Lakhmi Chand Tejoo Mal, Delhi V. ACIT, Circle-47(1), New Delhi

ITA 8094/DEL/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9077 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 07-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: E V BHASKAR
• Keywords: Reopening of assessment; Bogus Share capital; Search and seizure; Accommodation entries; Assessment record; Reason to believe; Reassessment proceedings
• Section: 143(3); 143(1); 13; 153; 147; 68; 148; 15

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI D BEN CH, NEW DELHI (THROUGH VIDEO CONFERENCING] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 8094/DEL/2019 [A.Y 2011-12] M/S LAKHMI CHAND TEJOO MAL VS. THE A.C.I.T. 879, KUCHA KABIL ATTTAR CIRCLE 47(1) CHANDNI CHOWK, DELHI NEW DELHI PAN : AAAFL3353 P [APPELLANT] [RESPONDENT] DATE OF HEARING : 04.08.2021 DATE OF PRONOUNCEMENT : 06.08.2021 ASSESSEE BY : SHRI KAPIL GOEL, ADV REVENUE BY : SHRI E.V. BHASKAR, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX [APPEALS] -16, DELHI DAT ED 01.08.2019 PERTAINING TO ASSESSMENT YEAR 2011-12. 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWO-FOLD FIRS TLY, THE ASSESSEE IS AGGRIEVED BY THE REOPENING OF THE ASSESSMENT U/S 14 7 OF THE INCOME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] AND SECONDLY, ON MERITS, THE ASSESSEE HAS CHALLENGED TH E ADDITION OF RS. 75 LAKHS ON ACCOUNT OF UNSECURED LOANS U/S 68 OF THE A CT AND DISALLOWANCE OF RS. 4,25,194/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST PAID FOR THE UNSECURED LOANS. 3. REPRESENTATIVES OF BOTH THE SIDES WERE HEARD AT LENGTH. CASE RECORDS CAREFULLY PERUSED AND JUDICIAL DECISIONS RE LIED UPON BY BOTH THE SIDES DULY CONSIDERED. 4. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE FILED ITS ORIGINAL RETURN OF INCOME ON 28.09.2011 DECLARING I NCOME AT RS. 43,06,620/-. ASSESSMENT WAS COMPLETED U/S 143(3) O F THE ACT VIDE ORDER DATED 13.03.2014. 5. PURSUANT TO THE INFORMATION RECEIVED FROM THE OF FICE OF THE ADIT, INV. WING, UNIT 2(1), NEW DELHI, THE ASSESSING OFFI CER REOPENED THE COMPLETED ASSESSMENT BY ISSUING NOTICE U/S 148 OF T HE ACT. REASONS FOR REOPENING ASSESSMENT READ AS UNDER: 3 1. BRIEF DETAILS OF THE ASSESSED: THE ASSESSEE M/S LAKCHMI CHAND TEJOO MAI. 876. KUCHA KABIL ATTAR. CHANDM CHOWK. DELHI. 1 10006 HAS PAN : AAAFL3353P. THE LAST RETURN OF THE ASSESSEE WAS FIL ED ON 30.10.2017 FOR A.Y. 2017-18 WHICH HAS NOT BEEN PROCESSED SO FA R. 2. BRIEF DETAILS OF INFORMATION COLLECTED/ RECEIVED B Y THE A0: A LETTER DATED 15.03.2018 WAS RECEIVED IN THIS OFFICE THROUG H THE OFFICE OF PR. CIT DELHI-16, NEW DELHI, FROM ASST. DIRECTOR OF INC OME TAX (INV.) UNIT- 2(1), NEW DELHI. AS PER THE LETTER, IT IS NOT ED THAT A SEARCH AND SEIZURE OPERATION WAS EXECUTED ON 18.1 1.2015 OIL S H. PRADEEP KUMAR JINDAL. DURING THE COURSE OF SEARCH, IT WAS FOUND S H. PRADEEP KUMAR JINDAL WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRI ES TO DIFFERENT BENEFICIARIES. THE BANK STATEMENTS OF VARIOUS FRONT COMPANIES OF SH. PRADEEP KUMAR JINDAL PROVIDED BY VAISH COOPERATIVE COMMERCIAL BANK LTD. NAI SARAK DELHI, REVEALS THAT HUGE CASH WAS BE ING DEPOSITED IN SUCH BANK ACCOUNTS AND RTGS/ CHEQUE ISSUED IMMEDIAT ELY TO OTHER BANK ACCOUNTS IN THE SAME BANK FOR PURPOSE OF LAYER ING AND ON 3 RD AND 4 TH STAGE FINALLY RTGS/CHEQUE WAS ISSUED TO THE BENEFI CIARIES FOR PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. 3. ANALYSIS OF INFORMATION COLLECTED/ RECEIVED: ON PE RUSAL OF REPORT, VARIOUS FINDINGS OF INVESTIGATION WING AND DOCUMENT ATTACHED WITH THE LETTER AS ANNEXURE A-L. IT IS SEEN THAT THE ASSESSE E, M/S LAKCHMI CHAND TEJOO MAI HAD BEEN PROVIDED ACCOMMODATION ENT RIES AS FOLLOW: 4 3. LAKHCMI CHAND TEJOOMAL ' 20.00.000 24.09.2010 FOCUS INDUSTRIAL RESOURCE LTD. 4. LAKCHMI CHAND TEJOO ! MAI 20,00,000 16.09.2010 PAWANSUT HOLDINGS LTD. 5. LAKCHMI CHAND TEJOO MAL 15,00,000 25.09.2010 PAWANSUT HOLDINGS LTD. 6. LAKCHMI CHAND TEJOO MAL 20,00,000 16.09,2010 FOCUS INDUSTRIAL RESOURCE LTD. 7; LAKCHMI CHAND TEJOO JGGPR 20,00,000 25.09.2010 FOCUS INDUSTRIAL J RESOURCE LTD. . 8. LAKCHMI CHAND TEJOO MAL 20.00.000 18.09.2010. PAWANSUT HOLDINGS LTD. - 9. LAKCHMI CHAND TEJOO : MAL 15,00,000 08.10.2010 -- PAWANSUT HOLDINGS LTD. 10 LAKCHMI CHAND TEJOO-MAL 20,00,000 18.09.2010 . PAWANSUT HOLDINGS LTD. 11. ; LAKCHMI CHAND TEJOO MAL 15,00,000 08.10.2010 PAWANSUT HOLDINGS LTD. TOTAL 2,05,00,000 1 FURTHER, AS PER THIS LETTER RECEIVED FROM ASST. DIR ECTOR OF INCOME TAX (INV.) UNIT- 2(1), NEW DELHI SH. PRADEEP KUMAR JINDAL HAS ADMITTED TO HAVE CHARGED COMMISSION IN CASH @ 2 .5% FROM VARIOUS BENEFICIARIES FOR PROVIDING ACCOMMODATION E NTRIES IN LIEU OF CASH. THE COMMISSION PAID IN CASH @2.5% BY THE BENE FICIARY TO SH. PRADEEP KUMAR JINDAL ON ACCOUNT OF ACCOMMODATION EN TRIES HAS TO BE ADDED TO TAXABLE INCOME OF THE BENEFICIARY ASSES SEE. IN VIEW OF S. NO NAME & ADDRESS OF THE BENEFICIARY AMOUNT (RS.) DATE OF ENTRY ENTRY PROVIDED BY 1. LAKCHMI CHAND TEJOO MAI 20,00,000 23.09.2010 -- FOCUS INDUSTRIAL RESOURCE LTD. 2. LAKCHMI CHAND TEJOO MAL 20,00,000 14.09.2010 FOCUS INDUSTRIAL RESOURCE LTD. 5 THIS COMMISSION OF RS. 5,12,500/- IS ALSO THE INCOM E OF THE ASSESSEE. THUS THE TOTAL INCOME ESCAPED TAXATION CO MES TO BE RS. 2,10,12,500/-( RS. 2,05,00,000/- + RS. 5,12,500/-). ENQUIRIES MADE BY THE AO AS SEQUEL TO INFORMATION C OLLECTED/ RECEIVED: ENQUIRIES MADE BY THE UNDERSIGNED CLEARLY SHOWS THA T THE ASSESSEE LAKCHMICHAND TEJOO MAI HAS BEEN A BENEFICIARY OF AC COMMODATION ENTRIES PROVIDED BY SH. PRADEEP KUMAR JIN DAL. THER E IS A LIVE LINK BETWEEN THE INFORMATION AVAILABLE WITH THE DEPART, , AT AND THE ENQUIRIES MADE BY THE DEPARTMENT IN THIS CASE. 5. FINDINGS OF THE AO: IN VIEW OF THE ABOVE DISCUSSION AND ANALYSIS OF THE MATERIAL AND ENQUIRIES MADE BY UNDERSIGNED CLEARLY SHOWS THAT THE ASSESSEE HAS BEEN A BENEFICIARY OF THE ACCOMMODATIO N ENTRIES PROVIDED BY SH. PRADEEP KUMAR JINDAL OR HIS ASSOCIATED ENTIT IES IN DIFFERENT LAYERS. 6. BASIS OF FORMING REASON TO BELIEVE AND DETAILS OF E SCAPEMENT OF INCOME: AS PER ENQUIRIES MADE BY INVESTIGATION WING OF THE DEPARTMENT AND THE UNDERSIGNED FROM THE SYSTEM AND THE MATERIAL AVAILA BLE IN THIS CASE 1 HAVE REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASS ESSMENT WHICH HAS BEEN SUFFICIENTLY DEMONSTRATED. CONSEQUENTLY. 1 HAV E REASONS TO BELIEVE THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF HIS INCOME FOR A.Y. 2011-12 AND INCOME HAS ESCAPED ASSESSMENT DUE TO FAILURE ON PART OF THE ASSESSEE WITHIN THE MEANING OF SEC. 147 OFL. T. ACT, 1961. 6 7. SEVENTH PARAGRAPH WILL INCLUDE ESCAPEMENT OF INCOME CHARGEABLE TO TAX IN RELATION TO ANY ASSETS (INCLUDING FINANCIAL INTE REST IN ANY ENTITY) LOCATED OUTSIDE INDIA: N.A. 8. FINDINGS OF THE AO ON TRUE AND FULL DISCLOSURE OF T HE MATERIAL FACTS NECESSARY FOR ASSESSMENT UNDER PROVISO TO SECTION 147 . THE MATERIAL AVAILABLE AND THE INFORMATION RECEIVED IN THIS CASE SHOWS THAT THE ASSESSEE HAS AVAILED THE UNDUE BENEFITS FR OM THE ACCOMMODATION ENTRIES. BENEFITS FROM THESE TRANSACT IONS HAD NOT BEEN SHOWN IN THE ORIGINAL RETURN BY THE ASSESSEE. NEITH ER WAS THIS INCOME ADDED DURING THE ASSESSMENT MADE IN THIS CASE FOR A .Y. 2011-12 AS THE ASSESSEE HAD NOT DISCLOSED THIS INCOME NEITHER IN H IS 1TR NOR DURING THE ASSESSMENT PROCEEDINGS. THE MATERIAL FACTS ARE CLEA R AND SOUND IN THIS CASE. 9. APPLICABILITY OF THE PROVISIONS OF SECTION 147/ 15 1 TO THE FACTS OF THE CASE: IN THIS CASE RETURN OF INCOME WAS FILED FOR THE YEA R UNDER CONSIDERATION AND REGULAR ASSESSMENT U/S 143(3) WAS MADE ON 13.03.2014. SINCE, 4 YEARS FROM THE END OF THE RELE VANT ASSESSMENT YEAR HAS EXPIRED IN THIS CASE, THE REQUI REMENTS TO INITIATE PROCEEDINGS U/S 147 OF THE ACT: ARE REASON TO BELIEVE THAT INCOME FOR THE YEAR UNDER CONSIDERATION HAS ESCAPED ASSESSMENT BECAUSE OF FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. IT IS PERTINEN T TO MENTION 7 HERE THAT REASONS TO BELIEVE THAT INCOME HAS ESCAPE D ASSESSMENT FOR THE YEAR UNDER CONSIDERATION HAVE RECORDED ABOV E IN PARA 3. I HAVE CAREFULLY CONSIDERED THE ASSESSMENT RECORDS CO NTAINING THE SUBMISSIONS MADE BY THE ASSESSEE IN RESPONSE TO VAR IOUS NOTICES ISSUED DURING THE ASSESSMENT PROCEEDINGS AND HAVE N OTED THAT THE ASSESSEE HAS NOT FULLY AND TRULY DISCLOSED THE MATE RIAL FACTS. IN THIS CASE MORE THAN FOUR YEARS HAVE LAPSED FROM THE END OF ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, NECESSA RY SANCTION TO ISSUE NOTICE U/S 148 IS BEING OBTAINED SEPARATEL Y FROM PRINCIPAL COMMISSIONER OF INCOME TAX DELHI UNDER AMENDED PROV ISIONS OF SECTION 151 OF THE ACT W.E.F. 01 06.2016. {DR. BHAGEERATH CHOUDHARY) ASSISTANT COMMISSIONER OF INCOME TAX CIR -47(1), NEW DELHI 6. THE MAIN CHALLENGE PUT FORTH BY THE LD. COUNSEL FOR THE ASSESSEE RELATES TO THE DETAILS PROVIDED BY THE ADIT, INV WH ICH IS AT PARA 3 OF THE REASONS. THE LD. COUNSEL FOR THE ASSESSEE VEHEM ENTLY STATED THAT 11 ENTRIES HAVE BEEN SHOWN IN THE INFORMATION AND I T CAN BE SEEN THAT THERE ARE REPETITION OF SAME ENTRIES/AMOUNTS AND TH E ASSESSING OFFICER HAS, IN FACT, AT PARA -6 OF HIS ORDER CONSIDERED ON LY 4 ENTRIES WHERE DATED: 21.03.2018 PLACE: NEW DELHI 8 TOTAL UNSECURED LOAN AMOUNT COMES TO RS. 75 LAKHS A ND INFORMATION IS IN RESPECT OF AMOUNT OF RS. 2.05 CRORES. 7. STRONG RELIANCE WAS PLACED ON THE DECISION OF TH E HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RMG POLY V IYNL INDIA LTD ITA NO. 29/2017 & CM NO. 1009/2017 ORDER DATED 07.07.20 17. 8. FURTHER RELIANCE WAS PLACED ON THE DECISION OF T HE CO-ORDINATE BENCH IN ITA NO. 4991/DEL/2014 AND 4853/DEL/2014 AN D ALSO ON THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF SYNFONIA TRADE LINKS PVT LTD IN WT(C) 12544/2018 JUDGMENT PR ONOUNCED ON 26.03.2021. REFERRING TO ALL THESE JUDGMENTS, THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY STATED THAT IN ALL THESE JUDGME NTS, THE ISSUE WAS IN RELATION TO MULTIPLE ENTRIES IN THE INFORMATION RECEIVED FROM INV WING WHERE THE ADDITIONS WERE MADE BY REOPENING ASS ESSMENT. 9. THE LD. COUNSEL FOR THE ASSESSEE ALSO ARGUED THA T THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND BEFORE ISSUING NOT ICE U/S 148 OF THE ACT AS IT CAN BE SEEN FROM THE REASONS FOR REOPENIN G ASSESSMENT AND ADDITIONS MADE IN THE ASSESSMENT ORDER DATED 18.12. 2018. 9 10. STRONGLY RELYING ON THE ORDER OF THE LD. CIT(A) , THE LD. DR STATED THAT THE ASSESSMENT PROCESS IS A FACT FINDING PROCE SS AND WHEN THE ASSESSING OFFICER FOUND THAT THERE WERE SEVERAL ENT RIES OF THE SAME AMOUNT, HE RESTRICTED THE ADDITION TO ACTUAL TRANSA CTION WHICH SHOWS THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND. TH E LD. DR RELIED UPON THE VERY SAME DECISIONS WHICH HAVE BEEN RELIED UPON BY THE FIRST APPELLATE AUTHORITY IN HIS APPELLATE ORDER. 11. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW. THE HON'BLE HIGH COURT OF DELHI WAS SEIZED WITH A SIMILAR SITUATION IN THE CASE OF RMG POLY VYNL INDI A LTD [SUPRA]. THE RELEVANT PART OF THE JUDGMENT READS AS UNDER: 9. HOWEVER, IN NEITHER OF THE ABOVE CASES ARE THE FACTS SIMILAR TO THOSE IN THE PRESENT CASE. THE TWO GLARING ERRORS I N THE REASONS IN THE PRESENT CASE ARE, IN FACT, UNUSUAL. WHAT THE AO MIGHT HAVE DONE IF HE WAS AWARE, EVEN AT THE STAGE OF CONSIDER ATION OF REOPENING OF THE ASSESSMENT THAT A RETURN HAD IN FA CT BEEN FILED BY THE ASSESSEE AND THAT THE EXTENT OF THE ACCOMMOD ATION ENTRIES WAS TO THE TUNE OF RS.78 LAKH AND NOT RS.1.56 CRORE WOULD BE A MATTER OF PURE SPECULATION AT THIS STAGE. HE MAY OR MAY NOT HAVE COME TO THE SAME CONCLUSION. BUT THAT IS NOT THE PO INT. THE QUESTION IS OF APPLICATION OF MIND BY THE AO TO THE MATERIAL AVAILABLE WITH HIM BEFORE DECIDING TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. 10 10. IN THIS CONTEXT THE FOLLOWING OBSERVATIONS OF T HIS COURT IN CIT V. SUREN INTERNATIONAL (2013) 357 ITR 24 (DEL)ARE RELEVANT: '....IN THE FIRST INSTANCE, WE DO NOT FIND THE REAS ONS AS RECORDED BY THE ASSESSING OFFICER TO BE REASONS IN LAW, AT ALL. A BARE PERUSAL OF THE TABLE OF ALLEGED ACCOMMODATION ENTRIES INCLUDED IN THE REASONS AS RECORDED, DISCLOSES THAT THE SAME ENTRIES HAVE B EEN REPEATED SIX TIMES. THIS IS CLEARLY INDICATIVE OF THE CALLOU S MANNER IN WHICH THE REASONS FOR INITIATING REASSESSMENT PROCEEDINGS ARE RECORDED AND WE ARE UNABLE TO COUNTENANCE THAT ANY BELIEF BA SED ON SUCH STATEMENTS CAN EVER BE ARRIVED AT. THE REASONS HAVE BEEN RECORDED WITHOUT ANY APPLICATION OF MIND AND THUS N O BELIEF THAT INCOME HAS ESCAPED ASSESSMENT CAN BE STATED TO HAVE BEEN FORMED BASED ON SUCH REASONS AS RECORDED.' 11. THERE CAN BE NO MANNER OF DOUBT THAT IN THE INS TANT THERE WAS A FAILURE OF APPLICATION OF MIND BY THE AO TO THE F ACTS. IN FACT HE PROCEEDED ON TWO WRONG PREMISES - ONE REGARDING ALL EGED NON-FILING OF THE RETURN AND THE OTHER REGARDING THE EXTENT OF THE SO-CALLED ACCOMMODATION ENTRIES. 12. RECENTLY, IN ITS DECISION DATED 26TH MAY, 2017 IN ITA NO.692/2016 ( PRINCIPAL COMMISSIONER OF INCOME TAX-6 V. MEENAKSHI OVERSEAS PVT. LTD .), THIS COURT DISCUSSED THE LEGAL POSITION REGARDING REOPENING OF ASSESSMENTS WHERE T HE RETURN FILED AT THE INITIAL STAGE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND NOT UNDER SECTION 143(3) OF THE ACT. THE REASONS FOR THE REOPENING OF THE ASSESSMENT IN THAT CASE WERE MORE OR LESS SIMILAR TO THE REASONS IN THE PRESENT CASE, VIZ., INFORMATI ON WAS RECEIVED 11 FROM THE INVESTIGATION WING REGARDING ACCOMMODATION ENTRIES PROVIDED BY A 'KNOWN' ACCOMMODATION ENTRY PROVIDER. THERE, ON FACTS, THE COURT CAME TO THE CONCLUSION THAT THE RE ASONS WERE, IN FACT, IN THE FORM OF CONCLUSIONS 'ONE AFTER THE OTH ER' AND THAT THE SATISFACTION ARRIVED AT BY THE AO WAS A 'BORROWED S ATISFACTION' AND AT BEST 'A REPRODUCTION OF THE CONCLUSION IN TH E INVESTIGATION REPORT.' 13. AS IN THE ABOVE CASE, EVEN IN THE PRESENT CASE, THE COURT IS UNABLE TO DISCERN THE LINK BETWEEN THE TANGIBLE MAT ERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE TOO, THE INFORMATIO N RECEIVED FROM THE INVESTIGATION WING CANNOT BE SAID TO BE TA NGIBLE MATERIAL PER SE WITHOUT A FURTHER INQUIRY BEING UNDERTAKEN B Y THE AO. IN THE PRESENT CASE THE AO DEPRIVED HIMSELF OF THAT OP PORTUNITY BY PROCEEDING ON THE ERRONEOUS PREMISE THAT ASSESSEE H AD NOT FILED A RETURN WHEN IN FACT IT HAD. 14. TO COMPOUND MATTERS FURTHER THE IN THE ASSESSME NT ORDER THE AO HAS, INSTEAD OF ADDING A SUM OF RS.78 LAKH, EVEN GOING BY THE REASONS FOR REOPENING OF THE ASSESSMENT, ADDED A SU M OF RS.1.13 CRORE. ON WHAT BASIS SUCH AN ADDITION WAS MADE HAS NOT BEEN EXPLAINED. 15. FOR THE AFOREMENTIONED REASONS, THE COURT IS SA TISFIED THAT NO ERROR WAS COMMITTED BY THE ITAT IN HOLDING THAT REO PENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS BAD IN LAW. 12 12. THE HON'BLE HIGH COURT OF DELHI, AGAIN, IN THE CASE OF SYNFONIA TRADE LINKS [SUPRA] CONSIDERED SIMILAR ISSUE AND TH E RELEVANT EXTRACT OF THE JUDGMENT READ AS UNDER: 9. WE HAVE HEARD THE LEARNED COUNSEL FOR THE PARTI ES AND PERUSED THE RECORD. BEFORE WE PROCEED FURTHER, IT WOULD BE HELPFUL IF WE WERE TO SET FORTH CERTAIN WELL-ESTABLISHED PRINCIPL ES ENUNCIATED BY THE COURTS OVER THE YEARS VIS--VIS INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. (I) THE REASONS WHICH LEAD TO THE FORMATION OF OPIN ION OR BELIEF THAT THE ASSESSEES INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT SHOULD BE INEXTRICABLY CONNECTED. IN OTH ER WORDS, THE REASONS FOR THE FORMATION OF OPINION SHOULD HAVE A RATIONAL CONNECTION WITH THE FORMATION OF THE BELIEF THAT TH ERE HAS BEEN AN ESCAPEMENT OF INCOME CHARGEABLE TO TAX ( SEE: ITO V. LAKHMANI MEWAL DAS, 1976 3 SCC 757] (II) THE EXPRESSION 'REASON TO BELIEVE' IS STRONGER THAN THE WORD 'SATISFIED'. THE BELIEF SHOULD BE BASED ON MATERIAL THAT IS RELEVANT AND COGENT. ( SEE: GANGA SARAN & SONS PVT. LTD. V. ITO, 1981 3 SC C 143 ]. (II) (A) THE ASSESSING OFFICER SHOULD HAVE REASONS TO BELIEVE THAT THE TAXABLE INCOME HAS ESCAPED ASSESSMENT. THE PROC ESS OF REASSESSMENT CANNOT BE TRIGGERED BASED ON A MERE SU SPICION. THE 13 EXPRESSION 'REASON TO BELIEVE' WHICH IS FOUND IN SE CTION 147 OF THE ACT DOES NOT HAVE THE SAME CONNOTATION AS 'REASON T O SUSPECT'. THE ORDER RECORDING REASONS SHOULD FILL THIS CHASM. THE MATERIAL BROUGHT TO THE KNOWLEDGE OF THE ASSESSING OFFICER S HOULD HAVE NEXUS WITH THE FORMATION OF BELIEF THAT THE TAXABLE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT; THE LINK BEING THE REA SONS RECORDED, IN THAT BEHALF, BY THE ASSESSING OFFICER. (III) THE AO IS MANDATORILY OBLIGED TO RECORD REASO NS BEFORE ISSUING NOTICE TO THE ASSESSEE UNDER SECTION 148(1) OF THE ACT. THIS IS EVIDENT FROM THE BARE PERUSAL OF SUB-SECTION (2) OF SECTION 148 OF THE ACT. (IV) NO NOTICE CAN BE ISSUED UNDER SECTION 148 OF T HE ACT BY THE A.O. AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY UNLESS THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISSIONER OR PRINCIPAL COMMISSIONER OR COMMISSIONER ARRIVES A T A SATISFACTION BASED ON THE REASONS RECORDED BY THE A.O. THAT IT I S A FIT CASE FOR ISSUANCE OF A NOTICE UNDER SECTION 148 OF THE ACT. [ SEE: SECTION151(1) OF THE ACT ]. (V) THE LIMITATION FOR ISSUANCE OF NOTICE UNDER SEC TION 148 AS PRESCRIBED UNDER SECTION 149 OF THE ACT COMMENCES F ROM THE DATE OF ITS ISSUANCE WHILE THE TIME LIMIT FOR PASSING TH E ORDER OF ASSESSMENT, REASSESSMENT, COMPUTATION AND RE-COMPUT ATION AS PRESCRIBED UNDER SECTION 153 OF THE ACT COMMENCES F ROM THE DATE OF SERVICE [ SEE: R.K. UPADHYAY V. SHANAB BHAI P. PATEL, (1987) 3 SCC 96 ]. 14 (VI) A JURISDICTIONAL ERROR WOULD OCCUR, WHICH CAN BE CORRECTED BY A WRIT COURT, IF REASONS TO BELIEVE ARE BASED ON GROU NDS THAT ARE EITHER ARBITRARY AND/OR IRRATIONAL. ( SEE: SHEO NATH SINGH V. APPELLATE ACIT, CALCUTTA (1972) 3 SCC 234 ]. 9.1. THUS, IF ONE WERE TO APPLY THE AFORESTATED PRI NCIPLES, IT WOULD BE CLEAR AS DAYLIGHT THAT THE ORDER RECORDING REASO NS DISCLOSES COMPLETE NON-APPLICATION OF MIND. THE REASON WE SAY SO IS DISCERNIBLE FROM THE FOLLOWING: 9.2. RESPONDENT NO.1 IN PARAGRAPHS 2 AND 3 OF THE O RDER RECORDING REASONS HAS UNEQUIVOCALLY STATED THAT UNDER THE HEA DING DETAILS OF INFORMATION RECEIVED REGARDING ESCAPEMENT OF INCOME AND ANALYSIS THAT MATERIAL IMPOUNDED DURING THE SEARCH CONDUCTED AT THE PREMISES OF MR. PRADEEP KUMAR JINDAL HAD, INTER ALIA , REVEALED THAT HE HAD MADE INVESTMENTS IN THE FORM OF SHARE CAPITA L, SHARE PREMIUM, LOANS AND ADVANCE IN LIEU OF CASH VIA FRON T/NON-LISTED COMPANIES CONTROLLED BY DUMMY DIRECTORS TO THE TUNE OF NEARLY RS.100 CRORES WHICH INCLUDED THE ASSESSEE. IT IS IN THIS CONTEXT THAT IN THE ORDER RECORDING REASONS, THE FOLLOWING TABLE IS SET OUT: S.NO. BENEFICIARIES NAME OF ENTRY PROVI DER DATE AMOUNT (RS.) I. SYNFONIA PHARMACEUTICALS DUME FOOTWEARS 09.06.2010 17,00,000 NAME CHANGED TO SYNFONIA PVT LTD TRADELINKS PVT. LTD II SYNFONIA PHARMACEUTICALS PVT. LTD. DO- 09.06.2010 5,00,000/- III SYNFONIA PHARMACEUTICALS PVT. LTD. DO- 22.06.2010 1,00,000/- 15 IV SYNFONIA PHARMACEUTICALS. FOCUS INDUSTRIAL PVT. LTD RESOURCES LTD. 24.05.2 010 43,500/- V SYNFONIA PHARMACEUTICALS PAWANSUT HOLDINGS 24.05.2010 3,50,000/- PVT. LTD. TOTAL 26,93,500/- THE TABLE EXTRACTED ABOVE, AS NOTED IN THE EARLIER PART OF THE JUDGMENT, IS FOLLOWED BY THE FOLLOWING ASSERTION WHICH IS MAD E IN THE ORDER RECORDING REASONS: THUS, THE ASSESSEE COMPANY HAS TAKEN BOGUS SHARE C APITAL/SHARE PREMIUM FROM THE SAID ENTRIES PROVIDERS AMOUNTING T O RS.26,93,500/-. 9.3. FURTHERMORE, RESPONDENT NO.1 IN NO UNCERTAIN T ERMS, HAS INDICATED IN THE ORDER RECORDING REASONS THAT THE I NFORMATION WHICH TRIGGERED THE INITIATION OF PROCEEDINGS QUA THE ASSESSEE UNDER SECTION 147 OF THE ACT WAS RECEIVED UPON A SE ARCH BEING CARRIED OUT AT THE RESIDENCE OF MR. PRADEEP KUMAR J INDAL. WHILE A GENERAL STATEMENT HAD BEEN MADE THAT MR. PRADEEP KU MAR JINDAL HAD PROVIDED ACCOMMODATION ENTRIES IN THE FORM OF S HARE CAPITAL/SHARE PREMIUM, LOANS AND ADVANCES, IN LIEU OF CASH, QUA A LARGE NUMBER OF BENEFICIARIES THROUGH HIS FRONT COM PANIES, INSOFAR AS THE ASSESSEE WAS CONCERNED, IT WAS EMPHASIZED TH AT THE ACCOMMODATION ENTRY WAS REFLECTED IN ITS BOOKS IN T HE FORM OF BOGUS SHARE CAPITAL AND SHARE PREMIUM. 9.4. RESPONDENT NO.1, IN PARAGRAPH 4 OF THE ORDER R ECORDING REASONS, IN NO UNCERTAIN TERMS ALLUDES TO THE FACT THAT THE 16 INFORMATION WAS RECEIVED FROM THE INVESTIGATION WIN G. THE EMPHASIS WAS LAID ON THE FACT THAT THE ENTRY PROVIDERS WERE THREE COMPANIES I.E. DUME FOOTWEARS PVT. LTD., FOCUS INDUSTRIAL RES OURCES LTD. AND PAWANSUT HOLDINGS LTD. A PERUSAL OF THE ORDER RECOR DING REASONS SHOWS THAT THE PURPORTED INVESTMENTS MADE VIA THESE ENTITIES WERE QUANTIFIED AT RS.26,93,500/-. THIS INFORMATION WHIC H WAS THE UNDERLINING MATERIAL BASED ON WHICH PROCEEDINGS UND ER SECTION 147 OF THE ACT WERE TRIGGERED WAS CORRELATED WITH THE R ETURN OF INCOME FILED BY THE ASSESSEE FOR THE CONCERNED AY I .E. AY 2011- 2012. IN CORRELATING THE INFORMATION, CONCEDEDLY, R ESPONDENT NO.1 MADE ERRORS WITH REGARD TO THE BASIC INFORMATION PR OVIDED BY THE ASSESSEE IN ITS BALANCE SHEET FOR THE YEAR ENDING O N 31.03.2011 CONCERNING AUTHORIZED SHARE CAPITAL, ISSUED AND SUB SCRIBED PAID-UP SHARE CAPITAL, SHARE PREMIUM AND EVEN AS REGARDS TH E YEAR IN WHICH THE ASSESSEE HAD BEEN INCORPORATED. THE FACTS AND F IGURES HAVE ALREADY BEEN RECORDED IN PARAGRAPHS 2 TO 2.9 ABOVE. THEREFORE, THE CORRELATION BETWEEN THE UNDERLYING MATERIAL AND THE INFORMATION WHICH WAS AVAILABLE IN THE BALANCE SHEE T OF THE ASSESSEE WAS CLEARLY NOT MADE. 9.5. MR. SINGH, IN A DESPERATE ATTEMPT TO SALVAGE T HE SITUATION, DREW OUR ATTENTION TO THE UNSECURED LOANS SHOWN IN THE INCOME TAX RETURNS OF THE ASSESSEE FOR AYS 2010-2011 AND 2011- 2012 AMOUNTING TO RS.38,071/- AND RS.25,57,206/- RESPECT IVELY. APART FROM ANYTHING ELSE, SIMPLE MATH WOULD SHOW THAT THE CUMULATIVE TOTAL OF THESE FIGURES IS RS.25,95,277/- AND NOT RS .26,93,500/- WHICH, ACCORDING TO RESPONDENT NO. 1, IS THE UNEXPL AINED CREDIT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND, HENCE, R EQUIRED TO BE 17 ADDED UNDER SECTION 68 OF THE ACT. THEREFORE, FOR M R. SINGH TO SAY THAT THESE ARE INADVERTENT ERRORS AND HENCE SHO ULD BE IGNORED, IN OUR OPINION, IS AN ARGUMENT THAT IS COMPLETELY M ISCONCEIVED. AS INDICATED ABOVE, IF THE INFORMATION RECEIVED (FROM THE INVESTIGATION WING) WAS THAT THE ACCOMMODATION ENTRIES, IN LIEU O F CASH, WERE TAKEN IN THE FORM OF SHARE CAPITAL AND SHARE PREMIU M THEY COULD CERTAINLY NOT BE LINKED TO UNSECURED LOANS RECEIVED IN AYS 2010- 2011 AND 2011-2012. 9.6. IT IS PERTINENT TO NOTE THAT IN THE OBJECTIONS FILED BY THE ASSESSEE, AN ATTEMPT HAS BEEN MADE TO EXPLAIN THE P URPORTED ACCOMMODATION ENTRIES BY STATING THEREIN THAT THE A DVANCES HAD BEEN GIVEN TO THE 5 COMPANIES ADVERTED TO IN THE OR DER RECORDING REASONS WHICH WERE RECEIVED BACK ON THE DATES GIVEN IN THE SAID ORDER. THE ASSESSEE ALSO WENT ON TO STATE, IN ITS O BJECTIONS, THAT THE OPENING BALANCE (AS ON 01.04.2010) AND CLOSING BALANCE (AS ON 31.03.2011) OF THE SHARE PREMIUM ACCOUNT (RS. 3,66, 16,800/-) AND THE SHARE CAPITAL ACCOUNT (RS. 24,15,200/-) REMAINE D UNCHANGED. IN OTHER WORDS, THE EMPHASIS WAS THAT THERE WAS NO INC REASE IN THE SHARE CAPITAL OR THE SHARE PREMIUM ACCOUNT, AS ALLE GED, OR AT ALL. IN THE ORDER PASSED BY THE ASSESSING OFFICER DATED 08. 10.2018, WHEREBY, THE OBJECTIONS OF THE ASSESSEE WERE REJECT ED; NONE OF THIS HAS BEEN DEALT WITH. THEREFORE, IN OUR VIEW, W HILE THE ASSESSING OFFICER MAY SUSPECT THAT THE TAXABLE INCO ME OF THE ASSESSEE ESCAPED ASSESSMENT, HE COULD NOT HAVE FORM ED A BELIEF QUA THE SAME BASED ON THE MATERIAL WHICH IS, PRESENTLY, ON RECORD. 18 9.7. THEREFORE, IN OUR OPINION, THE FORMATION OF BE LIEF BY RESPONDENT NO.1 THAT INCOME OF THE ASSESSEE CHARGEA BLE TO TAX HAD ESCAPED ASSESSMENT, WAS UNREASONABLE AND IRRATIONAL , AS IT COULD NOT BE RELATED TO THE UNDERLINING INFORMATION; SOME THING WHICH IS DISCERNIBLE FROM A BARE READING OF THE ORDER RECORD ING REASONS. 13. IN LIGHT OF THE AFOREMENTIONED DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT, THE CONTENTION OF THE LD . DR THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND WHILE FRAMIN G ASSESSMENT ORDER DOES NOT HOLD ANY WATER BECAUSE THE APPLICATION OF MIND IS REQUIRED WHILE ISSUING NOTICE U/S 148 OF THE ACT AND NOT DUR ING ASSESSMENT PROCEEDINGS BECAUSE THE CHALLENGE IS OF THE NOTICE FOR REOPENING THE ASSESSMENT WHICH WHEN SERVED, SETS THE LAW INTO MOT ION. 14. IT IS NOT IN DISPUTE THAT THE ORIGINAL RETURN W AS SELECTED FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT WAS FRAMED U /S 143(3) OF THE ACT, OBVIOUSLY, AFTER SCRUTINISING THE RETURN OF IN COME QUA THE DETAILS FURNISHED THEREWITH. 15. THE LD. COUNSEL FOR THE ASSESSEE MADE A STATEME NT AT BAR THAT THE BALANCE SHEET FILED WITH THE RETURN OF INCOME C LEARLY SHOWED UNSECURED LOANS IN LIABILITY SIDE AND THEREFORE, IT CANNOT BE SAID THAT 19 THE ASSESSEE HAS NOT DISCLOSED TRUE AND MATERIAL FA CTS IN THE ORIGINAL RETURN OF INCOME. 16. WE HAVE CAREFULLY GONE THROUGH THE DECISIONS RE LIED UPON BY THE FIRST APPELLATE AUTHORITY. WE FIND THAT IN NONE OF THE DECISIONS THE ISSUE WAS OF MULTIPLICITY OF THE ENTRIES IN THE INF ORMATION RECEIVED BY THE ASSESSING OFFICER WHICH FORMED THE BASIS FOR RE OPENING THE ASSESSMENT. IN ALL THE DECISIONS RELIED UPON BY TH E LD. DR, THE ISSUE WAS WHETHER THE INFORMATION RECEIVED AMOUNTS TO TAN GIBLE MATERIAL EVIDENCE FOR REOPENING THE ASSESSMENT. WHEREAS THE FACTS OF THE CASE IN HAND RELATES TO THE VERY INFORMATION ITSELF WHIC H CONTAINS 11 ENTRIES AS MENTIONED ELSEWHERE, WHERE THE TOTAL AMOUNT OF ESCAPED INCOME IS MENTIONED AT RS. 2.05 CRORES WHICH IS PART OF THE R EASONS RECORDED FOR REOPENING THE ASSESSMENT. 17. CONSIDERING THE TOTALITY OF THE FACTS IN LIGHT OF THE DECISIONS OF THE HON'BLE JURISDICTIONAL HIGH COURT DISCUSSED ELS EWHERE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSUMPTION OF JURISDIC TION BY ISSUE OF NOTICE U/S 148 OF THE ACT IS BAD IN LAW WHICH MAKES THE ASSESSMENT ORDER DATED 18.12.2018 FRAMED U/S 147 R.W.S 143(3) OF THE ACT VOID AB 20 INITIO. SINCE WE HAVE QUASHED THE ASSESSMENT, WE D O FIND IT NECESSARY TO DWELL INTO THE MERITS OF THE CASE. 18. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IN ITA NO. 8094/DEL/2019 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 06.08. 2021. SD/- SD/- [ SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 06 TH AUGUST, 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 21 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER