R.N. Khemka Enterprises (P) Ltd., Delhi V. ITO Ward- 20(3), New Delhi

ITA 7244/DEL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6892 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 02-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAR KHAN
• Assessee Lawyers: S K GUPTA
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Principle of natural justice; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction; TDS; Set aside
• Section: 143(3); 142(1); 143(1); 143(2); 43; 48; 194A; 73; 72; 13; 22; 153C; 147; 131; 68; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, F: NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.7244/DEL/2019 [ASSESSMENT YEAR: 2011-12] M/S R N KHEMKA ENTERPRISES (P) LTD. SHOP NO.9, PLOT NO.51, BLOCK-C, MAHENDRU ENCLAVE, NEAR HANS CINEMA, DELHI-110033 INCOME TAX OFFICER, WARD-20(3), NEW DELHI PAN-AADCR1772L ASSESSEE REVENUE ASSESSEE BY SH. S. K. GUPTA, CA REVENUE BY SH. FARHAR KHAN, SR. DR DATE OF HEARING 06.07.2021 DATE OF PRONOUNCEMENT 12.08.2021 ORDER PER R.K. PANDA, AM, THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 07.08.2019 OF THE LEARNED CIT(A)-7, NEW DELHI, RELATING TO ASSESSMENT YEAR 2011-12. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF FINANCE AND FILED ITS RE TURN OF 2 ITA NO.7244/DEL/2019 INCOME ON 12.09.2011, DECLARING TOTAL INCOME OF RS. 30,460/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT. SUB SEQUENTLY, INFORMATION WAS RECEIVED REGARDING THE SEARCH & SEI ZURE OPERATION IN THE CASE OF ENTRY PROVIDER MR. ANAND K UMAR JAIN AND MR. NARESH KUMAR JAIN (THE JAIN BROTHERS) ACCOR DING TO WHICH THE ASSESSEE IS A BENEFICIARY OF RS.92,00,110 /-. REASONS WERE RECORDED FOR REOPENING U/S 147 OF THE ACT AND A NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 2 6.03.2018 AFTER OBTAINING PRIOR APPROVAL OF THE PR. CIT-7, NE W DELHI. THE NOTICE WAS DULY SERVED ON THE ASSESSEE. IN RESPONS E TO THE SAME, THE ASSESSEE FILED A LETTER STATING THAT THE RETURN ALREADY FILED U/S 139 OF THE ACT MAY BE TREATED AS RETURN F ILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT. 2.1. SUBSEQUENTLY, THE AO ISSUED ANOTHER LETTER TO THE ASSESSEE REQUESTING HIM TO FILE THE RETURN IN RESPO NSE TO NOTICE U/S 148 OF THE ACT. ULTIMATELY, THE ASSESSEE FILED HIS RETURN OF INCOME ON 13.10.2018 DECLARING INCOME OF RS.30,460/ -. THEREAFTER, THE AO ISSUED NOTICE U/S 143(2) AND 142 (1) OF THE ACT AND THE COPIES OF THE REASONS RECORDED WERE ALS O HANDED OVER TO THE ASSESSEE. THE ASSESSEE FILED OBJECTIONS IN RESPONSE TO NOTICE U/S 142(1) OF THE ACT VIDE LETTER DATED 0 5.11.2018 AND 3 ITA NO.7244/DEL/2019 THE AO VICE ORDER DATED 09.11.2011 DISPOSED OFF SUC H OBJECTION BY PASSING A SPEAKING ORDER. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E AO NOTED THAT THE ASSESSEE HAS RECEIVED ACCOMMODATI ON ENTRIES TO THE TUNE OF RS.92,00,110/- FROM THE COMP ANIES CONTROLLED BY MR. ANAND KUMAR JAIN AND MR. NARESH K UMAR JAIN WHICH ARE AS UNDER:- 1 M/S VKS PROPERTIES PVT. LTD. RS.20,00,000/- 2 M/S SHIVIJ GARMENTS PVT. LTD. RS.5,00,000/- 3 M.S DANODIA IMPEX PVT. LTD. RS.20,00,000/- 4 M/S ZEN TRADEX PVT. LTD. RS.47,00,000/- 4. THE ASSESSEE FILED CONFIRMATIONS OF UNSECURED L OAN FROM THE ABOVE PARTIES. FROM THE VARIOUS DETAILS F URNISHED BY THE ASSESSEE, THE AO NOTED THAT ALL THESE COMPANIES ARE OWNED AND CONTROLLED BY MR. ANAND KUMAR JAIN AND MR. NARE SH KUMAR JAIN. THEREFORE, IN ORDER TO ASCERTAIN THE G ENUINENESS OF THE TRANSACTIONS, SUMMONS U/S 131 OF THE ACT WER E ISSUED TO THESE PARTIES ON 14.12.2018, BOTH AT THE ADDRESSES APPEARING IN ROC AS WELL AS MAIL-ID APPEARING AT THE ROC WEBS ITE FOR PERSONAL DEPOSITION OF THE PRINCIPAL OFFICER OF THE SE COMPANIES. 4 ITA NO.7244/DEL/2019 HOWEVER, NO-ONE APPEARED ON THE APPOINTED DATE AND ON BEING CONFRONTED BY THE AO, THE ASSESSEE ALSO EXPRESSED I TS INABILITY TO PRODUCE THESE PARTIES ON THE GROUND THAT THEY AR E NOT IN TOUCH WITH THE DIRECTORS OF THESE COMPANIES AT PRES ENT SINCE LOANS TAKEN FROM THESE COMPANIES WERE REFUNDED IN T HE SUBSEQUENT YEAR. IT WAS ALSO EXPLAINED THAT INTERE ST HAS BEEN PAID ON SUCH LOANS AND TDS HAS ALSO BEEN DEDUCTED F ROM SUCH INTEREST. HOWEVER, THE AO REJECTING THE VARIOUS EXP LANATION GIVEN BY THE ASSESSEE MADE ADDITION OF RS.92,00,100 /- INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. 5. THE AO FURTHER NOTED THAT AS PER THE OTHER INFORMATION RECEIVED FROM THE INVESTIGATION WING, T HE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES OF RS.50 LAKHS FROM M/S. ASHISH CAPITAL SERVICES (P) LTD. ON 15.05.2010. THI S COMPANY IS CONTROLLED BY SHRI SURENDER KUMR JAIN & VIRENDRA KUMAR JAIN WHO ARE INVOLVED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES. HE, THEREFORE, ASKED THE ASS ESSEE TO SUBSTANTIATE THE AMOUNT OF RS.50 LAKHS BY PROVING T HE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR AND THE GENUIN ENESS OF THE TRANSACTIONS. IT WAS EXPLAINED BY THE ASSESSEE THAT THEY HAVE RECEIVED SHARE CAPITAL OF RS.50 LAKHS FROM AASHEESH CAPITAL 5 ITA NO.7244/DEL/2019 SERVICES PVT. LTD. THROUGH BANKING CHANNEL. THE ASS ESSEE FILED THE COPY OF AUDITED BALANCE SHEET, BANK STATEMENT, CONFIRMATION WITH ITR AS PROOF OF GENUINENESS, ETC. IT WAS EXPLAINED THAT NO ACCOMMODATION ENTRIES FROM ANYONE WAS RECEIVED BY THE ASSESSEE AND THE TRANSACTION WAS GE NUINE. 5.1. IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTIONS, THE AO ISSUED SUMMONS U/S 131 OF THE ACT TO M/S AASHEESH CAPITAL SERVICES PVT. LTD. ON 14.12.20 18 FOR PERSONAL DEPOSITION OF THE PRINCIPAL OFFICER. HOWE VER, NOBODY APPEARED ON THE APPOINTED DATE NOR ANY REQUEST FOR ADJOURNMENT WAS RECEIVED. ON BEING ASKED BY THE AO TO PRODUCE THE PARTIES THE ASSESSEE EXPRESSED ITS INAB ILITY TO PRODUCE THEM. IN VIEW OF THE ABOVE, THE AO, INVOKI NG THE PROVISIONS OF SECTION 68 OF THE ACT AND RELYING ON VARIOUS DECISIONS INCLUDING THE DECISION OF THE TRIBUNAL IN THE CASE OF SH. SURENDER KUMAR JAIN AND SH. VIRENDRA JAIN WHERE IN THEY ARE TREATED AS ENTRY OPERATORS MADE ADDITION OF RS. 50 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE U/S 68 OF THE ACT. 6. THE AO HAS ALSO RECEIVED INFORMATION FROM ADIT(INV.), UNIT-5(4), NEW DELHI, DATED 23.03.2018, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES OF RS.33 LAKHS 6 ITA NO.7244/DEL/2019 FROM M/S RKG FINVEST PVT. LTD.. HE, THEREFORE, ASK ED THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SAID PARTIES AND THE GENUINENESS OF THE TRANSACTIONS. I T WAS EXPLAINED THAT THE ASSESSEE COMPANY HAD ALREADY REP AID THE ABOVE LOAN AMOUNT IN THE SUBSEQUENT YEAR AND ALSO D EDUCTED TDS ON INTEREST PAID ON THIS LOAN. COPY OF CONFIRMA TION WITH ITR AND AUDITED BALANCE SHEET OF THE SAID PARTY WAS FILED BEFORE THE AO. 6.1. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. SINCE, THE PRINC IPAL OFFICER OF M/S RKG FINVEST LTD. DID NOT APPEAR BEFORE THE AO I N RESPONSE TO SUMMONS ISSUED BY HIM U/S 131 OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE ALSO FAILED TO PRODUCE THE DI RECTOR OF M/S RKG FINVEST LTD. FOR RECORDING OF HIS STATEMENT , THEREFORE, THE AO, INVOKING THE PROVISIONS OF SECTION 68 OF TH E ACT MADE ADDITION OF RS.33 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. THUS, THE AO DETERMINED THE TOTAL INCOME OF THE ASS ESSEE AT RS.1,75,30,470/- BY MAKING ADDITION OF RS.1,75,00,1 10/- TO THE RETURNED INCOME OF RS.30,460/-. 7. BEFORE THE LEARNED CIT(A), THE ASSESSEE APART F ROM CHALLENGING THE ADDITION ON MERIT CHALLENGED THE VA LIDITY OF 7 ITA NO.7244/DEL/2019 REASSESSMENT PROCEEDINGS. IT WAS ARGUED THAT THE PR OVISIONS OF SECTION 153C ARE APPLICABLE TO THE FACTS OF THE PRE SENT CASE AND NOT 147. IT WAS ALSO ARGUED THAT THE REASSESSMENT PROCEEDINGS WERE MADE WITHOUT APPLYING INDEPENDENT MIND BY THE AO AND THE REOPENING WAS MERELY BASED ON THE REPORT OF THE INVESTIGATION WING. IT WAS ALSO ARGUED THAT THE REA SONS RECORDED DO NOT CONTAIN THE NAME OF THE SO CALLED E NTRY PROVIDER, THE IMPORTANT DETAILS IN FORM OF INSTRUME NT NUMBER THROUGH WHICH CHEQUES/RTGS WERE ACCEPTED BY THE ASS ESSEE COMPANY, NAME OF THE BANK FROM WHICH THE ACCOMMODAT ION ENTRIES WERE PROVIDED, THE NAME OF THE BANK IN WHIC H THE ACCOMMODATION ENTRIES WERE CREDITED AND THE DATE OF TRANSACTION ETC. THE ASSESSEE ALSO CHALLENGED THE V ALIDITY OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE AO ASSUMED JURISDICTION BY ISSUING NOTICE U/S 143(2) OF THE AC T ON 16.10.2018 AND SUPPLIED THE REASONS AFTER THAT WHIC H MEANS THE AO ASSUMED JURISDICTION BEFORE ALLOWING THE ASS ESSEE TO FILE OBJECTIONS FOR ASSUMPTION OF JURISDICTION. RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF MASTECH TECHNOLOGIES PVT. LTD. VS DCIT VIDE WRIT PETITION NO.2858/2016, ORDER DATED 13.07.2017 WHEREIN, IT WA S HELD 8 ITA NO.7244/DEL/2019 THAT THE ISSUANCE OF NOTICE U/S 142(1)/143(2) OF TH E ACT BEFORE SUPPLYING THE REASONS AND CONSIDERING THE OBJECTION AND PASSING REASONED ORDER THEREON DOES NOT MEET REQUIR EMENT OF LAW, THEREFORE, THE REASSESSMENT PROCEEDINGS SHOULD BE HELD AS INVALID. IT WAS ARGUED THAT THE INFORMATION/REPORT FROM THE INVESTING WING IS NOT A GOSPEL TRUTH AS HELD BY THE AO WITHOUT APPLYING HIS INDEPENDENT MIND. FURTHER, THE APPROV ING AUTHORITIES HAVE APPROVED THE REASSESSMENT PROCEEDI NGS IN A MECHANICAL MANNER WITHOUT DUE APPLICATION OF MIND. RELYING ON VARIOUS DECISION, IT WAS SUBMITTED THAT SUCH APP ROVAL GIVEN BY THE HIGHER AUTHORITY DOES NOT DEMONSTRATE THE DU E APPLICATION OF MIND AND THEREFORE, SUCH REASSESSMEN T PROCEEDINGS ARE INVALID. 8. SO FAR AS THE, MERITS OF THE CASE IS CONCERNED, IT WAS SUBMITTED THAT THE ASSESSEE HAS FILED THE REQUISITE DETAILS BEFORE THE AO BY FILING CONFIRMATIONS, COPY OF ITR , BANK STATEMENT OF RELEVANT PERIOD, AUDITED FINANCIAL STA TEMENT, SUBSEQUENT LEDGER ACCOUNT OF REPAYMENT OF LOAN ALON G WITH BANK INTEREST, ETC. IT WAS ARGUED THAT WHEN THE AS SESSEE HAS REPAID THE UNSECURED LOAN OBTAINED FROM THESE COMPA NIES IN THE SUBSEQUENT ASSESSMENT YEARS WHICH IS PRIOR TO T HE NOTICE 9 ITA NO.7244/DEL/2019 ISSUED U/S 148 OF THE ACT AND INTEREST HAS BEEN PAI D ON SUCH UNSECURED LOAN AND TDS HAS BEEN DEDUCTED, THEREFORE , NON- PRODUCTION OF THE DIRECTORS OF THOSE COMPANIES BEFO RE THE AO FOR RECORDING OF THEIR STATEMENT SHOULD NOT BE HELD AGAINST THE ASSESSEE FOR MAKING THE ADDITION. RELYING ON VARIOU S DECISIONS, IT WAS ARGUED THAT THE ADDITION MADE BY THE AO SHOU LD BE DELETED. 9. HOWEVER, THE LEARNED CIT(A) WAS NOT SATISFIED W ITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD T HE VALIDITY OF REASSESSMENT PROCEEDINGS AS WELL AS THE ADDITION ON MERIT. 9.1. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT( A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISIN G THE FOLLOWING GROUNDS:- 1. THE IMPUGNED ASSESSMENT IS INVALID AND WITHOUT JURISDICTION AS THE SAID ASSESSMENT IS COMPLETED WI THOUT COMPLYING WITH LEGAL REQUIREMENTS OF THE PROVISIONS OF SECTION 147/148 OF THE INCOME TAX ACT THEREFORE SUC H ASSESSMENT IS VOID AB INITIO AND LIABLE TO BE QUASH ED. 2. THE LD. CIT(A) ON THE FACTS AND CIRCUMSTANCES OF T HE CASE HAS ERRED IN UPHOLDING THE VALIDITY OF IMPUGNED ASSESSMENT ORDER PASSED U/S 143 (3)/147 OF THE ACT ON THE GROUND THAT THE AO WAS NOT ENTITLED TO TAKE COG NIZANCE OF THE MATERIAL SEIZED FROM THE THIRD PARTY BY INVO KING PROVISIONS OF SEC 147/148 OF THE ACT IGNORING THE S PECIFIC PROVISION U/S 153C OF THE ACT DEALING WITH SUCH MAT ERIAL. 10 ITA NO.7244/DEL/2019 3. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND CIRCUMSTAN CES OF THE CASE IN UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE IT ACT IGNORING THE CONTEN TION OF APPELLANT THAT THE PROCEEDINGS HAVE BEEN INITIATED BY THE AO WITHOUT APPLICATION OF INDEPENDENT MIND ON THE MATERIAL, IF ANY, PROVIDED BY THE INV. WING OF THE DEPARTMENT. IN VIEW OF THE ABOVE DEFECTS IN THE COMPLIANCES THE RESULTANT REASSESSMENT PROCEEDINGS ARE REQUIRED TO BE SET ASIDE. 3.1 THE VALIDITY OF REASSESSMENT PROCEEDINGS HAVE B EEN CONFIRMED BY LD CIT(A) ON BASIS OF A FINDING OF FAC T GIVEN BY THE LD CIT(A) THAT THE INFORMATION FROM THE INVE STIGATION WING WAS SPECIFIC WHICH CONTAINS NAMES OF COMPANIES , CHEQUES NUMBER AND DATE OF ACCOMMODATION ENTRIES. T HE ABOVE FINDING IS FACTUALLY INCORRECT LOOKING INTO T HE REASONS RECORDED AND ON THAT GROUND THE REASSESSMENT PROCEEDINGS AND THE IMPUGNED ASSESSMENT ORDER BOTH NEED BE QUASHED AS THE REASONS BEING VAGUE, INCOHER ENT AND INDICATIVE OF LACK OF APPLICATION OF INDEPENDEN T MIND BY THE AO. 4. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND IN FACTS OF THE CASE IN UPHOLDING THE IMPUGNED REASSESSMENT PROCEED INGS IGNORING THE FACT THAT THE SANCTION U/S 151 OF IT A CT AS PROVIDED WITH THE COPY OF THE REASON RECORDED SHOWS MECHANICAL SATISFACTION BY THE PR CIT, DELHI-7, NEW DELHI AND THE LD. CIT(A) HAVE HELD THAT SUCH MECHANICAL SATISFACTION ARE PROCEDURAL INFIRMITY WHICH DOES NO T INVALIDATE THE REASSESSMENT PROCEEDINGS. 5. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND CIRCUMSTA NCES OF THE CASES IN UPHOLDING THE ADDITIONS OF RS. 1,25,00 ,110/- AND RS.50,00,000/- U/S 68 OF THE IT ACT HOLDING THE UNSECURED LOAN AND SHARE CAPITAL RESPECTIVELY AS UNEXPLAINED CASH CREDIT IGNORING THE FACT THAT THE ASSESSEE HAS DISCHARGED ITS INITIAL ONUS U/S 68 OF THE IT AC T EXPLAINING NATURE AND SOURCE OF THE CREDITS BY FILI NG REQUISITE DOCUMENTS PROVING IDENTITY AND CREDITWORT HINESS OF THE LENDERS AND ALSO TO ESTABLISH GENUINENESS OF THE TRANSACTION DURING ASSESSMENT PROCEEDINGS. 6. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND CIRCUMSTAN CES OF THE CASES IN UPHOLDING ACTION OF THE AO, IN MAKING ADDITIONS U/S 68 OF THE IT ACT OF RS.1,25,00,110/- AND RS.50,00,000/- ARE ERRONEOUS AS THE EVIDENCES FILED BY THE APPELLANT IN SUPPORT OF ABOVE CASH CREDITS HAVE BEE N REJECTED BY THE AO WITHOUT CONDUCTING ANY ENQUIRY T HEREON 11 ITA NO.7244/DEL/2019 IN DISCHARGE OF ONUS SHIFTING ON THE REVENUE AFTER THE INITIAL ONUS DISCHARGED BY THE APPELLANT. 7. THE LD. CIT(A) HAS ERRED BOTH IN LAW AND CIRCUMSTAN CES OF THE CASES IN RELIANCE ON THE MATERIAL TO TAKE VIEW ADVERSE TO THE APPELLANT WITHOUT CONFRONTING THE SAME AND THEREFORE ACTION OF THE ASSESSING OFFICER IS IN CON TRAVENTION OF THE PRINCIPALS OF NATURAL JUSTICE. 8. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, MODIFY/A MEND THE ABOVE GROUNDS OF APPEAL WITH THE PERMISSION OF THE HONBLE APPELLATE AUTHORITY. 10. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE DID NOT PRESS THE GROUND CHALLENGING THE A PPLICABILITY OF PROVISIONS OF SECTION 153C OF THE ACT AS PER GRO UND OF APPEAL NO.2, FOR WHICH THE LEARNED DR HAS NO OBJECTION. T HEREFORE, THE GROUND OF APPEAL NO. 2 IS DISMISSED AS NOT PRESSED. 11. GROUND OF APPEAL NO.8 BEING GENERAL IN NATURE AND IS DISMISSED. 12. GROUND OF APPEAL NOS.1, 3, 3.1 AND 4 RELATE TO THE VALIDITY OF REASSESSMENT PROCEEDINGS. 13. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRING TO THE COPY OF THE REASONS RECORDED WHICH IS PLACED AT PAG E 47 TO 59 OF THE PAPER BOOK (PDF PAGE 48 TO 60) SUBMITTED THAT T HE AO HAS REPRODUCED THEREIN THE INFORMATION OBTAINED FROM TH E INVESTIGATION WING AND HAS STRAIGHT AWAY REACHED TH E STAGE OF 12 ITA NO.7244/DEL/2019 FORMATION OF BELIEF OF ESCAPEMENT OF INCOME. HE SUB MITTED THAT IN THE INFORMATION, THERE IS A GENERAL MENTION OF V ARIOUS UN- SPECIFIED SEIZED MATERIAL SUCH AS SEIZED PAPERS/DIG ITAL EVIDENCES AND ALSO CERTAIN STATEMENTS OF INDIVIDUAL S CONNECTED TO JAIN BROTHERS. HE SUBMITTED THAT IN ABSENCE OF I DENTITY OF SPECIFIC SEIZED MATERIAL BY THE AO, THE NON-APPLICA TION OF MIND IS EVIDENT SINCE NO PERSON OF ORDINARY INTELLIGENCE COULD BE IN A POSITION TO REACH TO BELIEF OF ESCAPEMENT OF INCOME U/S 147 OF THE ACT. HE SUBMITTED THAT MENTIONING OF STATEMEN TS OF UNNAMED INDIVIDUALS SHOWS NON-APPLICATION OF MIND Q UA THIS EVIDENCE AS FIRSTLY THEIR NAMES ARE NOT STATED AND CONTENTS OF THEIR STATEMENTS ARE NOT SPECIFICALLY DEALT AND IT IS NOT CLEAR WHETHER THE NAME OF THE ASSESSEE AS BENEFICIARY OF THE ACCOMMODATION ENTRIES WAS MENTIONED BY ANY OF THE INDIVIDUALS EXAMINED BY THE INVESTIGATION WING. RE FERRING TO THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUN AL IN THE CASE OF M/S INTEGRATED GLOBAL SOLUTIONS PVT. LTD. I N ITA NO.4993/DEL/2012, DATED 31.12.2019, HE SUBMITTED TH AT THE TRIBUNAL RELYING ON THE DECISION IN THE CASE OF PR. CIT VS MEENAKSHI OVERSEAS PVT. LTD. 395 ITR 677(DEL.), HAS HELD THAT REPRODUCTION OF INFORMATION WITHOUT SHOWING HOW THE MATERIAL 13 ITA NO.7244/DEL/2019 REFERRED TO THEREIN DOES NOT SHOW APPLICATION OF MI ND BY THE AO IN ABSENCE OF ANY SPECIFIC DISCUSSION ON THE MATERI AL ON THE BASIS OF WHICH INDEPENDENT PRIMA FACIE BELIEF IS RE ACHED THAT INCOME HAS ESCAPED ASSESSMENT. 14. REFERRING THE DECISION OF THE HONBLE DELHI HI GH COURT IN THE CASE OF SABH INFRASTRUCTURE VS ACIT RE PORTED IN 398 ITR 198 (DEL.) , HE SUBMITTED THAT IT IS SETTLE D POSITION OF LAW THAT THE REASON FOR REOPENING MUST BE COMPLETE AND SELF EXPLANATORY DEMONSTRATING THE APPLICATION OF MIND B Y THE AO OF THE RELEVANT MATERIAL IN HIS POSSESSION. HE ALSO R ELIED ON THE FOLLOWING DECISIONS:- I. PR. CIT VS RMG POLYVINYL (I) LTD. (2017) 396 ITR 5( DEL.) II. PR. CIT VS G & G PHARMA INDIA LTD. 384 ITR 147 (DEL .) III. CIT VS INDEPENDENT MEDIA PVT. LTD. IN ITA NO.108/2015(DEL.) IV. SIGNATURE HOTELS P. LTD. VS ITO [2011] 338 ITR 0051 (DEL.) V. CIT VS SFIL STOCK BROKING LTD. 325 ITR 285 (DEL.) VI. SARTHAK SECURITIES CO. P. LTD. VS ITO 329 ITR 110 (DEL.) VII. CIT VS SUPRME POLYPROPOLENE (P) LTD. ITA NO.266/2011(DEL.) VIII. CIT VS MULTIPLEX TRADING & INDUSTRIAL CO. LTD. 378 ITR 351 (DEL.) IX. HINDUSTAN LEVER LTD. [2004] 137 TAXMAN 479 (BOM.) 14 ITA NO.7244/DEL/2019 X. CIT VS GREENWORLD CORPORATION 314 ITR 81(SC) 15. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS NE XT PLANK OF ARGUMENT SUBMITTED THAT NON-IDENTIFICATION OF NATURE OF ALLEGED ACCOMMODATION ENTRIES, MODE OF PAYMENTS AND THE PARTIES ACTED AS ENTRY PROVIDER ENTITIES MAKE SUCH RECORDING OF REASONS INSUFFICIENT FOR INITIATING THE PROCEEDINGS U/S 147 OF THE ACT. 16. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF M/S. SUPERIOR BUILDWELL PRIVAT E LIMITED VS PR. CIT VIDE ITA NO.3301/DEL/2017, HE SUBMITTED THA T INITIATION OF REASSESSMENT PROCEEDINGS BY RECORDING INCORRECT FACTS AND NOT MENTIONING THE NAMES OF THE ENTITIES IN THE REASONS RECORDED ARE NOT IN ACCORDANCE WITH LAW FOR WHICH THE REASSESSMENT PROCEEDINGS BE QUASHED. HE ALSO RELIE D ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF MS/ SHIV SAI INFRASTRUCTURE P LTD. VS DCIT VIDE WRIT PE TITION NO.2158/2016, ORDER DATED 23.07.2018. 16.1. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS ANOTHER PLANK OF ARGUMENT SUBMITTED THAT THE REASSESSMENT PROCEEDINGS IN THE INSTANT CASE IS BASED ON BORROWE D SATISFACTION BASED ON THE CONCLUSION DRAWN BY INVES TIGATION 15 ITA NO.7244/DEL/2019 WING, ON INCOMPLETE/UNVERIFIED INFORMATION AND THE PURPOSE OF THE EXERCISE UNDERTAKEN BY THE AO IS TO VERIFY FURT HER FACTS AND TAX POSSIBLE ESCAPEMENT OF INCOME. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF SH. RAJ IV AGARWAL VS ACIT 395 ITR 255(DEL.), HE SUBMITTED THAT THE HONB LE DELHI HIGH COURT HELD THAT EVEN IN CASES WHERE THE AO COM ES ACROSS CERTAIN UNVERIFIED INFORMATION, IT IS NECESSARY FOR HIM TO TAKE FURTHER STEPS, MAKE ENQUIRIES AND GARNER FURTHER MA TERIAL AND IF SUCH MATERIAL INDICATES THAT INCOME OF AN ASSESS EE HAS ESCAPED ASSESSMENT FORM A BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. IT HAS BEEN HELD THAT WHER E THERE IS NON-APPLICATION OF MIND BY THE AO, IT CANNOT BE SAI D TO HAVE REASON TO BELIEVE SO AS TO JUSTIFY REOPENING OF THE ASSESSMENT. REFERRING TO THE DECISION OF THE HONBLE SUPREME CO URT IN THE CASE OF INDIAN OIL CORPORATION VS ITO REPORTED IN 1 59 ITR 956 (SC) AND BHOR INDUSTRIES LTD. VS ACIT REPORTED IN 2 67 ITR 161 (BOM.) AND VARIOUS OTHER DECISIONS, HE SUBMITTED T HAT REOPENING OF THE ASSESSMENT FOR VERIFICATION OF FAC TS AND POSSIBLE ESCAPEMENT ON THE BASIS OF INCOMPLETE MATE RIAL IS NOT IN ACCORDANCE WITH LAW. 16 ITA NO.7244/DEL/2019 17. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IN RESPONSE TO NOTICE U/S 148 OF THE A CT DATED 12.04.2018 HAD STATED THAT THE RETURN OF INCOME FIL ED U/S 139 OF THE ACT BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO NOTICE U/S 148 OF THE ACT AND ALSO REQUESTED FOR SU PPLY OF REASON. THE AO AFTER MORE THAN 4 MONTHS VIDE LETTE R DATED 07.08.2018, COPY OF WHICH IS PLACED AT PAGE 73 (PDF PAGE 77) OF THE PAPER BOOK DIRECTED THE ASSESSEE TO E-FILE THE RETURN OF INCOME WHICH WAS DONE ON 13.10.2018 COPY OF WHICH I S PLACED AT PAGE 1A (PDF PB 2) OF THE PAPER BOOK. REFERRIN G TO PAGE 74 TO 76 OF THE PAPER BOOK, HE SUBMITTED THAT THE AO I SSUED NOTICE DATED 16.10.2018 U/S 143(2)/142(1) AND SUPPLIED RE ASONS RECORDED ON 22.10.2018 AGAINST WHICH THE ASSESSEE S UBMITTED OBJECTION TO ASSUMPTION OF JURISDICTION ON 05.11.20 18,. THE SAME WERE DISPOSED OF BY THE AO ON 09.11.2018 AS PE R PAGES 65 TO 72 OF THE PAPER BOOK. HE ACCORDINGLY SUBMITTE D THAT THE AO HAS ASSUMED JURISDICTION TO MAKE ASSESSMENT BY I SSUING NOTICE U/S 143(2) OF THE ACT ON 16.10.2018 BEFORE S UPPLYING REASON WHICH MEANS THAT THE AO ASSUMED JURISDICTION BEFORE ALLOWING ASSESSEE TO FILE OBJECTIONS AGAINST ASSUMP TION OF JURISDICTION. REFERRING TO THE DECISION OF THE HON BLE DELHI HIGH 17 ITA NO.7244/DEL/2019 COURT IN THE CASE OF MASTECH TECHNOLOGIES LTD. VS D CIT IN WRIT PETITION NO.2858/2016, ORDER DATED 13.07.2017, HE S UBMITTED THAT THE HONBLE DELHI HIGH COURT HAS HELD THAT ISS UANCE OF NOTICE U/S 142(1)/143(2) BEFORE SUPPLYING THE REASO NS AND CONSIDERING PETITIONERS OBJECTION AND PASSING REAS ONED ORDER THEREON DOES NOT MEET REQUIREMENT OF LAW. SUCH LEGA L INFIRMITY LEADS TO INEVITABLE INVALIDATION OF ALL THE PROCEED INGS THAT TOOK PLACE PURSUANT TO NOTICE U/S 148 OF THE ACT. 18. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO CHAL LENGED THE VALIDITY OF REASSESSMENT PROCEEDINGS ON ACCOUNT OF ERROR IN QUANTIFICATION OF INCOME ESCAPING ASSESSMENT AND MECHANICALLY APPROVED BY THE PR. CIT BY SIMPLY STAT ING YES, IT IS A FIT CASE OF ISSUE OF NOTICE U/S 148 R.W.S. 147 OF THE ACT, 1961. REFERRING TO VARIOUS DECISIONS, HE SUBMITTE D THAT SUCH ERROR IN QUANTIFICATION OF INCOME ESCAPING ASSESSME NT AND MECHANICAL APPROVAL BY THE PR. CIT MAKES SUCH REASS ESSMENT A NULLITY. 19. SO FAR AS, THE MERITS OF THE CASE IS CONCERNED , THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE LOAN CREDITORS/IN VESTOR AND THE GENUINENESS OF THE TRANSACTIONS, THE ASSESSEE HAS F ILED 18 ITA NO.7244/DEL/2019 CONFIRMATIONS FROM THE PARTIES, COPIES OF THEIR INC OME TAX RETURN, COPIES OF THEIR BANK STATEMENT FOR THE RELE VANT PERIOD, COPIES OF THE AUDITED FINANCIAL STATEMENT OF CURREN T YEAR, LEDGER ACCOUNT SHOWING REPAYMENT OF LOAN ALONG WITH BANK I NTEREST, ETC. BEFORE THE ASSESSING OFFICER. FURTHER, THE AS SESSEE HAS PAID INTEREST ON SUCH LOANS OBTAINED AND DEDUCTED T DS FROM SUCH INTEREST AND HAS REPAID SUCH LOANS IN THE SUBS EQUENT YEAR AND THEREFORE MERELY BECAUSE THERE IS NON-COMPLIANC E TO SUMMONS AND NON-PRODUCTION OF DIRECTORS, THE AO SHO ULD NOT HAVE MADE THE ADDITION U/S 68 OF THE ACT. THE LEAR NED CIT(A) WITHOUT CONSIDERING THE ABOVE HAS UPHELD THE ADDITI ON SO MADE WHICH IS NOT CORRECT. 20. SO FAR AS THE OBJECTIONS OF THE AO THAT THERE ARE CREDITS OF THE IDENTICAL AMOUNT IN THE BANK ACCOUNT S OF LENDERS BEFORE THE TRANSFER TO THE ASSESSEE COMPANY IS CONC ERNED, HE SUBMITTED THAT ALL THE COMPANIES IN QUESTION APART FROM THEIR PRIMARY BUSINESS WERE ALSO INVOLVED IN ACTIVITIES O F FINANCING. IN THE BUSINESS OF FINANCING, SUCH COMPANY HAS TO A RRANGE THE FUNDS AND ONLY THEN LEND THE MONEY/MAKE INVESTMENT AND IN THAT PROCESS, CREDIT OF IDENTICAL AMOUNT IN THE BAN K ACCOUNT OF SUCH COMPANY BEFORE LENDING/INVESTMENT IS SOMETHING WHICH IS 19 ITA NO.7244/DEL/2019 A COMMON FEATURE. HE SUBMITTED THAT A PERUSAL OF THE BANK STATEMENTS OF THE ABOVE COMPANIES WOULD SHOW THAT T HERE IS NO CASH DEPOSIT IN THE BANK ACCOUNT AND THE ASSESSEE H AS PAID INTEREST TO THE ABOVE LENDERS ON THE AMOUNT BORROWE D AND ALSO HAS DEDUCTED TDS U/S 194A OF THE ACT. RELYING ON VA RIOUS DECISIONS AS PER CASE LAW COMPILATION, HE SUBMITTED THAT ACTION OF THE AO AND THE LEARNED CIT(A) ARE NOT IN ACCORDA NCE WITH LAW. 21. SO FAR AS, THE ADDITION ON ACCOUNT OF UNEXPLAI NED SHARE CAPITAL IS CONCERNED, HE SUBMITTED THAT THE A SSESSEE HAS FILED THE CONFIRMATIONS, SHARE APPLICATION FORMS, B ANK STATEMENTS FOR THE RELEVANT PERIOD, COPIES OF ITR F ILED AND COPIES OF AUDITED FINANCIAL STATEMENTS OF THE SHARE APPLICANTS, ETC. THE ASSESSEE HAS DISCHARGED THE ONUS CAST UPON IT. NOTHING HAS BEEN BROUGHT ON RECORD BY THE AO TO SUB STANTIATE HIS ALLEGATION THAT THESE CREDIT ENTRIES BY WAY OF SHARE CAPITAL ARE ACCOMMODATION ENTRIES. RELYING ON VARIOUS DECI SIONS, HE SUBMITTED THAT MERELY BECAUSE THE DIRECTORS WERE NO T PRODUCED BEFORE THE AO, THE ADDITION CANNOT BE MADE U/S 68 O F THE ACT. HE SUBMITTED THAT THE ASSESSEE HAS PROVED ALL THE T HREE IMPORTANT INGREDIENTS OF SECTION 68 OF THE ACT BY P ROVING THE 20 ITA NO.7244/DEL/2019 IDENTITY AND CREDITWORTHINESS OF THE INVESTOR/SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTIONS. HE FURTHE R SUBMITTED THAT DESPITE REQUEST MADE TO THE AO, THE ASSESSEE W AS NOT PROVIDED THE OPPORTUNITY FOR CROSS EXAMINE OF THE P ERSONS WHOSE STATEMENTS WERE THE BASIS FOR REOPENING OF TH E ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE, ACCORDINGLY SUBMITTED THAT BOTH ON MERIT AS WELL AS ON THE VALI DITY OF REASSESSMENT PROCEEDINGS, THE ASSESSEE HAS A STRONG CASE AND THEREFORE, THE ORDER OF THE LEARNED CIT(A) BE SET-A SIDE AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 22. THE LEARNED DR ON THE OTHER HAND, HEAVILY RELI ED ON THE ORDER OF THE AO AND THE LEARNED CIT(A). HE SUB MITTED THAT THE AO HAS GOT SPECIFIC, TANGIBLE AND ACTIONABLE IN FORMATION WHILE RECORDING THE REASONS FOR REOPENING OF THE AS SESSMENT. AT THE TIME OF REOPENING OF ASSESSMENT, THE AO IS N OT REQUIRED TO CONCLUSIVELY PROVE THAT INCOME HAS ESCAPED ASSES SMENT. REFERRING TO THE ORDER OF THE LEARNED CIT(A), HE SU BMITTED THAT THE LEARNED CIT(A) HAS GIVEN VALID REASONS FOR UPHO LDING THE REASSESSMENT PROCEEDINGS. SO FAR AS THE ARGUMENT O F THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE NOTICE U/ S 143(2) WAS ISSUED PRIOR TO SUPPLY OF REASONS RECORDED AND DISP OSAL OF THE 21 ITA NO.7244/DEL/2019 OBJECTION IS CONCERNED, HE SUBMITTED THAT NO SUCH G ROUND WAS TAKEN BEFORE THE AO OR THE LEARNED CIT(A). 23. SO FAR AS THE MERIT OF THE CASE IS CONCERNED, HE SUBMITTED THAT DESPITE MANY OPPORTUNITIES GRANTED B Y THE AO, THE ASSESSEE HAS NOT PRODUCED THE PRINCIPAL OFFICER S/DIRECTORS OF THE LOAN CREDITOR COMPANIES OR THE COMPANIES WHO HAVE GIVEN LOAN TO THE ASSESSEE OR WHO HAVE INVESTED IN THE SHARES OF THE ASSESSEE COMPANY. HE SUBMITTED THAT MERE SUBM ISSION OF CERTAIN DETAILS BEFORE THE AO CANNOT DISCHARGE THE ASSESSEE FROM THE ONUS CAST UPON IT, ESPECIALLY WHEN THE ASS ESSEE COMPANY HAS TAKEN MONEY FROM AN ENTRY PROVIDER COMP ANY. HE ACCORDINGLY, SUBMITTED THAT THE ORDER OF THE LEA RNED CIT(A) BEING A REASONED ONE BE UPHELD. 24. THE LEARNED COUNSEL FOR THE ASSESSEE IN HIS RE JOINDER REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE LE ARNED CIT(A). REFERRING TO PAGE 8 OF THE ORDER OF THE LE ARNED CIT(A) HE DREW THE ATTENTION OF THE BENCH TO THE SPECIFIC ARGUMENTS TAKEN BEFORE THE LEARNED CIT(A) THAT ASSUMING JURIS DICTION BY ISSUING NOTICE U/S 143(2) BEFORE ALLOWING THE ASSES SEE TO FILE OBJECTION AND SUBSEQUENT DISPOSAL OF THE SAME IS NO THING BUT 22 ITA NO.7244/DEL/2019 NON-APPLICATION OF MIND. HE ACCORDINGLY SUBMITTED THAT THE CONTENTION OF THE LEARNED DR IS NOT FACTUALLY CORRE CT. 25. WE HAVE HEARD THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A) AND THE PAPER BOOK FILED ON BEHALF O F THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECI SIONS CITED BEFORE US. WE FIND THE AO ON THE BASIS OF INFORMA TION RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE IS BE NEFICIARY OF ACCOMMODATION ENTRIES TO THE TUNE OF RS. RS.92,00,1 10/- EVIDENCE OF WHICH WAS FOUND DURING THE COURSE OF SE ARCH AND SEIZURE OPERATION IN THE CASE OF MR. ANAND KUMAR JA IN AND MR. NARESH KUMAR JAIN ON 17.12.2015 WHO ARE KNOWN AS EN TRY PROVIDERS, REOPENED THE ASSESSMENT U/S 147 OF THE A CT AFTER RECORDING THE REASONS AND ISSUED NOTICE 148 OF THE ACT. 26. WE FIND THE AO COMPLETED THE ASSESSMENT U/S 14 7 R.W.S. 143(3) OF THE ACT AND DETERMINED THE TOTAL I NCOME OF THE ASSESSEE AT RS.1,75,30,470/- BY MAKING ADDITION OF RS.1,75,00,110/- TO THE RETURNED INCOME OF RS.30,46 0/-. WE FIND THE LEARNED CIT(A) UPHELD THE ACTION OF THE AO BOTH ON MERIT AS WELL AS ON THE VALIDITY OF REASSESSMENT PR OCEEDINGS. IT IS THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT 23 ITA NO.7244/DEL/2019 REOPENING OF THE ASSESSMENT IN THE INSTANT CASE IS NOT IN ACCORDANCE WITH LAW ON ACCOUNT OF NUMBER OF INFIRMI TIES. 27. BEFORE PROCEEDING FURTHER, WE DEEM IT PROPER T O REPRODUCE THE REASONS RECORDED BY THE AO FOR REOPEN ING OF THE ASSESSMENT WHICH ARE AS UNDER:- 24 ITA NO.7244/DEL/2019 25 ITA NO.7244/DEL/2019 26 ITA NO.7244/DEL/2019 27 ITA NO.7244/DEL/2019 28 ITA NO.7244/DEL/2019 29 ITA NO.7244/DEL/2019 30 ITA NO.7244/DEL/2019 31 ITA NO.7244/DEL/2019 32 ITA NO.7244/DEL/2019 33 ITA NO.7244/DEL/2019 34 ITA NO.7244/DEL/2019 35 ITA NO.7244/DEL/2019 36 ITA NO.7244/DEL/2019 37 ITA NO.7244/DEL/2019 38 ITA NO.7244/DEL/2019 39 ITA NO.7244/DEL/2019 28. A PERUSAL OF THE REASONS RECORDED AS REPRODUCE D ABOVE SHOWS THAT THE AO HAS REPRODUCED THEREIN THE INFORMATION FROM THE INVESTIGATION WING AND HAS STR AIGHTWAY REACHED THE STAGE OF FORMATION OF BELIEF OF ESCAPEM ENT OF INCOME. WE FIND IN THE INFORMATION, THERE IS GENER AL MENTION TO VARIOUS UNSPECIFIED SEIZED MATERIAL SUCH AS SEIZED PAPERS, DIGITAL EVIDENCE AND ALSO CERTAIN STATEMENT OF INDI VIDUALS WHO ARE CONNECTED TO JAIN BROTHERS. HOWEVER, WE FIND T HERE IS COMPLETE ABSENCE OF IDENTITY OF SPECIFIC SEIZED MAT ERIAL BY THE AO WHICH SHOWS HIS NON-APPLICATION OF MIND TO THE I NFORMATION RECEIVED FROM THE INVESTIGATION WING. IN OUR OPINIO N, NO PERSON OF ORDINARY INTELLIGENCE COULD BE IN A POSITION TO REACH TO BELIEF OF ESCAPEMENT OF INCOME U/S 147 OF THE ACT, FROM TH E REASONS RECORDED BY THE AO. MENTIONING OF STATEMENTS OF UNNAMED INDIVIDUALS SHOWS NON-APPLICATION OF MIND BY THE AO SINCE, THEIR NAMES ARE NOT STATED AND CONTENTS OF THEIR ST ATEMENTS ARE NOT SPECIFICALLY DEALT WITH AND IT IS NOT CLEAR AS TO WHETHER THE NAME OF THE ASSESSEE AS BENEFICIARY OF THE ACCOMMOD ATION ENTRIES WAS MENTIONED BY ANY OF THE INDIVIDUALS EXA MINED BY THE INVESTIGATION WING. WE FIND FORCE IN THE ARG UMENT OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NON-IDENTIFIC ATION OF THE 40 ITA NO.7244/DEL/2019 DEPONENTS PROVES THAT THE STATEMENTS OF THESE INDIV IDUALS WERE NOT AVAILABLE TO THE AO AT THE TIME OF FORMATION OF BELIEF WHILE RECORDING OF REASONS. EITHER THESE DETAILS WERE NO T AVAILABLE WITH HIM AND EVEN IF AVAILABLE THE SAME FAILED TO F IND ANY SUBJECTIVE CONSIDERATION BY THE AO. FURTHER, ALTHOU GH THE AO IN HIS REASONS RECORDED HAS IDENTIFIED VARIOUS POSS IBLE MODES OF ACCOMMODATION ENTRIES SUCH AS PROVISION OF CHEQUES/ RTGS ETC FOR UNACCOUNTED CASH EITHER THROUGH FAKE PURCHASE A ND SALE, COMMODITY PROFIT/LOSS, FAKE COMMISSION, ONE TIME EN TRY OR OTHER MODES BUT FAILED TO IDENTIFY THE PARTICULAR M ODE(S) OF ACCOMMODATION ENTRIES ADOPTED IN THE PRESENT CASE. IN ABSENCE OF IDENTIFICATION OF MODE OF ACCOMMODATION ENTRY, T HE REASON RECORDED IN OUR OPINION IS INCOMPLETE, VAGUE AND IN COHERENT AND LEAVES THE READER CLUELESS. BESIDES NON-IDENTI FICATION OF THE ENTITIES, THE AO HAS ALSO FAILED TO IDENTIFY MI DDLEMAN, IF ANY, IN THE DEAL. THE IMPORTANT DETAILS IN THE FOR M OF INSTRUMENT NUMBER THROUGH WHICH CHEQUES/RTGS WAS ACCEPTED BY THE ASSESSEE COMPANY, NAME OF THE BANK FROM WHICH THE ACCOMMODATION ENTRY WAS PROVIDED, THE NAM E OF THE BANK IN WHICH THE ACCOMMODATION ENTRY WAS CREDITED AND THE DATE OF THE TRANSACTION IS MISSING IN THE REASON. T HE DATE OF 41 ITA NO.7244/DEL/2019 TRANSACTION IN OUR OPINION, IS IMPORTANT TO VERIFY WHETHER THE TRANSACTION FALLS IN THE YEAR UNDER CONSIDERATION W HICH IS EXTREMELY IMPORTANT PIECE OF INFORMATION TO JUSTIFY INDEPENDENT APPLICATION OF MIND. 29. WE FIND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD RAISED SPECIFIC OBJECTION BEFORE THE AO REGARDING THE NON-MENTIONING OF THE E NTITIES AS PER REASONS PROVIDED WHO HAD GIVEN ACCOMMODATION EN TRIES. HOWEVER, A PERUSAL OF THE SAID ANNEXURE WHICH IS RE PRODUCED AS UNDER DOES NOT GIVE SUCH DETAILS GIVING THE NAME S OF THE ENTITIES GIVING THE AMOUNT OF ACCOMMODATION ENTRIES DURING THE YEAR. 30. WE FIND THAT HONBLE DELHI HIGH COURT IN THE C ASE OF PR. CIT VS MEENAKSHI OVERSEAS PVT. LTD. REPORTED IN 395 ITR 677 (DEL.) HAS QUASHED THE REASSESSMENT PROCEEDINGS ON THE GROUND THAT THE REASONS RECORDED BY THE AO FAILED T O 42 ITA NO.7244/DEL/2019 DEMONSTRATE LINK BETWEEN TANGIBLE MATERIAL AND FORM ATION OF REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. THE RELEVANT OBSERVATIONS OF THE HONBLE DELHI HIGH COU RT FROM PARAS 19 TO 38 READ AS UNDER:- 19. A PERUSAL OF THE REASONS AS RECORDED BY THE AO REVEALS THAT THERE ARE THREE PARTS TO IT. IN THE FIRST PART , THE AO HAS REPRODUCED THE PRECISE INFORMATION HE HAS RECEIVED FROM THE INVESTIGATION WING OF THE REVENUE. THIS INFORMATION IS IN THE FORM OF DETAILS OF THE AMOUNT OF CREDIT RECEIVED, T HE PAYER, THE PAYEE, THEIR RESPECTIVE BANKS, AND THE CHEQUE N UMBER. THIS INFORMATION BY ITSELF CANNOT BE SAID TO BE TAN GIBLE MATERIAL. 20. COMING TO THE SECOND PART, THIS TELLS US WHAT T HE AO DID WITH THE INFORMATION SO RECEIVED. HE SAYS: 'THE INF ORMATION SO RECEIVED HAS BEEN GONE THROUGH.' ONE WOULD HAVE EXPECTED HIM TO POINT OUT WHAT HE FOUND WHEN HE WEN T THROUGH THE INFORMATION. IN OTHER WORDS, WHAT IN SU CH INFORMATION LED HIM TO FORM THE BELIEF THAT INCOME ESCAPED ASSESSMENT. BUT THIS IS ABSENT. HE STRAIGHTAWAY REC ORDS THE CONCLUSION THAT 'THE ABOVESAID INSTRUMENTS ARE IN THE NATURE OF ACCOMMODATION ENTRY WHICH THE ASSESSEE HA D TAKEN AFTER PAYING UNACCOUNTED CASH TO THE ACCOMMOD ATION ENTRY GIVEN (SIC GIVER)'. THE AO ADDS THAT THE SAID ACCOMMODATION WAS 'A KNOWN ENTRY OPERATOR' THE SOUR CE BEING 'THE REPORT OF THE INVESTIGATION WING'. 21. THE THIRD AND LAST PART CONTAINS THE CONCLUSION DRAWN BY THE AO THAT IN VIEW OF THESE FACTS, 'THE ALLEGED TRANSACTION IS NOT THE BONAFIDE ONE. THEREFORE, I H AVE REASON TO BE BELIEVE THAT AN INCOME OF RS. 5,00,000 HAS ES CAPED ASSESSMENT IN THE AY 2004-05 DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ITS ASSESSMENT... ' 22. AS RIGHTLY POINTED OUT BY THE ITAT, THE 'REASON S TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIO NS, ONE AFTER THE OTHER. THE EXPRESSION 'ACCOMMODATION ENTR Y' IS USED TO DESCRIBE THE INFORMATION SET OUT WITHOUT EX PLAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUSION. THE ST ATEMENT THAT THE SAID ENTRY WAS GIVEN TO THE ASSESSEE ON HI S PAYING 43 ITA NO.7244/DEL/2019 'UNACCOUNTED CASH' IS ANOTHER CONCLUSION THE BASIS FOR WHICH IS NOT DISCLOSED. WHO IS THE ACCOMMODATION EN TRY GIVER IS NOT MENTIONED. HOW HE CAN BE SAID TO BE 'A KNOWN ENTRY OPERATOR' IS EVEN MORE MYSTERIOUS. CLEARLY TH E SOURCE FOR ALL THESE CONCLUSIONS, ONE AFTER THE OTHER, IS THE INVESTIGATION REPORT OF THE DIT. NOTHING FROM THAT REPORT IS SET OUT TO ENABLE THE READER TO APPRECIATE HOW THE CONCLUSIONS FLOW THEREFROM. 23. THUS, THE CRUCIAL LINK BETWEEN THE INFORMATION MADE AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS ABSENT. THE REASONS MUST BE SELF EVIDENT, THEY MUST SPEAK F OR THEMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE B ASIS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING OF THE REASONS. THE ENTIRE M ATERIAL NEED NOT BE SET OUT. HOWEVER, SOMETHING THEREIN WHI CH IS CRITICAL TO THE FORMATION OF THE BELIEF MUST BE REF ERRED TO. OTHERWISE THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 I S A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAI NLY CANNOT BE INVOKED CASUALLY OR MECHANICALLY. THE HEART OF T HE PROVISION IS THE FORMATION OF BELIEF BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS SO RECORDED HAV E TO BE BASED ON SOME TANGIBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING THE REASONS. IT CANNOT BE SUPP LIED SUBSEQUENTLY EITHER DURING THE PROCEEDINGS WHEN OBJ ECTIONS TO THE REOPENING ARE CONSIDERED OR EVEN DURING THE ASSESSMENT PROCEEDINGS THAT FOLLOW. THIS IS THE BAR E MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SINC E THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT, AND NOT SECTION 143 (3) OF THE ACT, THE PR OVISO TO SECTION 147 WILL NOT APPLY. IN OTHER WORDS, EVEN THOUGH THE REOPENING IN THE PRESENT CASE WAS AFTER THE EXP IRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY, IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAI LURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSAR Y FOR THE ASSESSMENT. 26. THE FIRST PART OF SECTION 147 (1) OF THE ACT RE QUIRES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT IS THUS FORMATION OF REASON TO BELIEVE THAT IS SUBJECT MATTER OF EXAMINA TION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A 44 ITA NO.7244/DEL/2019 SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJECTI VE CRITERIA. WHILE THE REPORT OF THE INVESTIGATION WIN G MIGHT CONSTITUTE THE MATERIAL ON THE BASIS OF WHICH HE FO RMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVING AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REP ORT OF INVESTIGATION. THE RECORDING OF REASONS TO BELIEVE AND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASS UMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT. THE REAS ONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REA SON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 27. EACH CASE OBVIOUSLY TURNS ON ITS OWN FACTS AND NO TWO CASES ARE IDENTICAL. HOWEVER, THERE HAVE BEEN A LAR GE NUMBER OF CASES EXPLAINING THE LEGAL REQUIREMENT TH AT REQUIRES TO BE SATISFIED BY THE AO FOR A VALID ASSU MPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT TO REOPEN A PAST ASSESSMENT. 28.1 IN SIGNATURE HOTELS PVT. LTD. V. INCOME TAX OFFICER (SUPRA), THE REASONS FOR REOPENING AS RECOR DED BY THE AO IN A PROFORMA AND PLACED BEFORE THE CIT FOR APPR OVAL READ THUS: '11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.- INFORMATION IS RECEIVED FROM THE DIT (INV.-1), NEW DELHI THAT THE ASSESSEE HAS INTRODUCE D MONEY AMOUNTING TO RS. 5 LAKH DURING THE F.Y. 2002- 03 RELATING TO A.Y. 2003-04. DETAILS ARE CONTAINED IN ANNEXURE. AS PER INFORMATION AMOUNT RECEIVED IS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE IS A BENEFICIARY.' 28.2 THE ANNEXURE TO THE SAID PROFORMA GAVE THE NAM E OF THE BENEFICIARY, THE VALUE OF ENTRY TAKEN, THE NUMB ER OF THE INSTRUMENT BY WHICH ENTRY WAS TAKEN, THE DATE ON WH ICH THE ENTRY WAS TAKEN, NAME OF THE ACCOUNT HOLDER OF THE BANK FROM WHICH THE CHEQUE WAS ISSUED, THE ACCOUNT NUMBER AND SO ON. 28.3 ANALYSING THE ABOVE REASONS TOGETHER WITH THE ANNEXURE, THE COURT OBSERVED: '14. THE FIRST SENTENCE OF THE REASONS STATES THAT INFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCO ME- TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODU CED 45 ITA NO.7244/DEL/2019 MONEY AMOUNTING TO RS. 5 LACS DURING FINANCIAL YEAR 2002-03 AS PER THE DETAILS GIVEN IN ANNEXURE. THE S AID ANNEXURE, REPRODUCED ABOVE, RELATES TO A CHEQUE RECEIVED BY THE PETITIONER ON 9TH OCTOBER, 2002 FRO M SWETU STONE PV FROM THE BANK AND THE ACCOUNT NUMBER MENTIONED THEREIN. THE LAST SENTENCE RECORDS THAT A S PER THE INFORMATION, THE AMOUNT RECEIVED WAS NOTHIN G BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. 15. THE AFORESAID REASONS DO NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFERRED TO IS EXTREMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT ANNEXURE, WHICH HAS BEEN QUOTED ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWS OR ESTABLISHES NEXU S OR LINK WHICH DISCLOSES ESCAPEMENT OF INCOME. ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF T HE INFORMATION. THE ASSESSING OFFICER ACCEPTED THE PLE A ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANN ER. THE COMMISSIONER ALSO ACTED ON THE SAME BASIS BY MECHANICALLY GIVING HIS APPROVAL. THE REASONS RECOR DED REFLECT THAT THE ASSESSING OFFICER DID NOT INDEPEND ENTLY APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) AND ARRIVE A T A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT.' 28.4 THE COURT IN SIGNATURE HOTELS PVT. LTD. V. INC OME TAX OFFICER (SUPRA) QUASHED THE PROCEEDINGS UNDER SECTI ON 148 OF THE ACT. THE FACTS IN THE PRESENT CASE ARE M ORE OR LESS SIMILAR. THE PRESENT CASE IS THEREFORE COVERED AGAINST THE REVENUE BY THE AFOREMENTIONED DECISION. 29.1 THE ABOVE DECISION CAN BE CONTRASTED WITH THE DECISION IN AGR INVESTMENT V. ADDITIONAL COMMISSIONER OF INC OME TAX (SUPRA), WHERE THE 'REASONS TO BELIEVE' READ AS UNDER: 46 ITA NO.7244/DEL/2019 'CERTAIN INVESTIGATIONS WERE CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELH I IN RESPECT OF THE BOGUS/ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES. THE NAME OF THE ASSESSEE FIGURES AS ONE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS GIVEN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. I N THE SAID INFORMATION, IT HAS BEEN INTER-ALIA REPORT ED AS UNDER: 'ENTRIES ARE BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC., IN THE FORM OF GIFTS, SHAR E APPLICATION MONEY, LOANS ETC. 2. TO INFLATE EXPENSE IN THE TRADING AND PROFIT AND LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREB Y PAY LESS TAXES. IT HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAV E BEEN RECEIVED BY THE ASSESSEE:....' 29.2 THE DETAILS OF SIX ENTRIES WERE THEN SET OUT I N THE ABOVE 'REASONS'. THESE INCLUDED NAME OF THE BENEFICIARY, THE BENEFICIARY'S BANK, VALUE OF THE ENTRY TAKEN, INSTR UMENT NUMBER, DATE, NAME OF THE ACCOUNT IN WHICH ENTRY WA S TAKEN AND THE ACCOUNT FROM WHERE THE ENTRY WAS GIVE N THE DETAILS OF THOSE BANKS. THE REASONS THEN RECORDED: 'THE TRANSACTIONS INVOLVING RS. 27,00,000/-, MENTIO NED IN THE MANNER ABOVE, CONSTITUTES FRESH INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME/INCOME FROM OTHER SOURCES OF THE ASSESSEE COMPANY, WHICH HAS NOT BEEN OFFERED TO TAX BY THE ASSESSEE TILL ITS RETURN FILED. ON THE BASIS OF THIS NEW INFORMATION, I HAVE REASON TO BELIEVE THAT THE INCOME OF RS. 27,00,000/- HAS ESCA PED ASSESSMENT AS DEFINED BY SECTION 147 OF THE INCOME TAX ACT. THEREFORE, THIS IS A FIT CASE FOR THE ISSU ANCE OF THE NOTICE UNDER SECTION 148.' 47 ITA NO.7244/DEL/2019 29.3 THE COURT WAS NOT INCLINED TO INTERFERE IN THE ABOVE CIRCUMSTANCES IN EXERCISE OF ITS WRIT JURISDICTION TO QUASH THE PROCEEDINGS. A CAREFUL PERUSAL OF THE ABOVE REASONS REVEALS THAT THE AO DOES NOT MERELY REPRODUCE THE INFORMATI ON BUT TAKES THE EFFORT OF REVEALING WHAT IS CONTAINED IN THE INVESTIGATION REPORT SPECIFIC TO THE ASSESSEE. IMPO RTANTLY HE NOTES THAT THE INFORMATION OBTAINED WAS 'FRESH' AND HAD NOT BEEN OFFERED BY THE ASSESSEE TILL ITS RETURN PURSUA NT TO THE NOTICE ISSUED TO IT WAS FILED. THIS IS A CRUCIAL FA CTOR THAT WENT INTO THE FORMATION OF THE BELIEF. IN THE PRESE NT CASE, HOWEVER, THE AO HAS MADE NO EFFORT TO SET OUT THE P ORTION OF THE INVESTIGATION REPORT WHICH CONTAINS THE INFORMA TION SPECIFIC TO THE ASSESSEE. HE DOES NOT ALSO EXAMINE THE RETURN ALREADY FILED TO ASCERTAIN IF THE ENTRY HAS BEEN DISCLOSED THEREIN. 30.1 IN COMMISSIONER OF INCOME TAX, NEW DELHI V. HI GHGAIN FINVEST (P) LIMITED (2007) 164 TAXMAN 142 (DEL) REL IED UPON BY MR. CHAUDHARY, THE REASONS TO BELIEVE READ AS UN DER: 'IT HAS BEEN INFORMED BY THE ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT VII, NEW DELHI VID E LETTER NO. 138 DATED 8 TH APRIL 2003 THAT THIS COMPANY WAS INVOLVED IN THE GIVING AND TAKING BOGUS ENTRIES/ TRANSACTIONS DURING THE FINANCIAL YEAR 1996-97, AS PER THE DEPOSITION MADE BEFORE THEM BY SHRI SANJAY RASTOGI, CA DURING A SURVEY OPERATION CONDUCTED AT HIS OFFICE PREMISES BY THE INVESTIGATION WING. THE PARTICULARS OF SOME OF THE TRANSACTION OF THIS NATU RE ARE AS UNDER: DATE PARTICULARS OF CHEQUE DEBIT AMT. CREDIT AMT 18.11.96 305002 5,00, 000 THROUGH THE BANK ACCOUNT NO. CA 4266 OF M/S. MEHRAM EXPORTS PVT. LTD. IN THE PNB, NEW ROHTAK ROAD, NEW DELHI. NOTE: IT IS NOTED THAT THERE MIGHT BE MORE SUCH ENT RIES APART FROM THE ABOVE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-9 8 WAS FILED BY THE ASSESSEE ON 4TH MARCH 1998 WHICH WAS ACCEPTED UNDER SECTION 143 (1) AT THE DECLARED 48 ITA NO.7244/DEL/2019 INCOME OF RS. 4,200. IN VIEW OF THESE FACTS, I HAVE REASON TO BELIEVE THAT THE AMOUNT OF SUCH TRANSACTI ONS PARTICULARLY THAT OF RS. 5,00,000 (AS MENTIONED ABO VE) HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF TH E PROVISO TO SECTION 147 AND CLAUSE (B) TO THE EXPLAN ATION 2 OF THIS SECTION. SUBMITTED TO THE ADDITIONAL CIT, RANGE -12, NEW DEL HI FOR APPROVAL TO ISSUE NOTICE UNDER SECTION 148 FOR THE ASSESSMENT YEAR 1997-98, IF APPROVED.' 30.2 THE AO WAS NOT MERELY REPRODUCING THE INFORMAT ION RECEIVED FROM THE INVESTIGATION BUT TOOK THE EFFORT OF REFERRING TO THE DEPOSITION MADE DURING THE SURVEY BY THE CHARTERED ACCOUNTANT THAT THE ASSESSEE COMPANY WAS INVOLVED IN THE GIVING AND TAKING OF BOGUS ENTRIES. THE AO THUS INDICATED WHAT THE TANGIBLE MATERIAL WAS WHICH ENABLED HIM TO FORM THE REASONS TO BELIEVE THAT INC OME HAS ESCAPED ASSESSMENT. IT WAS IN THOSE CIRCUMSTANCES T HAT IN THE CASE, THE COURT CAME TO THE CONCLUSION THAT THE RE WAS PRIMA FACIE MATERIAL FOR THE AO TO COME TO THE CONC LUSION THAT THE ASSESSEE HAD NOT MADE A FULL AND TRUE DISC LOSURE OF ALL THE MATERIAL FACTS RELEVANT FOR THE ASSESSME NT. 31. IN COMMISSIONER OF INCOME TAX V. G&G PHARMA (SU PRA) THERE WAS A SIMILAR INSTANCE OF REOPENING OF ASSESS MENT BY THE AO BASED ON THE INFORMATION RECEIVED FROM THE D IT (I). THERE AGAIN THE DETAILS OF THE ENTRY PROVIDED WERE SET OUT IN THE 'REASONS TO BELIEVE'. HOWEVER, THE COURT FOUND THAT THE AO HAD NOT MADE ANY EFFORT TO DISCUSS THE MATERIAL ON THE BASIS OF WHICH HE FORMED PRIMA FACIE VIEW THAT INCO ME HAD ESCAPED ASSESSMENT. THE COURT HELD THAT THE BASIC REQUIREMENT OF SECTION 147 OF THE ACT THAT THE AO S HOULD APPLY HIS MIND IN ORDER TO FORM REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT HAD NOT BEEN FULFILLE D. LIKEWISE IN CIT-4 V. INDEPENDENT MEDIA P. LIMITED ( SUPRA) THE COURT IN SIMILAR CIRCUMSTANCES INVALIDATED THE INITIATION OF THE PROCEEDINGS TO REOPEN THE ASSESSMENT UNDER S ECTION 147 OF THE ACT. 32. IN ORIENTAL INSURANCE COMPANY LIMITED V. COMMIS SIONER OF INCOME TAX 378 ITR 421 (DEL) IT WAS HELD THAT 'T HEREFORE, EVEN IF IT IS ASSUMED THAT, IN FACT, THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, THE AO WOULD HAVE NO JURISD ICTION TO ASSESS THE SAME IF HIS REASONS TO BELIEVE WERE N OT BASED ON ANY COGENT MATERIAL. IN ABSENCE OF THE JURISDICT IONAL PRE- 49 ITA NO.7244/DEL/2019 CONDITION BEING MET TO REOPEN THE ASSESSMENT, THE Q UESTION OF ASSESSING OR REASSESSING INCOME UNDER SECTION 14 7 OF THE ACT WOULD NOT ARISE.' 33. IN RUSTAGI ENGINEERING UDYOG (P) LIMITED (SUPRA ), IT WAS HELD THAT '...THE IMPUGNED NOTICES MUST ALSO BE SET ASIDE AS THE AO HAD NO REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS HAD ESCA PED ASSESSMENT. CONCEDEDLY, THE AO HAD NO TANGIBLE MATE RIAL IN REGARD TO ANY OF THE TRANSACTIONS PERTAINING TO THE RELEVANT ASSESSMENT YEARS. ALTHOUGH THE AO MAY HAVE ENTERTAINED A SUSPICION THAT THE ASSESSEE S INCOME HAS ESCAPED ASSESSMENT, SUCH SUSPICION COULD NOT FORM THE BASIS OF INITIATI NG PROCEEDINGS UNDER SECTION 147 OF THE ACT. A REASON TO BELIEVE - NOT REASON TO SUSPECT - IS THE PRECONDITI ON FOR EXERCISE OF JURISDICTION UNDER SECTION 147 OF THE A CT. ' 34. RECENTLY IN AGYA RAM V. CIT (SUPRA), IT WAS EMP HASIZED THAT THE REASONS TO BELIEVE 'SHOULD HAVE A LINK WIT H AN OBJECTIVE FACT IN THE FORM OF INFORMATION OR MATERI ALS ON RECORD...' IT WAS FURTHER EMPHASIZED THAT 'MERE ALL EGATION IN REASONS CANNOT BE TREATED EQUIVALENT TO MATERIAL IN EYES OF LAW. MERE RECEIPT OF INFORMATION FROM ANY SOURCE WO ULD NOT BY ITSELF TANTAMOUNT TO REASON TO BELIEVE THAT INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENTS.' 35. IN THE DECISION OF THIS COURT DATED 16TH MARCH 2016 IN W.P. (C) NO. 9659 OF 2015 (RAJIV AGARWAL V. CIT) IT WAS EMPHASIZED THAT 'EVEN IN CASES WHERE THE AO COMES A CROSS CERTAIN UNVERIFIED INFORMATION, IT IS NECESSARY FOR HIM TO TAKE FURTHER STEPS, MAKE INQUIRIES AND GARNER FURTHER MA TERIAL AND IF SUCH MATERIAL INDICATES THAT INCOME OF AN AS SESSEE HAS ESCAPED ASSESSMENT, FORM A BELIEF THAT INCOME O F THE ASSESSEE HAS ESCAPED ASSESSMENT.' 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE RE ASONS TO BELIEVE CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THERE IS NO INDEPENDENT APP LICATION OF MIND BY THE AO TO THE TANGIBLE MATERIAL WHICH FO RMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESC APED ASSESSMENT. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT. INDEED IT IS A 'BORROWED SATISFACTION'. 50 ITA NO.7244/DEL/2019 THE REASONS FAIL TO DEMONSTRATE THE LINK BETWEEN TH E TANGIBLE MATERIAL AND THE FORMATION OF THE REASON T O BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SA TISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMITTED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QUESTION DOES NOT SATISF Y THE REQUIREMENT OF LAW. 38. THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE , I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS, ACCORDINGLY, DISMISSED BUT WITH NO ORDER S AS TO COSTS. 31. WE FIND, FOLLOWING THE ABOVE DECISION, THE CO- ORDINATE BENCHES OF THE TRIBUNAL ARE TAKING THE CON SISTENT VIEW THAT WHEN THERE IS NON-APPLICATION OF MIND BY THE A O TO THE REPORT OF THE INVESTIGATION WING, SUCH REASSESSMENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH LAW AND SUCH REOPENING PROCEEDINGS HAVE BEEN QUASHED. SINCE, IN THE INSTA NT CASE, THE AO HAS NOT APPLIED HIS MIND AS THERE IS NON-IDENTIF ICATION OF THE DEPONENTS, NON-MENTIONING OF MIDDLEMAN IF ANY, ABSENCE OF DETAILS IN THE FORM OF INSTRUMENT NUMBER THROUGH WH ICH THE CHEQUES/RTGS WAS ACCEPTED BY THE ASSESSEE COMPANY, NAME OF THE BANK FROM WHICH THE ACCOMMODATION ENTRIES WE RE PROVIDED, THE NAME OF THE BANK IN WHICH THE ACCOMMO DATION ENTRIES WERE CREDITED AND THE DATE OF TRANSACTION E TC. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THERE IS COMP LETE NON- 51 ITA NO.7244/DEL/2019 APPLICATION OF MIND BY THE AO TO THE INFORMATION RE CEIVED FROM THE INVESTIGATION WING. THEREFORE, IN VIEW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS MEENKASHI OVERSEAS PVT. LTD. (SUPRA), THE REASSESSM ENT PROCEEDINGS ARE NOT IN ACCORDANCE WITH LAW. 32. WE FURTHER FIND THE HONBLE DELHI HIGH COURT I N THE CASE OF SH RAJIV AGARWAL VS ACIT, REPORTED IN 395 ITR 0255 (DEL) HAS HELD THAT EVEN IN CASES WHERE THE AO COME S ACROSS CERTAIN UNVERIFIED INFORMATION, IT IS NECESSARY FOR HIM TO TAKE FURTHER STEPS, MAKE INQUIRIES AND GARNER FURTHER MA TERIAL AND IF SUCH MATERIAL INDICATES THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT, FORM A BELIEF THAT INCOME OF THE ASSESS EE HAS ESCAPED ASSESSMENT. THERE IS NON-APPLICATION OF MIN D BY THE AO COULD NOT BE SAID TO HAVE REASON TO BELIEVE AS T O JUSTIFY REOPENING OF ASSESSMENT. 33. WE FURTHER FIND IN THE INSTANT CASE, THE ASSES SEE IN RESPONSE TO NOTICE U/S 148 OF THE ACT VIDE LETTER D ATED 12.04.2018 (PAPER BOOK PAGE 77) STATED THAT RETURN OF INCOME FILED U/S 139 OF THE ACT BE TREATED AS RETURN OF IN COME FILED IN RESPONSE TO NOTICE U/S 148 AND ALSO REQUESTED FOR S UPPLY OF THE COPY OF REASONS. WE FIND THE AO AFTER MORE THAN FOU R MONTHS 52 ITA NO.7244/DEL/2019 VIDE LETTER DATED 07.08.2018 (PAPER BOOK 73), DIREC TED THE ASSESSEE TO E-FILE THE RETURN OF INCOME WHICH WAS D ONE ON 13.10.2018. WE FIND THE AO THEREAFTER ISSUED NOTICE DATED 16.10.2018 U/S 143(2)/142(1) OF THE ACT (PAPER BOO K 74-76) AND SUPPLIED REASONS RECORDED ON 22.10.2018 (PAPER BOOK 45) AGAINST WHICH THE ASSESSEE SUBMITTED OBJECTION TO A SSUMPTION TO JURISDICTION ON 05.11.2018 AND SAME WERE DISPOS ED OF BY AO ON 09.11.2018. FROM THE ABOVE FACTS, IT IS EVI DENT THAT THE AO ASSUMED JURISDICTION TO MAKE ASSESSMENT BY ISSUI NG NOTICE U/S 143(2) OF THE ACT ON 16.10.2018 BEFORE SUPPLYIN G REASON WHICH MEANS THAT THE AO ASSUMED JURISDICTION BEFORE ALLOWING ASSESSEE TO FILE OBJECTION TO ASSUMPTION TO JURISDI CTION. 34. WE FIND THE HONBLE DELHI HIGH COURT IN THE CA SE OF MASTECH TECHNOLOGIES PVT LTD. VS DCIT REPORTED IN 4 07 ITR 242(DEL.) AT PARA 30 OF THE ORDER HAS OBSERVED AS U NDER:- 30. AS REGARDS THE NON-COMMUNICATION OF THE REASON S AS CONTAINED IN ANNEXURE-A TO THE PROFORMA ON WHICH TH E APPROVAL DATED 19TH MARCH, 2015 WAS GRANTED BY THE ADDITIONAL CIT, THERE IS AGAIN NO SATISFACTORY EXPL ANATION. THE FACT REMAINS THAT WHAT WAS COMMUNICATED TO THE PETI TIONER ON 23RD FEBRUARY, 2016 WAS ONLY ONE LINE WITHOUT ANY SUPPORTING MATERIAL. THERE APPEARS TO BE ALSO NO CL ARITY OF HOW THE CASE HAD TO BE PROCEEDED WITH BY THE REVENUE, O N ONE DATE I.E. 16TH FEBRUARY 2016, THE AO WAS ISSUING NO TICE BOTH UNDER SECTION 142(1) OF THE ACT AS WELL AS NOTICE U NDER SECTION 143(2) OF THE ACT WHEN ON THAT VERY DATE THE PETITI ONER HAD ASKED FOR THE REASONS FOR REOPENING BY NOTICE DATED 18TH JANUARY, 2016. AGAIN, IT IS NOT CLEAR WHY THE AO DI D NOT WAIT 53 ITA NO.7244/DEL/2019 FOR THE PROCESS OF SUPPLYING REASONS TO THE PETITIO NER, CONSIDERING THE PETITIONER'S OBJECTIONS THERETO AND PASSING A REASONED ORDER THEREON TO BE COMPLETED BEFORE ISSUI NG THE NOTICE UNDER SECTION 142(1) AND 143(2) OF THE ACT. THERE APPEARS TO BE NON-APPLICATION OF MIND. 35. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT REASSESSMENT PROCEEDING INI TIATED BY THE AO IN THE INSTANT CASE AND UPHELD BY THE LEARNE D CIT(A) IS NOT IN ACCORDANCE WITH LAW. THEREFORE, WE QUASH THE REASSESSMENT PROCEEDING. SINCE, THE ASSESSEE SUCCE EDS ON THIS LEGAL GROUND, THEREFORE, THE OTHER PLANK OF ARGUMEN TS CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDING AND THE ARGUMENTS CHALLENGING THE VALIDITY ON MERIT ARE NOT BEING ADJUDICATED. 36. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 12/08/202 1. SD/- SD/- [SUCHITRA KAMBLE] [R.K.PA NDA] JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI; DATED: 12/08/2021. F{X~{T? F{X~{T? F{X~{T? F{X~{T? FA FA FA FA P.S P.SP.S P.S COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 54 ITA NO.7244/DEL/2019 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI