASSESSMENT. AS PER THE RECORDS, I N THE ORIG INAL ASSESSMENT YEAR, THE AO HAD VERIFI ED THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT AND BALANCE SHEET AL ONG WITH ALL ANNEXURES WHICH WERE SUBMITTED BY THE ASSESSEE. ON THE PERUSAL OF THE RECORD, WE ALSO NOTICED THAT DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, VIDE LETTER DATED 5.11.2011, DETAILS OF NEW SHARES ALLOTTED DURING A.Y. 2009 - 10 ALONG WITH BANK STATEMENT OF THE ASSESSEE REFLECTING THE AMOUNT RECEIVED FROM THE SHARE HOLDERS FOR ISSUE OF FRESH SHARE CAPITAL. 12 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ONCE THOSE DOCUMENTS WERE ALREADY BEFORE T HE AO AND THE AO HAD N OT DENIED THIS FACT IN THE ASSESSMENT ORDER. THEREFORE , THE INTRINSIC VALUE OF THE SHARE CAN ROUGHLY BE CALCULATED . T HE AO AT THE TIME OF RE - ASSESSMENT PROCEEDING, CATEGORICALLY STATED THAT 'ON PERUSAL OF THE SHARE VALUATION REPORT IT IS SEEN THAT THE VALU E ARRIVED BY FOLLOWING NET ASSETS VALUE METHOD WAS RS 408. WHICH IS NOT CONSIDERED AS ACCEPTABLE SINCE WHILE ADOPTING NET ASSETS VALUE METHOD INVESTMENT IN SHARE AND MUTUAL FUND IS TOTALLY IGNORED WHICH IS WRONG AND BASELESS AND UNJUSTIFIABLE WITHOUT ANY E XPLANATION THEREFORE NAV METHOD ADOPTED BY THE ASSESSEE IS REJECTED'. HOWEVER, NO REASONS FOR REJECTING THE NAV METHOD WERE GIVEN. THE AO HIMSELF AT THE TIME OF RECORDING T HE REASON HAD NOT QUANTIFIED THE INTRINSIC VALUE WHICH WAS ITSELF THE BASE FOR REOP ENING THE ASSESSMENT. EVEN FROM THE RECORDS, THE AO HAS NOT MENTIONED ON WHICH BASIS OR AS TO HOW HE FORMED THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE BASIC REQUIREMENT FOR REOPENING THE ASSESSMENT IS 'REASON TO BELIEVE'. BUT, AT THE TIME OF RECORDING THE REASON FOR REOPENING, THE AO HAS NOT RECORDED AS TO HOW HE HAS A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THE RE - OPENING 13 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. ORDER, THE AO WANTS TO VERIFY THE SHARE APPLICATION / SHARE PREMIUM MONEY R ECEIVED AND NOTHING MORE. HENCE, THE LD. CIT(A) HAD RIGHTLY RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SHEO NATH SINGH REPORTED IN 82 ITR 14 , WHEREIN IT WAS HELD AS UNDER : - ' THE REASONS RECORDED FOR THE ITO'S BELIEF WERE (1) THE ASS ESSEE WHO WAS AT THE RELEVANT TIME A MANAGING DIRECTOR IN ABOUT A DOZEN LIMITED COMPANIES ALONG WITH 'OBEROIS' WAS BELIEVED TO HAVE MADE SOME SECRET PROFITS WHICH WERE NOT OFFERED FOR ASSESSMENT, AND (2) THE ASSESSEE WAS BELIEVED TO HAVE RECEIVED A SUM OF RS. 22 LAKHS FROM 'OBEROIS' AND THIS SUM OR AT LEAST PART OF WHICH REPRESENTED INCOME WHICH HAD ESCAPED ASSESSMENT. IT WAS ABUNDANTLY CLEAR THAT THE TWO REASONS WHICH HAD BEEN GIVEN FOR THE BELIEF WHICH WAS FORMED BY THE /TO HOPELESSLY FAILED TO SATISFY THE REQUIREMENTS OF THE STATUTE. THE WORDS REASON TO BELIEVE' SUGGEST THAT THE BELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THE /TO MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE /TO WOULD BE ACTING WITHOUT ACTING WITHOUT JURISDICTION IF THE 14 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS ASP ECT THOUGH THE DECLARATION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. THERE WAS NO MATERIAL OR FACT WHICH HAD BEEN STATED IN THE REASONS FOR STARTING PROCEEDINGS IN THE INSTANT CASE ON WHICH ANY BELIEF COULD BE FOUNDE D OF THE NATURE CONTEMPLATED BY SECTION 34(1 A). THE SO - CALLED REASONS WERE STATED TO BE BELIEFS THUS LEADING TO AN OBVIOUS SELF - CONTRADICTION. HENCE, THE REQUIREMENTS OF SECTION 34(1 A) WERE NOT SATISFIED AND, THEREFORE, THE NOTICES WHICH HAD BEEN ISSUED WERE WHOLLY ILLEGAL AND INVALID. IN THE RESULT, THE APPEAL WAS ALLOWED.' 8. SIMILARLY, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF KHUCHANDNDANI HEALTHPARKS (P) LTD REPORTED IN 68 TAXMANN.COM 91 HAD HELD THAT IN THE ABSENCE OF REASON TO BELIEVE TH AT INCOME HAD ESCAPED ASSESSMENT EVEN IN THE CASE WHERE ASSESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U/S 143(1), THE ASSESSMENT IN NOT VALID. 15 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. 9. N O NEW FACTS O R CONTRARY JUDGMENTS HAVE B EEN BROUGHT ON RECORD I N ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). THEREFORE, THERE ARE NO REASON S FOR US TO INTERFERE INTO OR DEVIATE FROM THE FINDINGS SO RECORDED BY THE LD.CIT(A). HENCE , WE ARE OF THE CONSIDERED VIEW THAT THE FINDINGS SO RECORDED BY THE LD. CIT (A) ARE JUDICIOUS AND ARE WE LL REASONED. RESULTANTLY, THESE GROUND S RAISED BY THE REVENUE STANDS DISMISSED . GROUND NO. 3 & 4 . 10 . THESE GROUNDS RAISED BY THE REVENUE ARE GENERAL IN NATURE, THUS REQUIRES NO SPECIFIC ADJUDICATION. 11 . IN THE NET RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED WITH NO ORDER AS TO COST. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DEC , 2018 . SD/ - SD/ - ( R. C. SHARMA ) (SANDEEP GOSAIN) / A COUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 21 . 1 2 .201 8 SR.PS . DHANANJAY 16 I.T.A. NO. 6348 /MUM/201 6 IDEAL INTERNATIONAL PVT. LTD. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F I LE / BY ORDER, . / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI