Rajeshwari Sangeet Academy Trust, Jalandhar V. The Asstt. Commissioner of Income-tax, Jalandhar

ITA 705/ASR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8844 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 29-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 28-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S KANWAL
• Keywords: Bogus purchase; Business income; Depreciation; Search and seizure; Principle of natural justice; Period of limitation; Difference of opinion; Accommodation entries; Time period of passing order; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 80HHC; 133A; 12A; 10B; 147; 131; 148; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH; AMRITSAR BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NOS.710 & 711(ASR)/2014 ASSESSMENT YEAR:2006-07 & 2007-08 PAN:AAATA3534F M/S. APEEJAY EDUCATION SOCIETY VS. ASSTT. COMMR. OF INCOME TAX, NEW JAWAHAR NAGAR, CIRCLE-III, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) ITA NO.705(ASR)/2014 ASSESSMENT YEAR:2006-07 PAN:AAATR2430F M/S. RAJESHWARI SANGEET ACADEMY, VS. ASSTT. COMMR. OF INCOME TAX, NEW JAWAHAR NAGAR, CIRCLE-III, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SALIL KAPOR, ADV. SH. NIRMAL MAHAJ AN, CA, SH. SAMIT LAL CHANDANI, ADV. & ANANYA KAPOOR, ADV. RESPONDENT BY: SH.S. KANWAL, DR DATE OF HEARING:29/12/2015 DATE OF PRONOUNCEMENT: /02/2016 ORDER PER A.D. JAIN, JM: AS THE ISSUE INVOLVED IN ALL THESE APPEALS IS COMMO N, THE APPEALS ARE BEING DECIDED TOGETHER BY THIS CONSOLIDATED ORD ER. 2. FIRST, WE WILL TAKE UP APPEAL IN ITA NO.710(ASR) /2014 FOR THE ASSESSMENT YEAR 2006-07. 3. IN ITA NO.710(ASR)/2014, THE FOLLOWING GROUNDS H AVE BEEN RAISED: 2 1. THAT THE NOTICE ISSUED U/S 148 & REASSESSMENT O RDERS PASSED ARE ILLEGAL, BAD IN LAW, WITHOUT JURISDICTIO N AND BARRED BY TIME LIMITATION. 2. THAT THE CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE ASSESSMENT ORDER AND ALSO IN UPHOLDIN G THE DENIAL OF EXEMPTION U/S 11 OF THE ACT BY THE ASSESS ING OFFICER. 3. THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ASSE SSMENT ORDER FRAMED BY THE AO, IN GROSS VIOLATION OF SETTL ED POSITION OF LAW THAT ONCE REGISTRATION U/S 12A OF THE ACT WA S GRANTED TO THE ASSESSEE, IT WAS THEREAFTER NOT OPEN TO THE AO TO MAKE ANY ENQUIRY REGARDING THE EXEMPTION U/S 11 OF THE A CT. 4. THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ACTI ON OF THE ASSESSING OFFICER IN INVOKING THE PROVISIONS OF SEC TION 13(1 )(C) OF THE ACT, ALTHOUGH THERE IS NO EVIDENCE OR E VEN ALLEGATION THAT AMOUNT OF PURCHASE OF SOFTWARE FROM WASHINGTON SOFTWARE LTD HAS REACHED TO THE ASSESSEE TRUST OR ANY OF TRUSTEE. 5. THAT THE CIT(A) HAS ERRED IN LAW BY UPHOLDING TH E CONTENTION OF THE ACIT, CIRCLE III, JALANDHAR, IN H OLDING THAT THE APPELLANT HAS VIOLATED THE PROVISIONS OF 1 3 OF THE INCOME TAX ACT, 1961. 6. THAT THE CIT(A) HAS ERRED IN LAW BY UPHOLDING T HE CONTENTION OF THE ACIT, CIRCLE III, JALANDHAR IN AS SESSING THE INCOME AS BUSINESS INCOME INSTEAD OF ASSESSING THE SAME U/S 11 TO 13 OF THE INCOME TAX ACT, 1961. 7. WITHOUT PREJUDICE AND IN THE ALTERNATIVE, THE AO / CIT(A) HAS WRONGLY HELD THAT THE WHOLE INCOME IS TA XABLE AND NOT RESTRICTING THE TAXABILITY TO THE AMOUNT WHICH IS ALLEGEDLY COVERED U/S 13(1) (C) OF THE ACT. 8. THAT THE DEPRECIATION ON COMPUTER SOFTWARE HAS BEEN ILLEGALLY AND WRONGLY DENIED AND THE CIT(A) HAS ERR ED IN UPHOLDING THE SAME. 9. WITHOUT PREJUDICE AND IN THE ALTERNATIVE, EXPEN SES CLAIMED HAS BEEN ILLEGALLY AND WRONGLY DISALLOWED AND INCOM E HAS BEEN WRONGLY AND ILLEGALLY ASSESSED AT A HIGHLY EXO RBITANT FIGURE. 3 10. THAT THE EVIDENCE FILED AND MATERIALS AVAILABL E ON RECORD HAVE NOT BEEN PROPERLY CONSTRUED AND JUDICIOUSLY INTERPRETED, HENCE THE ADDITION/DISALLOWANCE MADE A RE UNCALLED FOR. 11. THAT INTEREST U/S 234A, 234B, 234C AND 234D OF THE INCOME TAX ACT, 1961 HAS BEEN WRONGLY AND ILLEGALLY CHARGED AND HAS BEEN WRONGLY WORKED OUT. 12. THAT THE APPLICANT CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEF ORE THE TIME OF HEARING. 4. APROPOS GROUND NO.1, IT HAS BEEN CONTENDED ON BE HALF OF THE ASSESSEE THAT EARLIER ASSESSMENT IN THE ASSESSEES CASE FOR THE YEAR UNDER CONSIDERATION, I.E., ASSESSMENT YEAR 2006-07 WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; THAT TH E NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED BEYOND A PERIOD OF FOUR Y EARS FROM THE END OF THE ASSESSMENT YEAR AND HENCE, THE PROVISO TO SECT ION 147 IS APPLICABLE; THAT AS PER THE PROVISO TO SECTION 147 OF THE ACT, WHERE AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN U/S 147 A FTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE AS SESSEE, INTER-ALIA, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. IT HAS BEEN CONTENDED THA T IN THE REASONS RECORDED FOR THE REOPENING OF THE COMPLETED ASSESSM ENT OF THE ASSESSEE, THERE IS NO ALLEGATION REGARDING ANY FAILURE ON THE PART OF THE ASSESSEE TO 4 DISCLOSE ANY MATERIAL FACTS RELEVANT FOR THE ASSESS MENT; THAT IN THE ABSENCE OF SUCH ALLEGATION, THE AO HAS NO JURISDICT ION TO ISSUE ANY NOTICE U/S 147 BEYOND FOUR YEARS FROM THE END OF THE ASS ESSMENT YEAR, WHERE THE ASSESSMENT ORDER WAS PASSED U/S 143(3). IN THIS REGARD, RELIANCE HAS BEEN PLACED ON THE FOLLOWING CASE LAWS: I) DULICHAND SINGHANIA VS. ACIT, 269 ITR 192 (P& H) II) MAHAVIR SPG. MILLS LTD. VS. CIT, 270 ITR 290 (P&H) III) CIT VS. PUNJAB LEASING PVT. LTD., ITA /596(ASR)/2 014 IV) DCIT VS. MICROSOFT CORPORATION INDIA (P) LTD., 13 9 TTJ 40 (DEL) V) HARYANA ACRYLIC MANUFACTURING VS. CIT, 308 ITR 38 (DEL.) 5. IT HAS FURTHER BEEN CONTENDED THAT THE VALIDITY OF NOTICE U/S 148 OF THE ACT HAS TO BE TESTED ON THE BASIS OF THE REASO NS RECORDED FOR INITIATING REOPENING OF THE ASSESSMENT, TO WHICH REASONS, NOTHING CAN BE ADDED OR SUBTRACTED THEREFROM; THAT THE REASON S ARE TO BE READ AS THEY ARE; AND THAT THERE IS NO SCOPE FOR DRAWING A NY INFERENCE THEREFROM. RELIANCE HAS BEEN PLACED ON HINDUSTAN LIVER LTD. V S. R.B. BADKAR, 268 ITR 332 (BOM.). IT HAS NEXT BEEN CONTENDED THAT IN THE CASE OF DULICHAND SINGHANIA (SUPRA), THE HONBLE JURISDIC TIONAL HIGH COURT HAS HELD THAT IN ORDER TO ASSUME JURISDICTION BY I SSUING A NOTICE U/S 148 BEYOND FOUR YEARS FROM THE END OF THE ASSESSM ENT YEAR CONCERNED, WHERE THE EARLIER ASSESSMENT STANDS COMPLETED U/S 143(3), THE AO HAS TO RECORD IN THE REASONS THAT THERE IS FAILURE ON T HE PART OF THE ASSESSEE 5 TO FURNISH ALL DOCUMENTS RELEVANT TO THE ASSESSMEN T AND THAT IN THE ABSENCE OF SUCH ALLEGATION IN THE REASONS RECORDED, THE AO HAS NO JURISDICTION TO ISSUE ANY NOTICE U/S 148 OF THE ACT . 6. IN RESPONSE TO THE ABOVE CONTENTION OF THE LD. C OUNSEL FOR THE ASSESSEE, THE LD. DR, BY WAY OF ORAL ARGUMENTS, AS WELL AS WRITTEN SUBMISSIONS, HAS CONTENDED THAT THIS ISSUE WAS NEVE R TAKEN BEFORE EITHER OF THE TAXING AUTHORITIES AND AS SUCH, THE A SSESSEE IS PRECLUDED FROM DOING SO FOR THE FIRST TIME BEFORE THE TRIBUNA L. IT HAS FURTHER BEEN SUBMITTED THAT THE REASONS RECORDED BY THE AO FOR INITIATING THE REASSESSMENT PROCEEDINGS ARE DETAILED AND THE FAILU RE ON THE PART OF THE ASSESSEE IS CLEARLY EVINCIBLE THEREFROM. 7. IT HAS BEEN CONTENDED THAT THE ASSESSEE IS WRONG IN COMPARING HIS CASE WITH THE DECISION OF DULICHAND SINGHANIA (SU PRA). IN THIS REGARD, HE HAS MADE THE FOLLOWING WRITTEN SUBMISSIONS: IT IS INDEED PAIN TO NOTE THAT THE STAND OF THE LE ARNED COUNSEL IS TOO ATROCIOUS TO CLAIM THAT ITS CASE HAS PARITY WIT H THE FACTS OF THE CASE DECIDED BY THE HON'BLE PUNJAB & HARYANA HIGH C OURT IN THE CASE OF DULI CHAND SINGHANIA REPORTED AT 269 ITR 01 92. THE COMPARISON OF THE FACTS OF THE ASSESSEE'S CASE WITH THE CASE OF DULI CHAND SINGHANIA ON THE FACE OF IT ITSELF MAKES THE COMPARISON LOOK LUDICROUSLY ODIOUS. THE FACTS ARE DELINEATED AS UND ER:- FACTS OF THE CASE OF SHRI DULI CHAND SINGHANIA: IN THIS CASE, THE ASSESSEE, A LEGAL PRACTITIONER, H AD CLAIMED DEDUCTION UNDER SECTION 80-0 OF THE INCOME TAX ACT, 1951 AT RS.1,76,54,480/- I.E. @ 50% OF HIS GROSS PROFESSION AL RECEIPTS DECLARED AT RS.3,53,08,960/- DECLARING IN THE RETUR N OF INCOME FOR THE ASSESSMENT YEAR 1995-96. THE RETURN WAS PROCESS ED UNDER SECTION 143(L)(A) AND NECESSARY INTIMATION WAS SENT . THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND REQUISITE NOTICE S UNDER SS. 143(2) AND 142(1) OF THE ACT, DT. 2ND AUG., 1996, W ERE ISSUED. A 6 QUESTIONNAIRE DT. 2ND AUG., 1996 WAS ALSO ISSUED RE QUIRING THE ASSESSEE TO FURNISH VARIOUS DETAILS. THE ASSESSMENT WAS ULTIMATELY COMPLETED UNDER S. 143(3) OF THE ACT VIDE ORDER DT. 30TH MARCH, 1997 AT A TOTAL INCOME OF RS. 16,12,230. THE DIFFER ENCE IN THE RETURNED INCOME AND THE ASSESSED INCOME REPRESENTED VARIOUS DISALLOWANCES MADE BY THE AO. HOWEVER, DEDUCTION UN DER S, 80-0 OF THE ACT WAS ALLOWED AS CLAIMED AT RS.1,76,54,480 .ON 22ND MARCH, 2002, THE AO ISSUED THE IMPUGNED NOTICE UNDE R S. 148 OF THE ACT OBSERVING THAT INCOME CHARGEABLE TO TAX FOR THE ASSESSMENT YEAR 1995-96 HAD ESCAPED ASSESSMENT WITHIN THE MEAN ING OF SECTION 147 OF THE ACT. THE ASSESSEE WAS, THEREFORE , REQUIRED TO FURNISH A RETURN OF INCOME WITHIN 30 DAYS FROM THE SERVICE OF THAT NOTICE. ON RECEIPT OF A COPY OF THE REASONS RECORDED, THE A SSESSEE FILED HIS OBJECTIONS VIDE LETTER DT. 24TH JAN., 2003. IT WAS CONTENDED THAT IN THE ABSENCE OF ANY ALLEGATION OF FAILURE ON HIS PART TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT, NO ACTION UNDER S. 147 OF THE ACT COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR IN V IEW OF THE PROVISO TO S. 147 OF THE ACT. IT WAS ALSO CONTENDED THAT THE ONLY GROUND ON WHICH THE PROCEEDINGS UNDER S. 147 OF THE ACT HAD BEEN INITIATED WAS THAT DEDUCTION UNDER S. 80-0 OF THE A CT WAS ADMISSIBLE AT THE RATE OF 50 PER CENT OF THE NET RE CEIPTS AND NOT THE GROSS RECEIPTS, AS CLAIMED BY THE ASSESSEE. THE CAS E OF THE ASSESSEE WAS THAT THE CIAIM FOR DEDUCTION HAD DULY BEEN EXAM INED WHILE MAKING THE ASSESSMENT UNDER S. 143(3) OF THE ACT. T HUS, THE REASSESSMENT PROCEEDINGS WERE BEING INITIATED MEREL Y ON A CHANGE OF OPINION ON THE SAME FACTS, WHICH IS NOT PERMISSI BLE UNDER THE ACT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT WAS IN THE CONTEXT OF THE ABOVE FACTS THAT THE H ON'BLE HIGH COURT HAD DISMISSED THE APPEAL OF THE DEPARTMENT. FACTS OF THE ASSESSEE'S CASE IN THE CASE OF THE ASSESSEE, A SEARCH AND SEIZURE O PERATION UNDER SECTION 132(1) OF THE ACT WAS CONDUCTED BY THE DIRE CTOR OF INCOME TAX (INVESTIGATION)-!! MUMBAI AT THE PREMISES OF ON E SHRI PRARAG V.MEHTA AT MUMBAI ON 22.3.2011. DURING THE COURSE O F SEARCH AND SEIZURE OPERATION, IT WAS FOUND THAT SHRI PARAG V M EHTA HAD GIVEN TABLE SPACE TO VARIOUS BOGUS COMPANIES IN HIS PREMI SES WHICH DID NOT ACTUALLY TRANSACT ANY BUSINESS BUT ARE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES TO THE NEEDY CONCERNS. SUCH C OMPANIES INCLUDED M/S. WASHINGTON SOFTWARE LM (WSL) WHICH WA S BEING RUN BY ONE SHRI SANJAY D SONAWANI. THE FACT THAT M/ S. WSL WAS A 7 COMPANY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WAS ADMITTED BY SHRI PARAG V.MEHTA IN HIS STATEMENT REC ORDED ON 22.3.2011. FURTHER, SHRI SANJAY D.SONAWANI IN HIS S TATEMENT RECORDED ON 12.05.2011 ALSO ADMITTED THAT HIS COMPA NY M/S. WASHINGTON SOFTWARE LTD WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES AND ALSO ACCEPTED THE FACT TH AT HE HAS PROVIDED ACCOMMODATION ENTRIES TO THE APEEJAY GROUP THROUGH HIS COMPANY M/S.WSL. AS A RESULT OF THIS INFORMATION, S URVEY OPERATIONS UNDER SECTION 133A WERE CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE GROUP ON 29.3.2011 DURING WHICH STATEMENTS OF DIFFERENT PERSONS ACTIVELY INVOLVED I N THE MANAGEMENT AND RUNNING OF THE ASSESSEE GROUP WERE R ECORDED. DURING THE COURSE OF SURVEY, THE MOST INCRIMINATING FACT WHICH CAME TO LIGHT THAT NO SOFT WAS INSTALLED AT ANY OF THE INSTITUTION OF THE ASSESSEE GROUP BUT ENTRIES IN THE BOOKS OF ACCO UNT OF DIFFERENT INSTITUTIONS BEING RUN BY THE ASSESSEE GROUP WERE F OUND. THE PERSONS WHOSE STATEMENTS WERE RECORDED HAD DEPOSED THAT THEY HAD RECEIVED ONLY BILLS FOR ENTERING IN THE BOOKS O F ACCOUNT AND NO SOFTWARE WERE EVER INSTALLED OR RECEIVED BY THEM. I T WAS FURTHER FOUND THAT M/S. WSL HAD BEEN PROVIDING ACCOMMODATIO N ENTRIES IN SUCH MANNER IN VARIOUS YEARS FROM ASSESSMENT YEA R 2003-04 ONWARDS TILL 2010-11 I.E. THE YEAR WHICH CLOSED BEF ORE THE DATE OF SEARCH ON M/S.WSL AND SURVEY ON THE ASSESSEE'S GROU P'S INSTITUTES. THE QUANTUM OF ACCOMMODATION ENTRIES PR OVIDED BY M/S. WSL WAS APPROXIMATELY AS UNDER DURING THE DIFF ERENT ASSESSMENT YEAR:- 2003-04 RS.2 CRORES 2005-06 RS.2.5 CRORES 2005-06 RS.3.4 CRORES 2007-08 RS.0.8 CRORE 2008-09 RS.1.2 CRORE 2009-10 RS.2,68,60,900 2010-11 RS.2.6 CRORES SINCE THIS WAS A MEGA DISCOVERY OF GARGUANTUM LEVEL S AND WHICH FACT HAD NEVER BEEN REVEALED BY THE ASSESSEE BEFORE , IT CLEARLY CONSTITUTED THAT THERE HAD BEEN MASSIVE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSESSMENT YEARS. I N FACT, THE 8 ASSESSEE HAD FURNISHED FALSE AND INACCURATE PARTICU LARS OF INCOME; FOR WHICH INITIATION OF PROCEEDINGS UNDER SECTION 1 47 WERE IMPERATIVE FOR BRINGING TO TAX THE INCOME WHICH HAD NOT BEEN ASSESSED. IN VIEW OF ABOVE SUBMISSIONS, IT IS HOPED THAT THE ASSESSEE'S PLACING RELIANCE ON THE JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IS SIMPLY ILL-CONCEIVED. IT IS FURTHER PERTINENT TO HIGHLIGHT THAT AT PARA 1 1 OF ITS ORDER THE HON'BLE HIGH COURT HAD HELD THAT WHERE THE PROC EEDINGS UNDER SECTION 147 HAD BEEN INITIATED ON THE BASIS OF SUBS EQUENT INFORMATION, THE PROVISO TO SECTION 147 WAS NOT VIO LATED. PARA OF THE HIGH COURT'S ORDER READS AS UNDER: 11. WE MAY ALSO BRIEFLY REFER TO THE AUTHORITIES CI TED BY THE REVENUE. THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF ES S ESS KAY ENGINEERING CO. (P) LTD. (SUPRA) IS CLEARLY DISTING UISHABLE. IN THIS CASE, THE SUPREME COURT HAD DISMISSED THE APPEAL BY A SHORT ORDER AGAINST THE DECISION OF THIS COURT IN CIT VS. ESS E SS KAY ENQINEERINQ. CO. (P) LTD. (1981) 25 CTR (P&H) 88: ( 1982) 137 ITR 446 (P&H). THE PROCEEDINGS IN THIS (THAT) CASE BEEN INITIATED ON THE GROUND THAT THE AO, ON THE BASIS OF SUBSEQUENT INFO RMATION, HAD FOUND THAT THE FACTS DISCLOSED AT THE TIME OF ORIGI NAL ASSESSMENT WERE FALSE. THUS, IT HAD BEEN CLEARLY FOUND THAT TH E ASSESSEE HAD FAILED TO DISCLOSE TRULY ALL FACTS FOR ITS ASSESSME NT. THERE IS NO ALLEGATION IN THE PRESENT CASE THAT THE FACTS DISCL OSED BY THE ASSESSEE HAVE BEEN FOUND TO BE FALSE AT ANY LATER S TAGE. IT MAY BE MENTIONED THAT THE ASSESSEE'S COUNSEL HAD RELIED UPON ONE OTHER JUDGMENT OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF MAHAVIR SPINNING MILS LTD. VS CIT IN 270 ITR 290. AGAIN, THE RELIANCE IS WHOLLY MISCONCEIVED. THE FAC TUAL MATRIX OF THE ASSESSEE'S CASE HAS BEEN DELINEATED ABOVE AND T HE FACTUAL MATRIX OF THIS CASE HAS BEEN DELINEATED ABOVE AND T HE FACTUAL MATRIX OF THIS CASE HAS BEEN DELINEATED BY THE HON BLE HIGH COURT AS UNDER:- M/S MAHAVIR SPINING MILLS LTD. IS A PUBLIC LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT,1956, AND IS R EGULARLY ASSESSED TO INCOME TAX UNDER THE ACT. IF FILED ITS RETURN OF INCOME FOR THE ASST. YEAR 1995-96 ON 28TH NOV., 1995, SHOW ING A TOTAL INCOME OF RS. 23,85,28,960. THE RETURN WAS SUBSEQUE NTLY REVISED ON 16TH JULY, 1996, SHOWING AN NCOME OF RS. 24,24,6 3,910. IN THE RETURN FILED BY THE ASSESSEE, IT HAD CLAIMED EXEMPT ION UNDER S. 10B OF THE ACT IN RESPECT OF PROFITS AND GAINS DERI VED FROM ONE OF ITS UNITS, M/S ANNANT SPINNING MILLS (UNIT I), WHIC H WAS A 100 PER CENT EXPORT-ORIENTED UNIT, AMOUNTING TO RS. 4,64,51 ,545. IT ALSO 9 CLAIMED DEDUCTION UNDER S. 80HHC OF THE ACT AMOUNTI NG TO RS.5,51,59,320. ASSESSMENT UNDER S. 143(3) OF THE A CT WAS MADE ON 16TH MARCH, 1998, AT AN INCOME OF RS. 25,06,29,0 80. THE AO ALLOWED EXEMPTION UNDER S. 10B AS CLAIMED WHEREAS D EDUCTION UNDER S. 80HHC WAS REDUCED TO RS. 5,29,90,077. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED C ERTAIN DEDUCTIONS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASST. YR. 1998- 99, IT CAME TO THE NOTICE THAT THE ASSESSEE HAD BEE N CLAIMING EXEMPTION UNDER S. 10B IN RESPECT OF THE INCOME OF ITS 100 PER CENT EOU NAMED AS ANNANT SPINNING MILLS (UNIT I) FOR THE ASST. YRS. 1995-96 TO 1999-2000. AT THE SAME TIME, IT HAS ALSO BEEN CLAIMING DEDUCTION UNDER S. 80HHC IN RESPECT OF EXPORT SALES OF THE SAID UNIT RESULTING INTO DOUBLE RELIEF UNDER SS. 10B AND 80HH C ON THE SAME EXPORT SALES. THIS DOUBLE RELIEF (EXEMPTION UNDER S . 10B AND DEDUCTION UNDER S. 80HHC) IS NOT ALLOWABLE UNDER TH E PROVISIONS OF THE ACT TO A 100 PER CENT EOU. THIS ISSUE HAS BEEN DISCUSSED IN DETAIL IN THE ASSESSMENT ORDER UNDER S. 143(3) DT. 30TH MARCH, 2001, FOR THE ASST. YR. 1998-99. AFTER TAKING INTO CONSIDERATION, THE ASSESSEE'S REPLY AND ARGUMENTS ON THE SAID ISSUE, I T HAS BEEN HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM DEDUCTIO N UNDER S. 80HHC ON EXPORT SALES OF A 100 PER CENT EOU, IN RESPECT O F INCOME OF WHICH, EXEMPTION HAS BEEN CLAIMED UNDER S. 10B OF T HE ACT. IT IS IN THE LIGHT OF THE ABOVE FACTS THAT THE HON' BLE HIGH COURT HELD THAT THE ASSESSEE DISCLOSED ALL MATERIAL FACTS AND AS SUCH INVOCATION OF THE PROVISIONS OF SECTION 147 WAS NOT WARRANTED. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THIS JUDGMEN T IS ALSO NOT APPLICABLE TO THE FACTS OF THE CASE. IT MAY BE MENTIONED THAT THE REASONS FOR REOPENING OF THE ASSESSMENT HAD COME TO THE KNOWLEDGE OF THE DEPARTM ENT IN SURVEY OPERATION AND ALL THE FACTS WERE DULY RECORDED IN T HE BODY OF THE REASONS RECORDED. THEREFORE, THE MENTIONIN G OF THE NEW FACTS, PER SE, CLEARLY INDICATED THAT THE ASSESSEE HAD NOT DISCLOSED ALL MATERIAL FACTS FULLY AND TRULY. THE REASONS SO RECO RDED CARRY THE SATISFACTION AS MANDATED IN THE PROVISO TO SECTION 147. NOTWITHSTANDING AND PREJUDICE TO THE ABOVE, IT IS S UBMITTED THAT THE HONBLE SUPREME COURT I IN THE CASE OF GRINDLAYS BA NK LTD. VS ITO REPORTED AT 122 ITR 55 HAS HELD THAT THE COURT IS / EMPOWERED TO GIVE DIRECTION FOR COMPLETING ASSESSMENT BEYOND THE LIMITATION PERIOD IN ORDER TO / SEE COMPLETE JUSTICE IS RENDER ED. IT IS FURTHER SUBMITTED THAT THE HONBLE SUPREME COURT IN THE / C ASE OF COLLECTOR OF LAND ACQUISITION VS MST. KATIJI REPORTED AT 167 ITR 0471 HAS HELD 10 THAT WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDE RATIONS ARE PITTED AGAINST EACH OTHER, THE CAUSE OF SUBSTANTIAL JUSTIC E DESERVES TO BE PREFERRED IN VIEW OF THE ASSESSEES GROUND OF APPEAL MAY KIND LY BE REJECTED. 8. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISS UE. SECTION 147 (RELEVANT PORTION) READS AS FOLLOWS: SECTION 147 : IF THE ASSESSING OFFICER HAS REASON TO BELIEVE] THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 , ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PRO CEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIA TION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE AS SESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR , UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR 9. THE WORDING EMPLOYED IN THE FIRST PROVISO TO SEC TION 147 IS AMPLY CLEAR AND SELF EXPLANATORY. AS PER THIS PROVISO, AC TION U/S 147 CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR, ONLY IN CASE THERE IS FAILURE ON T HE PART OF THE ASSESSEE, INTER-ALIA, AS RELEVANT TO THE FACTS OF THE PRESENT CASE, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSM ENT FOR THAT ASSESSMENT YEAR. 11 10. NOW, AS PER SECTION 148(1), BEFORE MAKING REASS ESSMENT U/S 147, THE AO SHALL SERVE ON THE ASSESSEE, A NOTICE, AS RE QUIRED THEREUNDER. ACCORDING TO THE MAIN PROVISION OF SECTION 147, REA SSESSMENT CAN BE DONE ONLY IF THE AO HAS REASON TO BELIEVE ESCAPEME NT OF INCOME. WHERE A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT HAS EXPIRED, THE INCOME HAVING ESCAPED ASSESSMENT NEEDS MUST, IN KEEPING WITH THE FIRST PROVISO TO SECTION 147, HAVE SO ESC APED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE, INTER-ALIA, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT, FOR THAT ASSESSMENT YEAR. 11. FROM THE ABOVE ANALYSIS OF THE RELEVANT PROVIS IONS, IT IS EVIDENT THAT SECTION 148 ENVISAGES ISSUANCE OF A NOTICE WHE RE INCOME HAS ESCAPED ASSESSMENT. THIS NOTICE, AS IS CLEAR FROM T HE ABOVE ANALYSIS OF THE RELEVANT PROVISIONS, NEED MUST BE ON THE AOS REASON TO BELIEVE ESCAPEMENT OF INCOME FROM ASSESSMENT. NOW, SINCE T HE MANDATE OF THE FIRST PROVISO TO SECTION 147 IS THAT IN A CASE OF EXPIRY OF FOUR YEARS FROM END OF THE RELEVANT ASSESSMENT WHERE ASSESSMENT, HA S BEEN MADE U/S 143(3), IT HAS TO BE THE FAILURE OF FULL AND TRUE D ISCLOSURE BY THE ASSESSEE, OF ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT, WHICH HAS LED TO ESCAPEMENT OF INCOME FROM ASSESSMENT, THE ASSESSEE OBVIOUSLY, REQUIRES TO BE MADE AWARE OF THE FACT OF SUCH NON-DISCLOSURE ON HIS PART. THIS IS CLEARLY IN ACCORDANCE WITH THE NATURAL JUSTICE PRIN CIPLE OF AUDIT ALTEREM PARTEM. THE FIRST PROVISO TO SECTION 147, THUS, PRO VIDES FOR: 12 (I) THE NECESSARY OPPORTUNITY TO THE ASSESSEE TO E XPLAIN HIS ALLEGED FAILURE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE RELEVANT ASSES SMENT YEAR. THIS OPPORTUNITY SHALL BE GRANTED TO HIM BY I SSUANCE OF A NOTICE U/S 148(1); II) CLARITY OBVIATING ANY ARBITRARINESS OR HAZINESS ON THE PART OF THE AO IN CONVEYING TO THE ASSESSEE, THE EXACT NA TURE OF THE ASSESSEES DEFAULT, AS PER THE A.O. SUCH A NOTICE W OULD EMERGE FROM THE AOS REASONS TO BELIEVE ESCAPEMENT OF INCOME FROM ASSESSMENT, AS ENVISAGED U/S 147. 12. THE GENESIS OF THE REASSESSMENT PROCEEDINGS, TH EREFORE, IS THE REASONS TO BE RECORDED BY THE AO, OF HIS BELIEF OF ESCAPEMENT OF INCOME FROM ASSESSMENT AND IN COMPLIANCE WITH THE FIRST PROVISO TO SECTION 147, SUCH REASONS TO BELIEVE MUST COMPRISE OF THE S PECIFIC MENTION OF THE ASSESSEES FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR WHE RE, AS IN THE PRESENT CASE, THE REASSESSMENT IS TO BE INITIATED AFTER EXP IRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT REQUIRE S TO BE STRESSED HERE, THAT THE FIRST PROVISO TO SECTION 147 IS PROHIBITIV E OF ANY ACTION U/S 147 BEING TAKEN IN SUCH A CASE, IF THERE IS NO SUCH FAI LURE TO DISCLOSE ALL MATERIAL FACTS ON THE PART OF THE ASSESSEE. IT IS T HE ABOVE POSITION, WHICH HAS BEEN JUDICIALLY RECOGNIZED BY THE COURTS, TIME AND AGAIN. 13. THE REASONS RECORDED BY THE AO FOR REOPENING TH E ASSESSMENT ARE AS FOLLOWS: 13 REASONS FOR RE-OPENING OF THE CASE U/S 148:- RETURN DECLARING NIL INCOME WAS FIFED BY THE ASS ESSEE ON 27.10.2006 FOR THE ASSTT. YEAR 2006-07. ASSESSMENT U/S 143(3) WAS MADE ON 29.12.2008 AT NIL INCOME. AS PER INFORMATION AVAILABLE IN THIS OFFICE, THE AS SESSEE HAD OBTAINED ACCOMMODATION ENTRIES FROM M/S WASHINGTON SOFTWARE LTD. PUNE IN THE FINANCIAL YEAR 2005-06 RELEVANT TO ASSTT. YEAR 2006-07 AS PER FOLLOWING DETAILS:- SR. NO. DATE OF INVOICE AMOUNT (RS.) 1. 07.09.2005 30,00,000/- 2. 27.09.2005 30,00,000/- 3. 28.09.2005 30,00,000/- 4. 29.09.2005 30,00,000/- 5. 11.10.2005 20,00,000/- 6. 15.10.2005 30,00,000/- 7. 18.10.2005 30,00,000/- 8. 20,10.2005 20,00,000/- 9. 24.10.2005 30,00,000/- TOTAL 2,50,00,000 / - A STATEMENT OF SH. SAN JAY D SONAWANI, DIRECTOR OF M/S WASHINGTON SOFTWARE LTD. PUNE WAS RECORDED BY THE D DIT (INV.) UNIT 1(1) PUNE ON 16.03,2011 U/S 131 OF THE INCOME TAX ACT 1961 AND HIS STATEMENT WAS AGAIN RECORDED ON 12.UB.2011 BY DDIT(INV.) UNIT VLL(4) MUMBAI. IN THESE STATEMENTS, SH. SANJAY D. SONAWANI STATED THAT HIS COMPANY M/S WASHINGTON SOF TWARE LTD., ONLY ISSUED SALE BILLS AND NO ACTUAL SALES TOOK PLA CE AND HE ACCEPTED THE FACT THAT HIS COMPANY WAS PROVIDING AC COMMODATION ENTRIES TO THE ASSESSEE SOCIETY. IN ORDER TO VERIFY THE GENUINENESS OF PURCHASE OF SOFTWARE FROM M/SVASHINGTON SOFTWARE LTD., A SURVEY U/S 133A WAS CONDUCTED IN CASE OF M/S APEEJA Y EDUCATION SOCIETY, AT DIFFERENT PREMISES OF THE ASSESSES AND DURING THE COURSE OF SURVEY IT WAS FOUND THAT NO ACTUAL DELIVERIES, O F ANY GOODS OR COMMODITIES OR SERVICES : SOFTWARE HAVE EVER BEEN P ROVIDED BY THE COMPANY, M/S WASHINGTON SOFTWARE LTD, TO / E VARIOU S INSTITUTES OF THE ABOVE SOCIETY, THOUGH BILLS WERE RECEIVED AN D CLAIMED IN ITS ACCOUNT BY THE ASSESSEE SOCIETY. PRINCIPALS AND IT PERSONS OF THE INSTITUTES COVERED U/S 133A CATEGORICALLY STATED TH AT THEY ONLY 14 RECEIVED BILLS FROM THE HEAD OFFICE OF THE SOCIETY AND NO SOFTWARE FROM THE ABOVE COMPANY WERE EVER SUPPLIED OR INSTAL LED IN THEIR INSTITUTE. STATEMENT OF SH. VIJAY KUMAR BERLIA, GEN ERA! SECRETARY AND AUTHORIZED SIGNATORY OF THE SOCIETY WAS RECORDE D ON 29.03.2011 BY DOIT (INV.) UNIT VL(3), NEW SELHI. SH RI VIJAY KUMAR BERLIA FAILED TO PRODUCE ANYTHING IN SUPPORT OF THE ACTUAL TRANSACTION WITH THE ABOVE SAID COMPANY AND EXPRESS ED HIS INABILITY TO CLARIFY ANY MATERIAL FACT ON THE ISSUE . THUS IT IS CLEAR THAT THE ASSESSEE HAS TAKEN THESE ENTRIES W.R.T. BOGUS PURCHASES JF SOFTWARE WITHOUT ACTUAL DELIVERY OF SOFTWARE. THE VENDOR PARTY M/S WASHINGTON TWARE LTD, PUNE HAD RAISED SALES BILLS WITHOUT ACTUAL DELIVERY OF SOFTWARE/ GO ODS, ESE ENTRIES WERE USED BY THE ASSESSEE TO INFLATE THE EXPENSES T O THE EXTENT OF RS. 2 50,00,000/- AND HENCE EVADED TAX ON INCOME O F RS. 2,50,00,000/- I HAVE INDEPENDENTLY EXAMINED THE ABOVE STATED FACT S AND I HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE CHAR GEABLE TO TAX TO THE TUNE OF RS. 2,50,00,000/- HAS ESCAPED FROM ASSE SSMENT FOR THE ASSESSMENT YEAR 2006-07 AND THUS THIS CASE IS FIT F OR ISSUANCE OF NOTICE U/S 148 FOR RE-OPENING OF ASSESSMENT FOR THE A.Y. 2006-07. THEREFORE APPROVAL U/S 151 (1) OF THE INCOME TAX AC T 1961 IS SOUGHT TO INITIATE -E'-ENT PROCEEDINGS IN THIS CASE FOR A.Y.2006- 07. 14. IN DULICHAND SINGHANIA (SUPRA), IT HAS BEEN C LEARLY HELD BY THE HONBLE JURISDICTIONAL HIGH COURT THAT IN ORDER TO ASSUME JURISDICTION U/S 147 IN A CASE WHERE THE ASSESSMENT HAS BEEN MAD E U/S 143(3), THE AO MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT AND THAT SUCH ESCAPEMENT OCCURRE D BY REASON OF FAILURE ON THE PART OF THE ASSESSEE, INTER-ALIA, TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT PURPOSE, WHERE ACTION U/S 147 IS SOUGHT TO BE TAKEN AFTER THE EXPI RY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE ASSESS MENT HAVING BEEN MADE U/S 143(3). 15 15. THE DEPARTMENT HAS SOUGHT TO MAKE OUT MUCH FROM THE DIFFERENCE BETWEEN THE FACTS IN DULICHAND SINGHANIA (SUPRA) AND THE ASSESSEES CASE. HOWEVER, IN THIS ENDEAVOUR, IT HAS BEEN LOST SIGHT OF THAT NO TWO CASES CAN BE IDENTICAL AND THEY CAN ONLY BE SIMILA R. WHILE IT IS TRUE THAT THE APPLICABILITY OF A DECISION NEEDS TO BE CONSIDE RED, KEEPING IN MIND THE FACTS THEREOF, IT IS THE RATIO DECIDENDI OF THE CASE, WHICH HAS TO BE APPLIED. HEREIN, AS TO HOW THE ABOVE RATIO OF DULI CHAND SINGHANIA (SUPRA) DOES NOT COVER THE CASE OF THE ASSESSEE, HA S NOT BEEN SHOWN. IT REMAINS UNDISPUTED THAT IN THE REASONS RECORDED BY THE AO, THERE IS NO ALLEGATION, MUCH LESS ANY SPECIFIC ONE, REGARDING A NY ALLEGED FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. 16. IN DULICHAND SINGHANIA (SUPRA), ESS ESS KAY ENGINEERING CO. PVT. LTD., 137 ITR 446 (P&H) WAS REFERRED TO ON BE HALF OF THE DEPARTMENT. THE SAME WAS, HOWEVER, HELD TO BE DISTINGUISHABLE. IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (SUPRA), THE PROCEEDINGS HAD BEEN INITIATED ON THE GROUND THAT THE AO ON THE BASIS OF SUBSEQUENT I NFORMATION, HAD FOUND THAT THE FACTS DISCLOSED AT THE TIME OF ORIGI NAL ASSESSMENT WERE FALSE, DUE TO WHICH, THE ASSESSEE HAD FAILED TO DIS CLOSE TRULY ALL FACTS FOR ITS ASSESSMENT. IN DULICHAND SINGHANIA (SUPRA), THERE WAS NO ALLEGATION THAT THE FACTS DISCLOSED BY THE ASSESSEE HAD BEEN FOUND TO BE FALSE AT ANY LATER STAGE. BEFORE US, ON BEHALF OF T HE DEPARTMENT, IT HAS BEEN CONTENDED THAT AS SUPPOSED TO IN DULICHAND SI NGHANIA (SUPRA), IN 16 THE PRESENT CASE, THE FACTS DISCLOSED BY THE ASSESS EE HAVE BEEN FOUND TO BE FALSE AT A LATER STAGE AND SO, IN KEEPING WITH ESS ESS KAY ENGINEERING CO. PVT. LTD., (SUPRA), IT CANNOT BE SAID THAT THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL THE MATERIAL PARTICULARS. 17. THE CONTENTION OF THE DEPARTMENT IN THIS REGARD DOES NOT VALIDATE THE REOPENING OF THE COMPLETED ASSESSMENT OF THE PR ESENT ASSESSEE. THIS IS SO, SINCE THE EXPRESS REQUIREMENT OF THE PROVISO TO SECTION 147 OF THE ACT IS THE SPECIFIC MENTION OF THE AO IN THE REASON S RECORDED, AS TO THE FAILURE ON THE PART OF THE ASSESSEE. IN THE PRESENT CASE, THERE IS NOT EVEN A WHISPER OF AN ALLEGATION BY THE AO IN THE REASON S RECORDED THAT ESCAPEMENT OF INCOME HAD OCCURRED BY REASON OF FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ITS ASSESSMENT. IT IS VERY PERTINENT THAT THIS WAS NOT THE CASE IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (SUPRA). AT PAGE 448 OF THE REPORT, IT HAS BEEN SPECIFICALLY OBSERVED THAT THE CLAIM OF THE AS SESSEE WAS ACCEPTED AND THE ASSESSEE WAS ALLOWED DEDUCTION BY THE ITO; THAT LATER ON, WHILE EXAMINING THE ASSESSEES ACCOUNTS FOR THE NEXT ASSE SSMENT YEAR, THE ITO, ON THE BASIS OF THE MATERIAL FOUND IN SUCH EXAMINAT ION, FORMED THE OPINION THAT THE SOLE SELLING AGENCY FIRM DID NOT RENDER ANY SERVICE TO THE ASSESSEE AND HENCE, THE INCOME TO THE EXTENT OF RS.1,27,313/- PAID TO THE SAID FIRM BY THE ASSESSEE IN THE SHAPE OF CO MMISSION HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE FAILURE ON THE PART O F THE ASSESSEE TO 17 DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESS ARY FOR THE ASSESSMENT. THEREAFTER, THE SAID MATERIAL HAS BEEN REPRODUCED. AFTER THAT IT HAS BEEN OBSERVED THAT THE AO ACCORDINGLY ISSUED A NOTICE U/S 148 OF THE ACT TO THE ASSESSEE. 18. FROM THE ABOVE, IT IS QUITE EVIDENT THAT EVEN I N ESS ESS KAY ENGINEERING CO. PVT. LTD.,(SUPRA), THE ASSESSEE W AS MADE AWARE BY THE NOTICE U/S 148 OF THE ACT, OF THE ALLEGED FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IT WOULD BE APPROPRIATE, FOR CLARITY, T O REPRODUCE THIS RELEVANT PORTION [PAGE 448 OF THE REPORT, I.E. 137 ITR 446 (P&H)] OF THE JUDGMENT IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (SUPRA): THE CLAIM WAS ACCEPTED AND THE ASSESSEE WAS ALLOW ED DEDUCTION BY THE ITO, VIDE ASSESSMENT ORDER DATED S EPTEMBER 28,1968. LATER ON, WHILE EXAMINING THE ASSESSEES A CCOUNTS FOR THE NEXT SUBSEQUENT YEA, THE ITO ON THE BASIS OF THE FO LLOWING MATERIAL FORMED THE OPINION THAT THE SOLE SELLING AGENCY FI RM DID NOT RENDER ANY SERVICE TO THE ASSESSEE AND HENCE THE INCOME T O THE EXTENT OF RS.1,27,313/- PAID TO THE SAID FIRM BY THE ASSESSEE IN THE SHAPE OF COMMISSION HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT: A) T.A. BILLS OF SH. K.S.KHOSLA, MANAGING PARTNER O F M/S. KAY ENGINEERING SALES CORPORATION WHICH WERE IMPOUN DED U/S 131 WERE FALSE TO THE EXTENT THAT HE WAS SHOWN ON TOUR ON CERTAIN DATES ON WHICH HE WAS ACTUALLY PRESENT I N KAPURTHALA AND ATTENDED THE DIRECTORS AND SHAREHOL DERS MEETINGS OF THE COMPANY. B) THE RECEIPT AND DESPATCH BOOKS OF THE COMPANY W HICH WERE INSPECTED DURING THE COURSE OF PROCEEDINGS FOR 1967-68 SHOWED THAT NO CORRESPONDENCE WAS EXCHANGED BETWEE N THE SO-CALLED SOLE SELLING AGENTS AND THE COMPANY. 18 C) IT WAS FOUND THAT THE EXISTENCE OF SH. S.K. PURI AND YODHA RAM, WHO ARE SAID TO BE THE TWO TRAVELING AGE NTS EMPLOYED BY THE FIRM AND SUBMITTED DAILY PROGRESS R EPORTS, WAS DOUBTFUL AS THE ASSESSEE HAD FAILED TO FURNISH EVEN THE BASIC INFORMATION ABOUT THEM. D) THE ASSESSEES CLAIM THAT M/S. KAY ENGINEERING S ALES CORPORATION HAD ISSUED CIRCULARS, LETTERS, ETC., TO ITS DISTRIBUTORS WAS DOUBTFUL AND WAS NOT SUPPORTED BY ANY EVIDENCE. E) SH. K.S. KHOSLA, WHO WAS WORKING AS DIRECTOR-IN- CHARGE (SALES) IN THE ACCOUNT YEAR RELEVANT TO THE ASSESSMENT YEAR 1965-66, CONTINUED TO WORK IN THIS YEAR AS WELL AND DREW HIS SALARY AND T.A. BILLS. THIS WAS I N ADDITION TO THE PAYMENT MADE BY THE ASSESSEE TO M/S. KAY ENGINEERING SALES CORPORATION ON ACCOUNT OF OVERRI DING COMMISSION. HE ACCORDINGLY ISSUED A NOTICE U/S 148 OF THE I.T. A CT TO THE ASSESSEE WHICH WAS SERVED ON FEBRUARY 2, 1971. 19. NOW, IN KEEPING WITH DULICHAND SINGHANIA (SU PRA), THE SPECIFIC MENTION BY THE AO IN THE REASONS RECORDED FOR REO PENING THE COMPLETED ASSESSMENT, OF THE FAILURE OF THE ASSESSEE TO DIS CLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, IS THE SINE QUA NON FOR ASSUMING JURISDICTION U/S 147 OF THE ACT IN A CASE FALLING UNDER THE PROVISO THERETO AND IN THE ABSENCE THREOF MAKES TH E ACTION TAKEN BY THE AO WHOLLY WITHOUT JURISDICTION ( PARA 13 OF THE JU DGMENT). 20. IN ESS ESS KAY ENGINEERING CO. PVT. LTD. (SUP RA), THE ASSESSEE WAS MADE AWARE, OF HIS ALLEGED FAILURE, BUT CLEARLY , THIS IS NOT SO IN THE PRESENT CASE. THE ISSUE THAT THE REASONS SANS THE M ENTION OF THE SPECIFIC FAILURE OF THE ASSESSEE, ARE NON EST IN THE EYE O F LAW, WAS NOT UP FOR 19 CONSIDERATION BEFORE THE HONBLE HIGH COURT IN ES S ESS KAY ENGINEERING CO. PVT. LTD.(SUPRA) AND SO, ESS ESS KAY ENGINEER ING CO. PVT. LTD., (SUPRA), IS NOT APPLICABLE. 20. IN MAHAVIR SPG. MILLS LTD. (SUPRA), THE HON BLE HIGH COURT OBSERVED THAT THE ENTIRE THRUST OF THE OBSERVATION RECORDED BY THE AO IN THE ASSESSMENT ORDER WAS ON JUSTIFYING HIS SATISFAC TION ABOUT ESCAPEMENT OF INCOME AND THERE WAS NOT EVEN A WHISP ER OF AN ALLEGATION THAT SUCH ESCAPEMENT HAD OCCURRED DUE TO REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ITS ASSESSMENT; THAT IN THE ABSENCE OF THAT FINDIN G, THE AOS ACTION WAS WHOLLY WITHOUT JURISDICTION; AND THAT THE ILLEGALIT Y OF THE NOTICE U/S 148 WAS APPARENT FROM THE REASONS RECORDED FOR INITIATI ON OF PROCEEDINGS U/S 147, AND THE NOTICE WAS LIABLE TO BE QUASHED. 21. ALL THE OTHER CASE LAWS RELIED ON BY THE ASSESS EE ARE TO THE SAME EFFECT. THE DEPARTMENT HAS NOT BEEN ABLE TO CITE AN Y DECISION CONTRARY TO THESE DECISIONS. THEREFORE, THE GRIEVANCE OF THE AS SESSEE IN THIS REGARD IS JUSTIFIED. IT IS ACCEPTED AS SUCH. ACCORDINGLY, THE NOTICE ISSUED U/S 148 OF THE ACT AND ALL PROCEEDINGS PURSUANT THERETO ARE Q UASHED, AS A RESULT NOTHING FURTHER SURVIVES FOR ADJUDICATION. 22. OUR ABOVE OBSERVATIONS ARE , MUTATIS-MUTANDIS, DIRECTLY AND SQUARELY APPLICABLE TO ITA NOS. 11(ASR)/2014 AND ITA NO.705(ASR)/2014. ITA NO. 711(ASR)/2014 IS THE ASSE SSEES APPEAL FOR THE AY 2007-08 IN THE MATTER OF M/S. APEEJAY EDUCATION SOCIETY WHEREAS ITA 20 NO.705(ASR)/2014 IS THE ASSESSEES APPEAL FOR AY 20 06-07 IN THE MATTER OF RAJESHWARI SANGEET ACADEMY. 23. IN THE RESULT, ALL THE APPEALS IN ITA NOS. 710 , 711 & 705(ASR)/2014 ARE ALLOWED. THE RESPECTIVE STAY APPL ICATIONS ARE DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON /02/201 6 (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: /02/2016 /SKR/ COPY OF ORDER FORWARDED TO: 1. THE ASSESSEE: M/S. APEEJAY EDUCATION SOCIETY (II ) M/S. RAJESHWARI SANGEET ACADEMY, JALANDHAR. 2. THE ACIT, CIRCLE-III, AMRITSAR. 3. THE CIT(A), AMRITSAR 4. THE CIT, AMRITSAR. 5. THE SR. DR, ITAT, ASR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.