M/s Priya Tools Pvt. Ltd., Chandigarh V. ACIT, Chandigarh

ITA 849/CHANDI/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 8916 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 14-05-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 22-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus Share capital; Transfer pricing; Search and seizure; Share purchase agreement; Retrospective amendment; Tangible material; Fair market value; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 142(1); 133A; 153A; 143(1); 148; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCHB, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO. 849/CHD/2017 ASSESSMENT YEAR 2011-12 M/S PRIYA TOOLS PVT. LTD. VS. ACIT 341, SECTOR 40A CENTRAL CIRCLE-II CHANDIGARH CHANDIGARH PAN NO. AABCP7962L (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. ASHWANI KUMAR, CA DEPARTMENT BY: SMT. ZEENIA HANDA, SR.(DR) DATE OF HEARING : 22/05/2019 DATE OF PRONOUNCEMENT : 10/07/2019 O R D E R PER N.K. SAINI, VICE PRESIDENT : THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DT. 31/03/2017 OF LD. CIT(A)-3, GURGAON. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE LD. CIT(APPEALS) HAS ERRED IN UPHOLDING TH E REASSESSMENT PROCEEDINGS WHEREAS, THE NOTICE ISSUED U/S 148 BY T HE LD. ASSESSING OFFICER IS NOT MAINTAINABLE AS THE SAME IS AGAINST THE LAW, FACTS & THE JURISDICTION AND THEREFORE REASSESSMENT MADE BE CONSIDERED AS VOID. 2. THAT THE LD. CIT (APPEALS) HAS GROSSLY ERRED IN HOL DING THE REASSESSMENT AS VALID INSPITE OF THE FACT THAT THE REASSESSMENT ORD ER U/S 143(3) R.W.S 147 BEING BAD IN LAW AND FACTS AND WITHOUT JURISDICTION LIABLE TO BE CONSIDERED NULL AND VOID AND ADDITIONS MADE MAY PLEASE BE DELETED. 3. THAT THE LD. CIT (APPEALS) HAS ERRED IN HOLDING THE REASSESSMENT ORDER VALID INSPITE OF THE FACT THAT THE LD. ASSESSING OFFICER HAS WRONGLY DISMISSED THE OBJECTIONS RAISED BY THE ASSESSEE AGAINST THE NOTIC E U/S 148, WHEREAS THE OBJECTIONS RAISED BY THE ASSESSEE OUGHT TO HAVE BEE N ALLOWED. THEREFORE ORDER PASSED U/S 143(3) R.W.S 147 SHOULD BE DISMISSED AND ADDITIONS MADE THEREIN MAY KINDLY BE DELETED. 4. THAT, THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 1,43,93,620/-U/S 56(2)(VIIA) ON WRONG BASIS IN AN A RBITRARY AND UNJUSTIFIED MANNER WITHOUT APPRECIATING THE EXPLANATION AND EVIDENCE P LACED ON RECORD, WHEREAS PROVISION OF SECTION 56(2)(VIIA) WERE NOT APPLICABL E ON THE DATE OF TRANSACTION OF TRANSFER OF SHARES IN THE PRESENT CASE I.E. 10.05.2 010. THEREFORE NO ADDITION CAN BE MADE TO THE INCOME OF THE ASSESSEE U/S 56(2)(VIIA) AND THE ADDITION OF RS. 1,43,93,620/- MAY BE DELETED. 2 5. THAT THE LD. CIT(APPEALS) HAS ERRED IN CONFIRMING T HE ADDITION OF RS. 1,43,93,620/- U/S 56(2)(VIIA) ON PRESUMPTIONS BY AS SUMING THE TRANSACTION OF SHARE TRANSFER AS NON GENUINE ON THE BASIS OF HUMAN PROBA BILITIES WITHOUT APPRECIATING THE EXPLANATION AND EVIDENCE PLACED ON RECORD. THER EFORE THE ADDITION OF RS.1,43,93,620/- MAY BE DELETED. 3. VIDE GROUND NOS. 1 TO 3 THE ASSESSEE HAS CHALLEN GED THE VALIDITY OF THE JURISDICTION OF THE A.O. IN ISSUING THE NOTICE UNDE R SECTION 148 OF OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT). 4. FACTS OF THE CASE IN BRIEF ARE THAT A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON 04/10/201 2 AT THE BUSINESS AND RESIDENTIAL PREMISES OF M/S STEEL STRIPS GROUP OF C ASES ALONGWITH SURVEY UNDER SECTION 133A OF THE ACT, IN THE CASE OF THE ASSESSE E. EARLIER THE RETURN OF INCOME WAS FILED BY THE ASSESSEE UNDER SECTION 139(1) OF T HE ACT ON 26/09/2011 AT AN INCOME OF RS. 8030/-, THE SAID RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AT THE RETURNED INCOME ON 13/01/2012. THEREAFTE R THE A.O. ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT ON 05/03/2015. IN RESP ONSE TO WHICH THE ASSESSEE FILED ITS RETURN OF INCOME ON 08/04/2015 THE ASSESS EE ALSO REQUESTED THE REASONS FOR REOPENING THE CASE VIDE LETTER DT. 01/04/2015. THE A.O. COMMUNICATED THE REASONS RECORDED FOR REOPENING VIDE LETTER DT. 16/0 6/2015 WHICH READ AS UNDER: 'A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 O F THE INCOME TAX ACT, 1961 WAS CARRIED OUT ON 04.10.2015 BY THE DIRECTORATE OF INCOME TAX (INV.), CHANDIGARH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE M/S STEEL STRIPS GROUP OF CASES ALONGWITH SURVEY IN THE CASE OF M/S PRIYA TOOLS PVT. LTD., 341, SECTOR 40A, CHANDIGARH. AMONGST THE VARIOUS BUSINESS / RESIDENTIAL PREMISES COVERED, THE PREMISE # 341, SECTOR 40A, CHANDIGARH WHICH IS THE REGISTERED ADDR ESS OF M/S PRIYA TOOLS PVT. LTD. WAS SURVEYED AND THAT OF M/S BHARATNET TECHNOLOGY L TD. WAS COVERED U/S 132 AND ACCORDINGLY BOTH THE COMPANIES ARE BEING ASSESS ED WITH THE UNDERSIGNED U/S 142(1) AND 153A RESPECTIVELY. AS PER INFORMATION ON RECORD AND THE REPLY SUBMITTE D IN THIS CASE BY M/S BHARATNET TECHNOLOGY LTD., IT IS SEEN THAT M/S PRIY A TOOLS PVT. LTD. HAS MADE AN INVESTMENT IN THIS YEAR IN 719681 UNQUOTED SHARES O F M/S BHARATNET TECHNOLOGY LTD. BY PURCHASING THEM AT A PRICE OFRS. 1 EACH. HO WEVER, THE FAIR MARKET VALUE OF SUCH SHARE IS MUCH MORE AS CALCULATED FROM THE N ET ASSETS VALUE OF M/S BHARATNET TECHNOLOGY LTD. AS PER PROCEDURE PRESCRIB ED UNDER RULE 11UA AND IT COMES TO AROUND RS.21 PER SHARE. IN THE GIVEN SCENA RIO, AS PER THE PROVISIONS OF SECTION 56(2)(VIIA), THE DIFFERENCE OF FAIR MARKET VALUE (AS COMPUTED IN ACCORDANCE WITH RULE 11UA) AND THE ACTUAL CONSIDERA TION PAID; IS TAXABLE IN THE HANDS OF PURCHASER I.E. M/S PRIYA TOOLS PVT. LTD. I HAVE THEREFORE REASONS TO BELIEVE THAT APPROXIMAT ELY RS.2.10 CR. HAS ESCAPED ASSESSMENT IN LIGHT OF PROVISIONS U/S 56(2)(VIIA) I N THE HANDS OF M/S PRIYA TOOLS PVT. LTD. AND ASSESSMENT U/S 148 NEEDS TO BE RESORTED FO R THE A. Y.2011-12. ACCORDINGLY, NOTICE U/S 148 NEEDS TO BE ISSUED TO A SSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH C OMES TO NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 O F THE I. T. ACT.' THEREAFTER THE ASSESSEE VIDE ITS LETTER DT. 15/10/2 015 RAISED OBJECTION TO THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT WHI CH THE A.O. DISPOSED OFF VIDE 3 LETTER DT. 17.11.2015. THE A.O. MENTIONED THAT THE ASSESSEE FURTHER RAISED THE OBJECTIONS VIDE LETTER DT. 07/12/2015 WHICH WERE AL SO DISPOSED OFF VIDE LETTER DT. 08/12/2015. (HOWEVER NOTHING IS MENTIONED AS TO HOW AND IN WHAT MANNER THE OBJECTIONS OF THE ASSESSEE WERE DISPOSED OFF). 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAD MADE AN INVESTMENT IN THIS YEAR FOR 71 9681 UNQUOTED SHARES OF M/S BHARATNET TECHNOLOGY LTD. PURCHASED AT A PRICE OF R E. 1 EACH FROM THE FOLLOWING PARTIES: SL.NO. NAME OF TRANSFEROR NO. OF SHARES 1 ACHATES E-SERVICES (P) LTD. 24800 2. ALPEE ENTP. (P) LTD. 115281 3. GOLDEN MERCHANTILES 154600 4. TEN EQUITY LTD. 425000 THE A.O. COMPUTED THE FAIR MARKET VALUE(FMV) OF THE AFORESAID SHARE AS PER RULE 11UA AS UNDER: FMV= NET WORTH DIVIDED BY NO. OF SHARES = 4,29,48,4 24 = 20.79 20,66,089 6. THE A.O. OBSERVED THAT THE FMV OF THE SHARE WAS APPROXIMATELY RS. 21/-, AS CALCULATED FROM THE NET ASSET VALUE OF M/S BHARA TNET TECHNOLOGY LTD. BUT THE SAME HAD BEEN TRANSFERRED AT A PRICE OF RS. 1. THE A.O. ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE ADDITION OF RS. 2.10 CR ORES MAY NOT BE MADE TO ITS INCOME. IN RESPONSE THE ASSESSEE SUBMITTED THAT IT HAD ACQUIRED THE SHARES OF M/S BHARATNET TECHNOLOGY LTD. ON 10/05/2010 AND THE PROVISIONS OF SECTION 56(VII)(A) CAME INTO EFFECT FROM 01/06/2010 WHICH D ID NOT APPLY TO IT. THE ASSESSEE ALSO FURNISHED A CONFIRMATION CERTIFICATIO N FROM A PRACTICING COMPANY SECRETARY THAT THE SHARES OF M/S BHARATNET TECHNOLO GY LTD. HAD BEEN TRANSFERRED IN FAVOUR OF THE ASSESSEE ON 10/05/2010. THE ASSESS EE ALSO SUBMITTED AS UNDER: AS PER SECTION 159 OF THE COMPANIES ACT, 1956 WHIC H STATES AS UNDER: - EVERY COMPANY HAVING A SHARE CAPITAL SHALL, WITHIN SIXTY DAYS FROM THE DAY ON WHICH EACH OF THE ANNUAL GENERA/ MEETING REFERRED T O IN SECTION166 IS HELD, PREPARE AND FILE WITH THE REGISTRAR A RETURN CONTAI NING THE PARTICULARS SPECIFIED IN PART I OF SCHEDULE V, AS THY STOOD ON THAT DAY, REG ARDING:- A) ITS REGISTERED OFFICE, B) THE REGISTER OF ITS MEMBERS, C) THE REGISTER OF ITS DEBENTURE HOLDERS, D) ITS SHARES AND DEBENTURES, E) ITS INDEBTEDNESS, F) ITS MEMBERS AND DEBENTURE HOLDERS, PAST AND PRESENT AND G) ITS DIRECTORS, MANAGING DIRECTORS PAST AND PRESENT. PROVIDED THAT IF ANY OF THE FIVE IMMEDIATELY PRECED ING RETURNS HAS GIVEN AS AT THE DATE OF THE ANNUAL GENERAL MEETING WITH REFEREN CE TO WHICH IT WAS SUBMITTED 4 THE FULL PARTICULARS REQUIRED AS TO PAST AND PRESEN T MEMBERS AND THE SHARE HELD AN TRANSFERRED BY THEM, THE RETURN IN QUESTION MAY CONTAIN ONLY SUCH OF THE PARTICULARS AS RELATE TO PERSONS CEASING TO BE OR B ECOMING MEMBERS SINCE THAT DATE AND TO SHARES TRANSFERRED SINCE THAT DATE OR T O CHANGES COMPARED WITH THAT DATE IN THE NUMBER OR SHARES HELD BY A MEMBER. AS PER THE AFORESAID PROVISIONS OF SECTION 159, ALL THE TRANSFERS TAKEN PLACE DURING THE YEAR HAS TO BE INTIMATED WHILE FILING THE ANNUA L RETURN WITH REGISTRAR OF COMPANIES, WHICH HAS BEEN DONE BY BHARATNET AND DUL Y ACCEPTED BY THE REGISTRAR OF COMPANIES. THE CERTIFIED COPY OF THE D ULY FILED AND APPROVED ANNUAL RETURN BY THE REGISTRAR OF COMPANIES FOR THE PERIOD UNDER CONSIDERATION IS ENCLOSED WHEREIN DATE OF TRANSFER OF SHARES IS MENT IONED AS ON 10.05.2010. THE ASSESSEE IS STILL HOLDING THE SHARES OF BHARATNET T ECHNOLOGY LTD. AND THE SAME IS ALSO APPEARING IN ALL THE SUBSEQUENT ANNUAL RETURNS FILED BY THE BHARATNET TECHNOLOGY LTD. COPIES OF THE SUBSEQUENT ANNUAL RET URNS FILED WITH ROC ARE ALSO FILED. ISSUE OF SHARE CERTIFICATES UNDER SECTION 113 OF TH E COMPANIES ACT, EVERY COMPANY UNLESS PROHIBITED BY ANY PROVISIONS OF LAW OR OF ANY ORDER OF ANY COURT, TRIBUNAL OR OTHER AUTHORITY, SHALL WITHIN THREE MON THS AFTER THE ALLOTMENT OF ANY OF ITS SHARES, DEBENTURES OR DEBENTURE STOCK AND WITHI N TWO MONTHS AFTER THE APPLICATION FOR THE REGISTRATION OF TRANSFER OF ANY SUCH SHARES, DEBENTURE OR DEBENTURE STOCK, DELIVER IN ACCORDANCE WITH THE PRO CEDURE LAID DOWN IN SECTION 53, THE CERTIFICATES OF ALL SHARES, DEBENTURES AND CERTIFICATES OF DEBENTURE STOCKS ALLOTTED OR TRANSFERRED. AS PER THE AFORESAID SPECIFIED PROVISIONS OF SECTIO N 113, THE ASSESSEE HAS BEEN ISSUED DULY ENDORSED TRANSFER DATED 10.05.2010, SHA RE CERTIFICATES BY BHARATNET WHICH ARE ENCLOSED FOR YOUR PERUSAL PLEASE. THE CERTIFIED ANNUAL RETURN, SHARE CERTIFICATES AND CERTIFICATE OF THE PRACTICING COMPANY SECRETARY WHO IS AN EXPERT IN THE FIELD ARE THE CONCLUSIVE, AUTHENTIC AND LEGAL DOCUMENTS WHICH CONFIRMS THE DATE OF TRAN SFER OF SHARES AS 10.05.2010 AS AFORESAID. THE SHARES HAVE BEEN TRANSFERRED THROUGH DULY ENDOR SED SHARE CERTIFICATES IN FAVOUR OF THE ASSESSEE ON 10.05.2010 AND ASSESSEE H OLDS THE OWNERSHIP OF SAID SHARES W.E.F.10.05.2010. IN VIEW OF THE AFORESAID SUBMISSIONS AND FACTS PLAC ED ON RECORD, IT IS SUBMITTED THAT SINCE THE ASSESSEE HAS ACQUIRED THE SHARES OFM /S BHARATNET TECHNOLOGY LTD. ON 10.05.2010, WITH ALL THE DUE COMPLIANCES, THE PR OVISIONS OF SECTION 56(VII)(A) READ WITH RULE 11U AND RULE 11UA WHICH CAME INTO EF FECT FROM 01.06.2010 DO NOT APPLY TO IT. THEREFORE, NO ADDITION CAN BE MADE TO THE INCOME OF THE ASSESSEE ON ACCOUNT OF PROVISIONS WHICH CAME INTO FORCE AFTER 1 0.05.2010 BY GIVING RETROSPECTIVE EFFECT. WE MAY ALSO STATE HERE THAT EVERY COMPANY IS AN IND EPENDENT COMPANY AND FACTS OF EVERY CASE ARE DIFFERENT. THEREFORE DECISI ON IN THE CASE OF SCM FINTRADE PVT. LTD. CANNOT BE MADE APPLICABLE TO THE ASSESSEE 'S CASE.' 6.1 THE A.O. HOWEVER DID NOT FIND FAVOUR WITH THE S UBMISSIONS OF THE ASSESSEE FOR FOLLOWING REASONS : A) THE TRANSACTION WITH AN UNRELATED PARTY COULD NOT H AVE BEEN COMPLETED WITHOUT THE PAYMENT BEING MADE AND AS PER BANK ACCO UNT STATEMENTS; THE SALE CONSIDERATION FOR THE ABOVE SHARES PURPORTED TO HAV E BEEN SOLD ON 10.05.2010 HAS BEEN TRANSFERRED THROUGH HDFC BANK ACCOUNT NO. 01072000011422 ON 02.11.2010. B) THIS WOULD HAVE BEEN VALID IF TRANSACTION WAS DONE AT ARMS LENGTH PRICE AND BETWEEN GENUINE PARTIES IN ORDINARY CIRCUMSTANCES. THE FACT THAT THE PAYMENT IS MADE OR THE SHARES ARE TRANSFERRED IS NOT DOUBTED. IT IS THE DATE OF PAYMENT WHICH IS THE ISSUE OF CONTENTION AS SHARES COULD NO T HAVE BEEN TRANSFERRED BEFORE RECEIVING THE PAYMENT. THE ISSUE IS NOT WHETHER THE INTIMATION OF TRANSFER HAVING TAKEN PLACE DURING THE YEAR HAS BEEN COMMUNICATED T O THE REGISTRAR OF 5 COMPANIES OR NOT OR WHETHER THE ASSESSEE IS HOLDING THE SHARES OF M/S BHARATNET TECHNOLOGY OR NOT. THE ISSUE IS WHETHER OR NOT THE SHARES WERE PURCHASED ON 10.05.2010. IN THIS REGARD, THE PAYMENT FOR THE SHARES WAS MADE ON 02.11.2010 THROUGH HDFC BANK ACCOUNT NO. 01072000011422 TO ALL THE PARTIES. IT IS HIGHLY IMPROBABLE THAT ALL THE PARTIES FROM WHOM SHARES WE RE PURCHASED ON 10.05.2010 WOULD HAVE WAITED FOR 6 MONTHS TO RECEIVED THE PAYM ENTS THAT TO WHEN THE SALE OF SHARE OF FACE VALUE RS.10 AND FMV OF RS.21 WAS B EING MADE AT A VERY NOMINAL RATE OF RS.1 PER SHARE. C) AS FAR AS THE CERTIFICATE FROM THE COMPANY SECRETAR Y IS CONCERNED, IT DOES NOT HOLD GOOD BECAUSE THE RETURN OF M/S. BHARATNET TECH NOLOGY LTD. BASED UPON WHICH THE LIST OF TRANSFERS HAS BEEN SUBMITTED TO T HE ROC CLAIMING IT TO HAVE BEEN DONE ON 10.05.2010 HAS BEEN FILED BY THE AUTHORIZED SIGNATORY IN NOVEMBER, 2010. SINCE, THE DUE DATE FOR FILING OF RETURN WAS IN SEPTEMBER, 2010, SO HAD THE TRANSACTION HAPPENED IN MAY, THE SAME WOULD HAVE BE EN IMMEDIATELY INTIMATED TO THE ROC. THE ASSESSEE HAS NOT GIVEN AN Y COMPELLING REASON AS TO WHY THE ASSESSEE DID NOT FILE RETURN WITHIN ITS DUE DATE IF THE SHARES HAD GOT TRANSFERRED IN MAY 2010. RATHER THE PAYMENT HAS BEE N MADE ON 02.11.2010 AND RETURN HAS BEEN FILED IMMEDIATELY AFTER THAT ON 10. 11.2010. SO IN MOST PROBABILITY, SHARES WOULD HAVE TRANSFERRED ALSO IN NOV. 2010. D) M/S. BHARATNET TECHNOLOGY LTD. HENCEFORTH WAS CO NTROLLED BY STEEL STRIPS GROUP SO ISSUING DULY ENDORSED SHARES CERTIFICATE I N A BACK DATE FOR ITSELF IS NOT DIFFICULT FOR THE ASSESSEE. E) M/S. BHARATNET TECHNOLOGY LTD. HENCEFORTH WAS CO NTROLLED BY STEEL STRIPS GROUP SO IT MAY NOT BE DIRECTLY RESPONSIBLE BUT BEI NG PART OF THE SAME GROUP IT CANNOT ABSOLVE ITSELF OF SUCH DEFAULT. 6.2 THE A.O. OBSERVED THAT THE COMPANY M/S BHARATNE T TECHNOLOGY LTD. HAD ITSELF RECEIVED HUGE BOGUS SHARE CAPITAL THROUGH AC COMMODATION ENTRY IN THE EARLIER YEARS OF AROUND RS. 6 CRORES AND SUBSEQUENT LY MANAGEMENT OF THE COMPANY HAD BEEN TRANSFERRED TO THE EMPLOYEES OF ST EEL STRIPS GROUP AT THROWAWAY PRICE. THE A.O. WAS OF THE VIEW THAT EVEN THOUGH THE TRANSACTION HAD TAKEN PLACE THROUGH BANKING CHANNEL AND THERE W AS TRANSFER OF FUNDS IN EXCHANGE OF SHARES AS WELL AS SHARE CERTIFICATES, B UT THE DATE OF THIS TRANSACTION CAME OUT TO BE NON-GENUINE. THE A.O. WAS OF THE VIE W THAT THE SALE TRANSACTION HAD NOT OCCURRED IN MAY 2010 AS CLAIMED BY THE ASSE SSEE BUT THE TRANSACTION ACTUALLY TOOK PLACE IN NOVEMBER 2010. THEREFORE THE PROVISIONS OF SECTION 56(2)(VIIA) WHICH CAME INTO EFFECT ON 01/06/2010 WE RE CLEARLY APPLICABLE IN ASSESSEES CASE. THE A.O. ADDED THE DIFFERENCE OF F MV I.E; RS. 21/- AND THE ACTUAL CONSIDERATION PAID I.E; RS. 1/- AGAINST SALE OF 719681 SHARES AND MADE THE ADDITION OF RS. 1,43,93,620/-. 7. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND CHALLENGED THE VALIDITY OF REOPENING. THE ASSESSEE SUBMITTED TO THE LD. CIT(A) AS UNDER: IN THIS REGARD IT IS SUBMITTED THAT THE NOTICE ISSU ED U/S 148 IS BAD IN LAW AND WITHOUT JURISDICTION. THE LD. AO HAS WRONGLY DISMISSED THE OBJECTIONS RAISE BY THE ASSESSEE WHEREAS THE SAME SHOULD HAVE BEEN ALLOWED IN VIEW O F THE FACTS OF THE CASE WHICH ARE SUBMITTED AS UNDER: 6 THE ASSESSEE HAS FILED ORIGINAL RETURN ON 26.9.2011 . WE HAVE RECEIVED NOTICE DATED 5.3.2015 VIDE WHICH LD. AO DIRECTED US TO FIL E THE RETURN AGAIN. WE OBJECTED TO THE NOTICE VIDE OUR LETTER DATED 1.4.20 15, HOWEVER FILED THE RETURN TO COMPLY WITH THE NOTICE. VIDE LETTER DATED 16.6.2015 OF LD. AO, WE RECEIVED COPY OF THE REASONS RECORDED ON 5.3.2015 TO REOPEN THE A SSESSMENT PROCEEDINGS. THEREAFTER WE AGAIN RECEIVED LETTER DATED 18.6.2015 FROM LD. AO WHEREIN WE WERE ASKED TO FILE COMPLETE BALANCE SHEET ALONGWITH PROFIT & LOSS ACCOUNT INCLUDING THE COMMENTS OF THE AUDITORS. THE ASSESSEE AGAIN FILED THE OBJECTIONS ON 15.10.20 15 TO NOTICE U/S 148 AND RECEIVED THE REPLY OF THE SAME VIDE LETTER DATED 17 .11.2015 WHEREIN NEW REASONS HAVE BEEN ADDED TO REOPEN THE ASSESSMENT. IT IS SET TLED PRINCIPLE THAT NEW REASONS CANNOT BE ADDED TO THE REASONS ALREADY RECO RDED. IN THE REASONS RECORDED ON 5.3.2015 THERE WAS NO MENTION OF APPRAI SAL REPORT OF STEEL STRIPS GROUP. THE ONLY MENTION WAS THE REPLY OF BHARATNET IN THE REPLY OF BHARATNET THERE WAS NO MENTION THAT PRIYA TOOLS PVT LTD. HAS PURCHA SED SHARES AT RE.1/-. REPLY OF BHARATNET NOWHERE INDICATES OR SUGGESTS THAT INCOME OF PRIYA TOOLS HAVE ESCAPED ASSESSMENT COPY OF THE REPLY IS ENCLOSED. T HEREFORE THE GROUND OF REPLY OF BHARATNET ON THE BASIS OF WHICH THE CASE HAS BEE N REOPENED IS WRONG, FURTHER IT IS SETTLED PRINCIPLE THAT NO NEW GROUND AS TAKEN BY LD. AO BASED ON APPRAISAL REPORT CAN BE TAKEN LATER ON. THEREFORE THE NOTICE U/S 148 IS WITHOUT JURISDICTION. RELIANCE IN THIS REGARD IS PLACED ON THE JUDGMENT O F THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD VS ACIT 26 8 ITR 332 (2004) (BOM). COPY OF THE AFORESAID CORRESPONDENCE AND JUDGMENT OF HON'BL E BOMBAY HIGH COURT IS ENCLOSED. FURTHERMORE, ON THE DATE OF RECORDING THE REASONS I .E. 05.03.2015, THE LD.AO HAS NOT MADE ANY ASSESSMENT IN CASE OF SCM FINTRADE WHI CH WAS MERELY AT INVESTIGATION STAGE. THE ASSESSMENT OF SCM FINTRADE WAS FRAMED ON 25.3.2015. ON 5.3.2015 THERE WAS NO OCCASION FOR THE LD.AO TO REC ORD REASON THAT INCOME OF PRIYA TOOLS HAS ESCAPED ASSESSMENT EVERYTHING WAS D ONE ON SUSPICION ON THE BASIS OF ALLEGED APPRAISAL REPORT WHICH IS ADDED IN REASONS LATER ON AND WHICH WAS ALSO NOT IN THE POSSESSION OF THE ASSESSEE. THE RE IS NO INDEPENDENT OPINION OFLD.AO OR REASONS TO BELIEVE INDEPENDENTLY THAT IN COME CHARGEABLE TO TAX OF PRIYA TOOLS HAS ESCAPED ASSESSMENT REASONS TO BELIE VE IN SECTION 147 REFER TO INDEPENDENT CONCLUSION AND NOT SUSPICION. THERE WAS NO INDEPENDENT CONCLUSIONS HENCE REASONS TO BELIEVE DOES NOT HOLD GOOD. FOR THE PURPOSE OF REOPENING THE ASSESSMENT, THE AS SESSMENT RECORD OF THE ASSESSEE HAS TO BE EXAMINED ON THE BASIS OF WHICH T HE LDAO COULD HAVE REASONS TO BELIEVE THAT ANY INCOME HAS ESCAPED ASSESSMENT T HE ASSESSEE HAS BEEN ASKED TO PREPARE THE NEW RETURN AND TO FURNISH BALA NCE SHEET ALONGWITH TRADING AND PROFIT & LOSS ACCOUNT INCLUDING COMMENTS OF THE AUDITORS. THE ASSESSEE HAS ALSO INSPECTED THE FILE ON 04.12.2015 ON PAYMENT OF REQUISITE FEE. IT WAS FOUND THAT NO RECORD OR DOCUMENT OF THE ORIGINAL RETURN F ILED ON 26.09.2011 AND THE ONLY DOCUMENT ON THE FILE WAS REASON RECORDED BY LD. AO ON 05.03.2015. THERE WAS NO NOTING, DOCUMENT, RETURN OR ANY OTHER DOCUMENT DATE D PRIOR TO 05.03.2015. THERE WAS NO OCCASION FOR THE LD. AO TO EXAMINE AND FORM AN INDEPENDENT OPINION. IT GOES TO SHOW THAT THE CASE OF THE ASSESSEE HAS BEEN OPENED WITHOUT EXAMINING THE ORIGINAL RECORD VIS-A-VIS INCOME TAX RETURN. SI NCE LD.AO HAS NOT EXAMINED THE ORIGINAL RETURN OR RECORD THEREFORE NOTICE U/S 148 IS BAD IN LAW. THE NOTICE HAS BEEN ISSUED BY THE LD. AO IN A MECHANICAL MANNER WI THOUT APPLICATION OF OWN MIND. THE RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HIGH COURT OF BOMBAY IN THE CASE OF M/S MAVANY BROTHERS VS CIT IT A NO.8/20 07 DECIDED ON 17 TH APRIL 2015. COPY OF THE JUDGMENT IS ENCLOSED. THERE WAS NO NEW INFORMATION OR INCRIMINATING DOCUM ENT OR MATERIAL AGAINST THE ASSESSEE ON THE BASIS OF WHICH ANY OPINION CAN BE F ORMED FOR THE REASSESSMENT OF THE CASE OF THE ASSESSEE. THE ASSESSEE HAS DISCLOSE D FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE CONCERNE D ASSESSMENT YEAR. THE LD. ASSESSING OFFICER MUST DISCLOSE IN REASONS AS TO WH ICH FACT OR MATERIAL WAS NOT DISCLOSED BY ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR SO AS TO ESTABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. ALL THE PRIMARY FACTS HAD BEEN DISCLOSED AND THE GROUND ON WHICH THE NOTICE HAS BEEN ISSUED WAS A MERE INFERENCE WHICH WAS NOT JUSTIFIED . THEREFORE THE NOTICE FOR REASSESSMENT HAS BEEN ISSUED MERELY ON SUSPICION WI THOUT ANY CONCLUDED OPINION IN THIS REGARD. 7 7.1 THE LD. CIT(A) HOWEVER DID NOT FIND MERIT IN TH E SUBMISSION OF THE ASSESSEE BY OBSERVING IN THE IMPUGNED ORDER AS UNDER: (I) THE AO IN HER LETTER DATED 16.11.2015 ADDRESSED TO THE APPELLANT HAS REPLIED TO THE OBJECTIONS RAISED BY THE APPELLANT R EGARDING ISSUANCE OF NOTICE U/S 148 OF THE ACT AS FOLLOWS:- ' PARA 2 & 3: IT HAS BEEN CONTENDED THAT THE BASIS FOR ISSUE OF NOTICE U/S 148 WAS REPLY SUBMITTED BY M/S BHARATNET TECHNOLOGY LTD. IN THIS REGARD, THE RELEVANT PORTION OF REASON RECORDED U/S 148 IS REPRODUCED AS UNDER:- 'AS PER INFORMATION ON RECORD ANY REPLY SUBMITTED I N THIS OFFICE BY M/S BHARATNET TECHNOLOGY LTD IT IS SEEN THAT M/S PRIYA TOOLS PVT LTD HAS MADE AN INVESTMENT IN THIS YEAR 719681 UNQUOTED SHARES OF M/S BHARATNET T ECHNOLOGY LTD BY PURCHASING THEM AT A PRICE OF RS. 1 EACH. AS CAN BE SEEN FROM THE ABOVE REASONS, THE REPLY SU BMITTED BY M/S BHARATNET TECHNOLOGY LTD WAS NOT THE ONLY REASON TO FORM A BE LIEF THAT INCOME HAS ESCAPED ASSESSMENT AS CONTENDED RATHER THE INFORMAT ION ON RECORD AND THE REPLY CONJOINTLY FORMED THE BASIS FOR REOPENING THE CASE. AS REGARDS, INFORMATION AVAILABLE ON RECORDS, WHICH FORMED THE BASIS OF REO PENING THE CASE, RELEVANT EXTRACT FROM THE APPRAISAL REPORT OF M/S STEEL STRI PS GROUP OF CASES, WHICH IS REPRODUCED AS UNDER:- 'EVENTUALLY, IT IS SEEN THAT ON 30.07.2010, AS PER THE MODUS OPERANDI OF THE GROUP, ALL THE SHAREHOLDERS AND COMPANIES HAVE TRANSFERRED THEIR SHARES TO THE FOLLOWING ENTITIES OF THE STEEL STRIPS GROUP AT A PRICE OF RS . 1 PER SHARE. SAB DEVELOPERS PVT LTD 645559 SHARES PRIYA TOOLS PVT LTD 719681 SHARES SCM FINTRADE PVT LTD 700449 SHARES AS REGARDS, REPLY SUBMITTED BY M/S BHARATNET TECHNO LOGY LTD AS DESIRED COPY OF THE SAME IS ENCLOSED HEREWITH, WHEREIN DETAILS OF S HARE HOLDING OF PRIYA TOOLS PVT LTD. HAS BEEN PROVIDED IN ANNEXURE 4 OF THIS REPLY. 3. PARA 4 & 5: I) THE TRANSACTION CLAIMED TO BE DONE ON 10.05.2010 IS REFUTED ON THE SAME GROUNDS AS HAS BEEN DISCUSSED IN DETAIL IN THE ASSESSMENT O RDER FOR THE AY 2011-12 DATED 25.03.2015 PASSED U/S 153A(L)(B) READ WITH 143(3) O F THE IT ACT 1961 IN THE SIMILARLY PLACED CASE OF M/S SCM FINTRADE PVT LTD. II) AS REGARDS, OBJECTION REGARDING ISSUE OF NOTICE FOR SUCH INCOME AND ALSO OTHER INCOME CHARGEABLE TO TAX WHICH COMES INTO NOT ICE SUBSEQUENTLY, YOUR KIND ATTENTION IS INVITED TO EXPLANATION 3 OF SECTION 14 7 OF THE IT ACT, 1961, WHICH IS REPRODUCED AS UNDER:- FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPEC T OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT AND SUCH ISSUE COMES TO HIS NOTI CE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS UNDER THIS SECTION, NOTWITHST ANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RE CORDED UNDER SUB- SECTION (2) OF SECTION 148.' AS SUCH, THE NOTICE HAS BEEN CONFORMITY WITH THE LA W.' I AGREE WITH THE CONTENTION OF THE AO IN THIS REGAR D AND IT IS HELD THAT NOTICE U/S 148 OF THE ACT IN THIS CASE WAS ISSUED AS PER PROVI SIONS OF LAW AND THEREAFTER REASSESSMENT ORDER U/S 143(3) R.W.S. 147 IS ALSO IN ORDER. 8. NOW THE ASSESSEE IS IN APPEAL. 8 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RETURN OF INCOME WAS FILED ON 26/09/2011 BY THE ASSESSEE WHICH WAS PROCE SSED UNDER SECTION 143(1) OF THE ACT ON 13/01/2012 THEREAFTER THE SEARCH WAS CONDUCTED ON 04/10/2012 IN M/S STEEL STRIPS GROUP OF CASES AND SURVEY WAS COND UCTED ON THE SAME DAY AT THE PREMISES OF THE ASSESSEE. IT WAS STATED THAT TH E A.O. RECORDED THE REASONS ON 05/03/2015 COPY OF WHICH IS PLACED AT PAGE NO. 1 2A OF THE ASSESSEES COMPILATION. HE DREW OUR ATTENTION TOWARDS REASONS RECORDED FOR REOPENING WHEREIN IT HAS BEEN MENTIONED THAT THE ASSESSEE MAD E AN INVESTMENT IN 719681 UNQUOTED SHARES OF M/S BHARATNET TECHNOLOGY LTD. B Y PURCHASING THEM AT PRICE OF RS. 1/- EACH AND THAT THE FMV OF SUCH SHARES WAS MUCH MORE AS CALCULATED FROM THE NAV OF M/S BHARATNET TECHNOLOGY LTD. WHIC H CAME TO AROUND RS. 21/- PER SHARE THEREFORE THE DIFFERENCE OF FMV AND THE A CTUAL CONSIDERATION PAID WAS TAXABLE IN THE HANDS OF THE PURCHASER I.E; ASSE SSEE. 9.1 IT WAS SUBMITTED THAT DURING THE COURSE OF SURV EY UNDER SECTION 133A OF THE ACT NO MATERIAL / DOCUMENT WAS FOUND AGAINST TH E ASSESSEE AND NO SURRENDER WAS MADE. IT WAS STATED THAT THE A.O. COU LD ONLY SUSPECT AT THE TIME OF ISSUING NOTICE UNDER SECTION 148, BUT THERE WAS NO REASON TO BELIEVE SINCE THERE WAS NO EVIDENCE/DOCUMENT/STATEMENT AVAILABLE AGAINST THE ASSESSEE AS ON 05/03/2015 I.E; THE DATE OF RECORDING THE REASON S TO BELIEVE FOR OPENING OF THE CASE. IT WAS CONTENDED THAT THE A.O. DID NOT HA VE ANY TANGIBLE MATERIAL IN HIS POSSESSION AT THE TIME OF RECORDING THE REASONS FOR REOPENING OF THE CASE AND THAT THE NOTICE HAD BEEN ISSUED FOR A PRE CONCE IVED IDEA UNDER SUSPICION BY WRONGLY APPLYING RULE 11UA R.W.S 56(2)(VIIA) OF THE ACT WHICH CAME INTO FORCE ON 01/06/10 AND THE SHARES WERE PURCHASED BY THE AS SESSEE ON 10/05/10, THEREFORE WITHOUT APPLYING THE MIND THAT AS TO WHEN THE SHARES WERE PURCHASED, THE NOTICE UNDER SECTION 148 OF THE ACT HAD BEEN IS SUED BY THE A.O. 9.2 IT WAS SUBMITTED THAT THE A.O. IN THE REASONS R ECORDED REFERRED TO THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WHICH WERE APPLICABLE WITH EFFECT FROM 01/06/2010 WHILE THE SHARE WERE PURCHASED BY T HE ASSESSEE ON 10/05/2010 WHICH CLEARLY SHOWS THAT THE A.O. HAD NOT APPLIED H IS MIND WHILE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT WHICH WAS ISSUE D ONLY ON THE BASIS OF SUSPICION AND NOT ANY MATERIAL ON RECORD. 9.3 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMIT TED THAT AT THE TIME OF ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, TH E A.O. AT THE MOST COULD ONLY 9 SUSPECT AND NO REASONS TO BELIEVE COULD BE MADE AS NEITHER THERE WAS ANY EVIDENCE / DOCUMENT/STATEMENT AVAILABLE AGAINST THE ASSESSEE ON 05/03/2015 I.E; DATE ON WHICH THE A.O RECORDED THE REASONS TO BELIEF FOR REOPENING THE CASE OF THE ASSESSEE NOR ANY SUCH MATERIAL HAD BEEN MENTIONED WHICH WAS AVAILABLE WITH THE A.O. IT WAS FURTHER SUBMITTED TH AT THE WORDING OF THE NOTICE UNDER SECTION 148 CLEARLY SHOWS THAT THE CASE HAD B EEN REOPENED EVEN FOR THE OTHER INCOME WHICH MAY CAME TO NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS UNDER SECTION 147 OF THE ACT WHICH GOES TO SHOW THAT THE A.O. JUST WANTED TO REOPEN THE CASE WHETHER THE REASONS TO BE LIEF WERE THERE OR NOT. IT WAS STATED THAT THE CASE CANNOT BE REOPENED IN SUCH A MANNER OR FOR ANY OTHER INCOME OF WHICH THE A.O. WAS NOT EVEN AWARE. IT WAS CONTENDED THAT THE A.O. WHILE GIVING THE REPLY TO THE OBJECTIONS RAISED BY THE ASSESSEE FOR REOPENING THE ASSESSMENT CLEARLY STATED IN THE LETTER DT. 16 & 17 /11/2015 THAT THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON THE BASIS OF R EPLY SUBMITTED BY M/S BHARATNET TECHNOLOGY LIMITED A REFERENCE WAS MADE T O PAGE NO. 22 & 23 OF THE ASSESSEES PAPER BOOK WHICH IS COPY OF THE AFORESAI D LETTER WRITTEN BY THE A.O. AND READS AS UNDER: 2. PARA 2 & 3: IT HAS BEEN CONTENDED THAT THE BA SIS OF ISSUE OF NOTICE U/S 148 WAS REPLY SUBMITTED BY M/S BHARATNET TECHNOLOGY LTD . IN THIS REGARD, THE RELEVANT PORTION OF REASON RECORDED U/S 148 IS REPRODUCED AS UNDER: AS PER INFORMATION ON RECORD AND REPLY SUBMITTED IN THIS OFFICE BY M/S BHARATNET TECHNOLOGY LTD., IT IS SEEN THAT M/S PRIYA TOOLS PV T. LTD. HAS MADE AN INVESTMENT IN THIS YEAR IN 719681 UNQUOTED SHARES OF M/S BHARATNE T TECHNOLOGY LTD. BY PURCHASING THEM AT A PRICE OF RS.1 EACH. AS CAN BE SEEN FROM THE ABOVE REASONS, THE REPLY SU BMITTED BY M/S BHARATNET TECHNOLOGIES WAS NOT THE ONLY REASON TO FORM A BELI EF THAT INCOME HAS ESCAPED ASSESSMENT AS CONTENDED RATHER THE INFORMATION ON R ECORD AND THE REPLY CONJOINTLY FORMED THE BASIS FOR REOPENING THE CASE. AS REGARDS, INFORMATION AVAILABLE ON RECORD, WHICH FORMED THE BASIS OF REOP ENING THE CASE, RELEVANT EXTRACT FROM THE APPRAISAL REPORT OF M/S STEEL STRI PS GROUP OF CASES, WHICH IS REPRODUCED AS UNDER: EVENTUALLY, IT IS SEEN THAT ON 30.07.2010, AS PER THE MODUS OPERANDI OF THE GROUP, ALL THE SHAREHOLDERS AND COMPANIES HAVE TRANSFERRED THEIR SHARES TO THE FOLLOWING ENTITIES OF THE STEEL STRIPS GROUP AT A PRICE OF RS . 1 PER SHARE SAB DEVELOPERS PVT. LTD. 645559 SHARES PRIYA TOOLS PVT. LTD. 719681 SHARES SCM FINTRADE PVT. LTD. 700449 SHARES AS REGARDS, REPLY SUBMITTED BY BHARATNET TECHNOLOGY LTD. AS DESIRED COPY OF THE SAME IS ENCLOSED HEREWITH, WHEREIN DETAILS OF SHARE HOLDING OF PRIYA TOOLS PVT. LTD. HAS BEEN PROVIDED IN ANNEXURE 4 OF THIS REPLY. 9.4 IT WAS CONTENDED THAT THE APPRAISAL REPORT IN T HE CASE OF M/S BHARATNET TECHNOLOGY LIMITED WAS DT. 30/07/2010 AS MENTIONED BY THE A.O. BUT THE REASONS WERE RECORDED ON 05/03/2015 FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, WHICH CLEARLY SHOWS THAT THE A.O. HAS N OT APPLIED HIS MIND AND THE 10 NOTICE WAS ISSUED ONLY ON SUSPICION. IT WAS FURTHER CONTENDED THAT IN THE APPRAISAL REPORT A NAME OF M/S SCM FINTRADE PVT. LT D. WAS ALSO MENTIONED WHO HAD PURCHASED 700449 SHARES. IT WAS STATED THAT THE ADDITION IN THE SAID COMPANY I.E; M/S SCM FINTRADE PVT. LTD. AMOUNTING T O RS. 1,40,08,980/- WAS MADE BY INVOKING THE PROVISIONS OF SECTION 56(2)(VI IA) OF THE ACT, ON THE SIMILAR BASIS AS HAS BEEN DONE IN ASSESSEES CASE AND WHEN THE SAID ADDITION WAS DELETED BY THE LD. CIT(A), THE MATTER WAS TAKEN UP IN APPEAL IN ITA NO. 982/CHD/2017 BY THE DEPARTMENT IN THE CASE OF SAID ASSESSEE M/S SCM FINTRADE PVT. LTD. BEFORE THE ITAT, THEN THE APPEAL OF THE R EVENUE WAS DISMISSED VIDE ORDER DATED 05/01/2018 AND VIEW TAKEN BY THE LD. CI T(A) WAS AFFIRMED. IT WAS STATED THAT THE ITAT ALSO MENTIONED IN THE ORDER DA TED 05/01/2018 THAT EVEN THE LD. DR ADMITTED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH ACTION AND THAT THE ORIGINAL ASSESSMENT PROCEEDINGS STOOD COMPLETED ON THE DATE OF SEARCH, A REFERENCE WAS MADE TO PARA 4 OF T HE AFORESAID REFERRED TO ORDER COPY OF THE SAME WAS FURNISHED WHICH IS PLACE D ON RECORD. IT WAS ACCORDINGLY SUBMITTED THAT THE NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED BY THE A.O. ONLY ON THE BASIS OF SUSPICION SO IT WA S BAD IN LAW. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING J UDICIAL PRONOUNCEMENTS : I) KROWN AGRO GOODS PVT. LTD. VS. ASSISTANT COMMISS IONER OF INCOME TAX [2015] 375 ITR 460 (DEL) II) CIT VS. GUPTA ABHUSHAN P. LTD. (2009) 312 ITR 166 ( DEL) 9.5 IT WAS FURTHER SUBMITTED THAT EVEN IF THE A.O. FORMED THE BELIEF FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT ON THE BASIS OF APPRAISAL REPORT IN THE CASE OF M/S BHARATNET TECHNOLOGY LIMITED THE N ALSO THERE WAS NO INDEPENDENT VIEW OF THE A.O. FOR MAKING THE BELIEF AND AS SUCH REOPENING WAS NOT VALID. THE RELIANCE WAS PLACED ON THE FOLLOWIN G CASE LAWS: I) CIT VS. ANUPAM KAPOOR [2008] 299 ITR 179 (P&H) II) CIT VS. SMR. PARAMJIT KAUR (2009) 311 ITR 38 ( P&H) III) PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (2017) 395 ITR 677(DEL) 10. ON MERITS OF THE CASE IT WAS SUBMITTED THAT THE RE WAS NO DISPUTE RELATING TO THE SALE CONSIDERATION THE ONLY DISPUTE WAS RELA TING TO THE DATE ON WHICH TRANSFER OF SHARES TOOK PLACE. IT WAS SUBMITTED THA T THE INDEPENDENT COMPANY SECRETARY M/S S.K. SIKKA ASSOCIATES, CHANDIGARH ISS UED CERTIFICATE THAT THE SHARES WERE TRANSFERRED ON 10/05/2010 BY EXECUTING TRANSFE R DEED AS PER THE PHOTO COPY OF THE LIST OF TRANSFER DT. 10/05/2010 DOWNLOA DED FROM THE MINISTRY OF CORPORATE AFFAIRS PORTAL, A REFERENCE WAS MADE TO P AGE NO 57 & 58 OF THE 11 ASSESSEES PAPER BOOK WHICH IS THE COPY OF THE SAID CERTIFICATE AND THE LIST OF THE SHARES TRANSFERRED AS ON 10/05/2010. IT WAS CONTEND ED THAT THE ASSESSEE FILED THE ANNUAL RETURN WITH THE REGISTRAR OF COMPANY IN THE MONTH OF NOVEMBER BUT ON THAT BASIS IT CANNOT BE SAID THAT THE SHARES WERE A LREADY TRANSFERRED IN THE MONTH OF NOVEMBER 2010 AND WHEN THE SHARES WERE TRA NSFERRED ON 10/05/2010, THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WE RE NOT APPLICABLE, THOSE PROVISIONS WERE APPLICABLE WITH EFFECT FROM 01/06/2 010. THE LD. COUNSEL FOR THE ASSESSEE REFERRED TO THE PAGE NO. 42 TO 55 OF THE A SSESSEES COMPILATION WHICH IS THE COPY OF THE FORM NO. 20B I.E, THE ANNUAL RETURN FILED BY M/S BHARATNET TECHNOLOGY LIMITED TO THE REGISTRAR OF COMPANY WHER EIN THE DETAILS OF THE SHARES TRANSFERRED AS ON 10/05/2010 HAS BEEN MENTIO NED AND NAME OF THE ASSESSEE IS APPEARING AS A TRANSFEREE AT SL.NO. 3 T O 5 OF THE SAID DETAIL. IT WAS FURTHER SUBMITTED THAT THE A.O. STATED THAT IN THE APPRAISAL REPORT THE DATE OF SHARE TRANSFER WAS MENTIONED AS 30/07/2010, THEN AL SO THE PRESUMPTION OF THE A.O. THAT THE SHARES WERE ACTUALLY TRANSFERRED IN N OVEMBER 2010 CANNOT BE ACCEPTED. IT WAS FURTHER SUBMITTED THAT EVEN IF THE PAYMENT HAD BEEN MADE ON A SUBSEQUENT DATE WHICH MAY FOLLOW THE DATE OF T RANSFER OF SHARES, IT CAN NOT BE PRESUMED THAT THE TRANSACTIONS WAS NOT GENUINE. HE FURTHER SUBMITTED THAT EVEN DURING THE COURSE OF SURVEY OR SEARCH NO INCRI MINATING MATERIAL WAS FOUND, THEREFORE THE ADDITION MADE BY THE A.O. AND SUSTAIN ED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 11. IN HER RIVAL SUBMISSIONS THE LD. SR. DR STRONGL Y SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND FURTHER SUBMITTE D THAT THE OBJECTIONS RAISED BY THE ASSESSEE WERE CONSIDERED BY THE A.O. AND THA T NO NEW OBJECTION WAS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE, DURING THE COURSE OF HEARING. IT WAS FURTHER SUBMITTED THAT THE A.O. AT THE TIME OF RECO RDING THE REASONS FOR REOPENING THE ASSESSMENT HAD SUFFICIENT MATERIAL WI TH HIM TO FORM AN OPINION THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE THE REOPENING WAS VALID. IT WAS FURTHER SUBMITTED THAT IN REPLY T O THE OBJECTIONS RAISED BY THE ASSESSEE, THE A.O. REPRODUCED THE APPRAISAL REPORT IN THE CASE OF M/S BHARATNET TECHNOLOGY LIMITED AND ON THAT BASIS, HE FORMED THE VIEW THAT THE INCOME ESCAPED ASSESSMENT. IT WAS FURTHER SUBMITTED THAT T HE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH WAS RELEVANT ONLY FOR MAKING THE ASSESSMENT UNDER SECTION 153A OF THE ACT AND NOT FOR REOPENING THE ASSESSMENT UNDER SECTION 148 OF THE ACT. AND SINCE THE A.O. FORMED A VIEW THAT INCOME OF THE ASSESSEE ESCAPED ASSESSMENT THEREFORE THE REOPENING UNDER SECTION 147 OF THE ACT WAS VALID, RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: 12 RATTAN GUPTA VS. UNION OF INDIA & OTHERS (1998) 234 ITR 220 (DEL) 12. AS REGARDS TO THE MERITS OF THE CASE LD. SR. DR SUBMITTED THAT THE A.O. WORKED OUT THE FAIR MARKET VALUE (FMV) OF THE SHARE S ON THE BASIS OF NET ASSETS VALUE (NAV) OF M/S BHARATNET TECHNOLOGY LIMITED IN ACCORDANCE WITH RULE 11UA WHICH CAME TO APPROXIMATELY RS. 21/- WHILE THE SHARE WERE TRANSFERRED AT A PRICE OF RS. 1/- PER SHARE, THEREFORE THE DIFFERE NCE WAS RIGHTLY ADDED BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 56(2)(VI IA) OF THE ACT. IT WAS FURTHER SUBMITTED THAT SINCE THE ASSESSEE HAD MADE PAYMENT ON 02/11/2010 AND THE ANNUAL RETURN HAD BEEN FILED WITH THE ROC IMMEDIATE LY AFTER THAT PAYMENT, ON 10/11/2010 BY M/S BHARATNET TECHNOLOGY LIMITED, SO IN MOST PROBABILITY THE SHARES WOULD HAVE BEEN TRANSFERRED IN NOVEMBER 2010 AND NOT ON 10/05/2010 AS CLAIMED BY THE ASSESSEE. THEREFORE THE ADDITION WAS RIGHTLY MADE BY THE A.O. AND THE LD. CIT(A) WAS JUSTIFIED IN SUSTAINING THE ADDITION. 13. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON THE RECORD IN THE PRESENT CAS E THE A.O. RECORDED THE FOLLOWING REASONS FOR REOPENING THE ASSESSMENT UNDE R SECTION 148 OF THE ACT: A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 WAS CARRIED OUT ON 04/10/2012 BY THE DIRECTORATE OF INCOME TAX (INV.), CHANDIGARH AT THE BUSINESS AND RESIDENTIAL PREMISES OF THE M/S STEEL STRIPS GROUP OF CASES ALONGWITH SURVEY IN THE CASE OF M/S PRIYA TOOLS PVT. LTD., 341, SECTOR-40/A, CHANDIGARH. AMONGST THE VARIOUS BUSINESS/RESIDENTIAL PREMISES C OVERED, THE PREMISE# 341, SECTOR-40/A, CHANDIGARH WHICH IS THE REGISTERED ADD RESS OF M/S PRIYA TOOLS PVT. LTD. WAS SURVEYED, AND THAT OF M/S. BHARATNET TECHN OLOGY LTD WAS COVERED U/S 132 AND ACCORDINGLY BOTH THE COMPANIES ARE BEING AS SESSED WITH THE UNDERSIGNED U/S 142(1) AND 153A RESPECTIVELY. AS PER INFORMATION ON RECORD AND THE REPLY SUBMITTE D IN THIS OFFICE BY M/S.BHARATNET TECHNOLOGY LTD., IT IS SEEN THAT M/S PRIYA TOOLS PVT. LTD. HAS MADE AN INVESTMENT IN THIS YEAR IN 719681 UNQUOTED SHARE S OF M/S BHARATNET TECHNOLOGY LTD. BY PURCHASING THEM AT A PRICE OF RS. 1 EACH. H OWEVER, THE FAIR MARKET VALUE OF SUCH HARE IS MUCH MORE AS CALCULATED FROM THE NE T ASSETS VALUE OF M/S BHARATNET TECHNOLOGY LTD AS PER PROCEDURE PRESCRIBE D UNDER RULE 11UA AND IT COMES TO AROUND RS. 21 PER SHARE. IN THE GIVEN SCEN ARIO, AS PER THE PROVISIONS OF SEC. 56(2)(VIIA), THE DIFFERENCE OF FAIR MARKET VAL UE (AS COMPUTED IN ACCORDANCE WITH RULE 11A) AND THE ACTUAL CONSIDERATION PAID; I S TAXABLE IN THE HANDS OF PURCHASER I.E. M/S. PRIYA TOOLS PVT. LTD. I HAVE THEREFORE REASONS TO BELIEVE THAT APPROXIMAT ELY RS. 2.10 CRORES HAS ESCAPED ASSESSMENT IN LIGHT OF PROVISIONS U/S SEC. 56(2)(VIIA) IN THE HANDS OF M/S PRIYA TOOLS PVT. LTD. AND ASSESSMENT U/S 148 NEEDS TO BE RESORTED FOR AY 11-12. ACCORDINGLY, NOTICE U/S 148 NEEDS TO BE ISSUED TO A SSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH C OMES TO NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 O F THE I.T. ACT. 14. FROM THE AFORESAID REASONS RECORDED, IT IS CLEA R THAT THE A.O. FORMED THE VIEW THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESS MENT AS THE INVESTMENT IN 13 719681UNQUOTED SHARES OF M/S BHARATNET TECHNOLOGY L IMITED WAS DONE AT A PRICE OF RS. 1/- PER SHARE WHILE THE FMV CALCULATED ON THE NAV BASIS AS PER THE PROCEDURE PRESCRIBED UNDER RULE 11UA CAME TO RS. 21 /- PER SHARE AND THAT AS PER THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE AC T, THE DIFFERENCE OF FMV AND THE ACTUAL CONSIDERATION PAID WAS TAXABLE IN THE HANDS OF THE ASSESSEE. THE SAID PROVISION OF SECTION 56(2)(VIIA) OF THE ACT WERE AP PLICABLE FROM 01/06/2010. IT IS EVIDENT FROM THE ANNUAL REPORT IN FORM NO. 20B OF M /S BHARATNET TECHNOLOGY LIMITED FURNISHED TO THE REGISTRAR OF THE COMPANIES , COPY OF WHICH IS PLACED AT PAGE NO. 42 TO 55 OF THE ASSESSEES COMPILATION THA T 719681 SHARES WERE TRANSFERRED TO THE ASSESSEE ON 10/05/2010. THEREFOR E THE REASONS RECORDED ON THE BASIS OF APPLICATION OF PROVISIONS OF SECTION 5 6(2)(VIIA) READ WITH RULE 11UA WERE NOT APPLICABLE TO THE ASSESSEES CASE. IN THE PRESENT CASE NOTHING IS BROUGHT ON RECORD THAT ANY INCRIMINATING MATERIAL W AS FOUND DURING THE COURSE OF SEARCH AND SURVEY TO SUBSTANTIATE THAT ANY PAYME NT EXCEEDING RS. 1/- PER SHARE WAS MADE BY THE ASSESSEE. THEREFORE THE REASO NS RECORDED BY THE A.O. WERE BASED AS SUSPICION ONLY. 15. ON A SIMILAR ISSUE THE HON'BLE DELHI HIGH COURT IN THE CASE OF KROWN AGRO GOODS PVT. LTD. VS. ASSISTANT COMMISSIONER OF INCOM E TAX (SUPRA) HELD THAT REASSESSMENT PROCEEDINGS CAN BE INITIATED ONLY IF THE A.O. HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE WOR DS REASON TO BELIEVE INDICATE THAT THE BELIEF MUST BE THAT OF A REASONAB LE PERSON BASED ON REASONABLE GROUNDS EMERGING FROM DIRECT OR CIRCUMST ANTIAL EVIDENCE AND NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE REQUIREMEN T OF LAW IS REASON TO BELIEVE AND NOT REASON TO SUSPECT. THE REASONS T O BELIEVE MUST BE SUCH, WHICH UPON A PLAIN READING, SHOULD DEMONSTRATE THAT SUCH A REASONABLE BELIEF COULD BE FORMED ON SOME BASIS/FOUNDATION AND HAD IN FACT BEEN FORMED BY THE A.O. THAT INCOME HAS ESCAPED ASSESSMENT. IT WOU LD BE THE PROXIMITY OF THE REASONS WITH THE BELIEF OF ESCAPEMENT OF INCOME, WH ICH WOULD BE THE DETERMINATIVE FACTOR FOR REOPENING OF THE ASSESSMEN T. THE REMOTENESS OF THE REASONS WOULD OBVIATE THE POSSIBILITY OF A BELIEF A ND WOULD BRING THE CASE IN THE REALM OF MERE SUSPICION, WHICH CANNOT BE A GROUND F OR REOPENING OF ASSESSMENT. IN THE PRESENT CASE ALSO THE REASSESSMENT PROCEEDIN GS WAS INITIATED BY THE A.O. ON SUSPICION WHICH CANNOT BE A GROUND FOR REOPENING OF THE ASSESSMENT. 14 16. SIMILARLY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF CIT VS. GUPTA ABHUSHAN P. LTD. (SUPRA) HELD THAT THE A.O. HAD MERE SUSPICION THAT THERE WAS A LIKELIHOOD OF THERE BEING A DISCREPANCY IN THE ST OCK WHEN THE SURVEY WAS CONDUCTED. IT WAS MERELY A REASON TO SUSPECT AND CO ULD NOT BE THE SAME AS REASON TO BELIEVE WHICH WAS A NECESSARY PRE-CONDITI ON FOR ANY ACTION UNDER 147 OF THE ACT. THE FACT THAT THE RENOVATION EXPENSES H AD NOT BEEN BOOKED IN THAT YEAR, I.E., THE FINANCIAL YEAR ENDING ON MARCH 31,2 002, DID NOT BY ITSELF INDICATE THAT RENOVATION WORK HAD BEEN CARRIED OUT IN THE EA RLIER THREE YEARS. THE CONCLUSION OF THE A.O. BASED ON WHAT WAS NOTICED IN THE COURSE OF SURVEY COULD NOT BE EXTRAPOLATED TO OTHER YEARS. THE PURPORTED B ELIEF OF THE A.O. WAS NOT A BELIEF BUT WAS MERELY A SUSPICION AND SUCH SUSPICIO N COULD NOT TAKE THE PLACE OF BELIEF BASED ON REASONS. IN THE PRESENT CASE ALSO NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SURVEY AND THE A.O. INVOKED THE PROVISIONS OF SE CTION 56(2)(VIIA) OF THE ACT, WHICH WERE NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE, THE A.O ACTED ON THE BASIS OF REASONS TO SUSPECT, THEREFORE THE REAS SESSMENT PROCEEDINGS WAS NOT VALID. 17. SIMILARLY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. ANUPAM KAPOOR (SUPRA) HELD THAT THERE WAS NO MATERIAL BEFORE THE A.O., WHICH COULD HAVE LED TO A CONCLUSION THAT THE TRANS ACTION WAS A DEVICE TO CAMOUFLAGE ACTIVITIES TO DEFRAUD THE REVENUE. NO SU CH PRESUMPTION COULD BE DRAWN BY THE A.O. MERELY ON SURMISES AND CONJECTURE S. THE TRIBUNAL TOOK INTO CONSIDERATION THAT IT WAS ONLY ON THE BASIS OF A PR ESUMPTION THAT THE A.O. CONCLUDED THAT THE ASSESSEE HAD PAID CASH AND PURCH ASED THE CHEQUE. IN THE ABSENCE OF ANY COGENT MATERIAL IN THIS REGARD, HAVI NG BEEN PLACED ON RECORD, THE A.O. COULD NOT HAVE REOPENED THE ASSESSMENT. TH E ASSESSE HAD MADE AN INVESTMENT IN A COMPANY, EVIDENCE WHEREOF WAS WITH THE A.O. THEREFORE, THE A.O. COULD NOT HAVE ADDED THE INCOME, WHICH WAS RIG HTLY DELETED BY THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL. IN THE PRESENT CASE ALSO NOTHING WAS FOUND DURING T HE COURSE OF SURVEY THAT ANY PAYMENT IN EXCESS OF RS. 1/- PER SHARE HAS BEEN MADE BY THE ASSESSEE TO M/S BHARATNET TECHNOLOGY LIMITED AND EVEN THE PR OVISIONS OF SECTION 56(2)(VIIA) WERE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, THEREFORE THE A.O. WAS NOT JUSTIFIED IN MAKING THE IMPUGNED ADDIT ION. 18. ON A SIMILAR ISSUE THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMR. PARAMJIT KAUR (SUPRA) HELD THAT THE A.O. HAD NOT EXAMINED THE 15 INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASSESSMENT PROCE EDINGS. THE ASSESSING OFFICER HAD THUS ACTED ONLY ON THE BASIS OF SUSPICI ON AND IT COULD NOT BE SAID THAT IT WAS BASED ON BELIEF THAT THE INCOME CHARGEA BLE TO TAX HAD ESCAPED INCOME. THE A.O. HAD TO ACT ON THE BASIS OF REASON S TO BELIEVE AND NOT ON REASONS TO SUSPECT. THE TRIBUNAL RIGHTLY CONCLUDE D THAT THE A.O. HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SATISFACTION FOR R EOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID. IN THE PRESENT CASE ALSO AS WE HAVE POINTED OUT EAR LIER THAT NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SURVEY AND THE A.O. INVOKED THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT, WHICH WERE NOT APPLICABLE TO THE FACT OF THE PRESENT CASE, AND THE A.O. ACTED ON THE BASI S OF REASONS TO SUSPECT, THEREFORE THE REASSESSMENT PROCEEDINGS WERE NOT VAL ID. 19. SIMILARLY THE HON'BLE DELHI HIGH COURT IN THE C ASE OF PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. (SUPRA) HELD THAT WHILE THE REPORT OF THE INVESTIGATION WING MIGHT HAVE CONSTITUTED MATERIAL ON THE BASIS OF WHI CH THE A.O. FORMED THE REASONS TO BELIEVE, THE PROCESS OF ARRIVING AT SUCH SATISFACTION COULD NOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. IN THE ASSESSEES CASE THE CRUCIAL LINK BETWEEN THE INFORMATION MADE AVAILABLE TO THE A.O. AND THE FORMATION OF BELIEF WAS ABSENT. THE REASONS TO BELIEVE RECORDE D WERE NOT REASONS BUT ONLY CONCLUSIONS AND A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT RECEIVED FROM THE DIRECTOR (INVESTIGATION). IT WAS A BORROWED SATISFACTION. THE EXPRESSION ACCOMMODATION ENTRY WAS USED TO DESCR IBE THE INFORMATION SET OUT WITHOUT EXPLAINING THE BASIS FOR ARRIVING AT SU CH A CONCLUSION. THE BASIS FOR THE STATEMENT THAT THE ENTRY WAS GIVEN TO THE ASSES SEE ON HIS PAYING UNACCOUNTED CASH WAS NOT DISCLOSED. WHO WAS THE A CCOMMODATION ENTRY GIVER AND HOW HE COULD BE SAID TO BE A KNOWN ENTRY OPERATOR WERE NOT MENTIONED. THE SOURCE FOR ALL THE CONCLUSIONS WAS T HE INVESTIGATION REPORT. THE TANGIBLE MATERIAL WHICH FORMED THE BASIS FOR THE BE LIEF THAT INCOME HAD ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READING O F THE REASONS. THE REASONS FAILED TO DEMONSTRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAD ESCAPED AS SESSMENT. THE A.O. HAD NOT INDEPENDENTLY CONSIDERED THE TANGIBLE MATERIAL WHICH FORMED THE BASIS FOR THE REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSE SSMENT. NO ERROR HAD BEEN COMMITTED BY THE APPELLATE TRIBUNAL IN CONCLUDING T HAT THE INITIATION OF THE 16 REASSESSMENT PROCEEDINGS UNDER SECTION 147/148 TO R EOPEN THE ASSESSMENTS FOR THE ASSESSMENT YEAR 2004-05, WAS NOT LEGAL. IN THE PRESENT CASE ALSO NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SURVEY IN ASSESSEES CASE AND SEARCH IN T HE GROUP OF CASES TO WHICH ASSESSEE BELONGED AND THE A.O. ACTED ON THE BASIS O F THE REPLY SUBMITTED BY M/S BHARATNET TECHNOLOGY LIMITED WHICH HAS BEEN ADM ITTED BY THE A.O. IN PARA 2 OF THE LETTER DT. 16/17-11-2015, SO, IT WAS A BOR ROWED SATISFACTION AND NOT ON THE BASIS OF MATERIAL AVAILABLE IN ASSESSEES CASE. THEREFORE THE REOPENING OF THE ASSESSMENT UNDER SECTION 147 R.W.S 148 OF THE ACT W AS NOT VALID. 20. AS REGARDS TO THE MERITS OF THE CASE IS CONCERN ED THE A.O. MADE THE ADDITION BY INVOKING THE PROVISIONS OF SECTION 56(2 )(VIIA) OF THE ACT, WHICH WERE APPLICABLE WITH EFFECT FROM 01/06/2010 WHILE THE SH ARE WERE TRANSFERRED TO THE ASSESSEE ON 10/05/2010 WHICH IS EVIDENT FROM THE CE RTIFICATE ISSUED BY THE PRACTICING COMPANY SECRETARY, COPY OF WHICH IS PLAC ED AT PAGE NO. 57 OF THE ASSESSEES COMPILATION WHEREIN IT HAS CLEARLY BEEN MENTIONED THAT 719681 NUMBER OF EQUITY SHARES WERE TRANSFERRED TO THE ASS ESSEE ON 10/05/2010. THE SAID INFORMATION WAS VERIFIED FROM THE RECORD FILED BY THE COMPANY WITH THE REGISTRAR OF THE COMPANY AND DULY EXECUTED VIDE TRA NSFER DEED. IT HAS ALREADY BEEN MENTIONED THAT THE PHOTOCOPY OF THE LIST OF TR ANSFER DEED DT. 10/05/2010 WAS DOWNLOADED FROM THE MINISTRY OF CORPORATE AFFAI RS PORTAL, COPY OF THE SAID LIST OF SHARE TRANSFER IS PLACED AT PAGE NO. 58 OF THE ASSESSEES COMPILATION WHICH CLEARLY SHOWS THAT THE SHARE WERE TRANSFERRED ON 10 /05/2010. THEREFORE THE PROVISIONS OF SECTION 56(2)(VIIA) WERE NOT APPLICAB LE AS THE TRANSACTION TOOK PLACE ON 10/05/2010 WHILE THE SAID PROVISIONS WERE INSERTED BY THE FINANCE ACT 2010 WITH EFFECT FROM 01/06/2010 AND AS SUCH WERE N OT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IN THE PRESENT CASE THE A.O . ON THIS BASIS THAT THE ANNUAL RETURN WAS FILED BY THE COMPANY M/S BHARATNET TECHN OLOGY LIMITED ON 10/11/2010 AND THAT THE PAYMENT HAD BEEN MADE BY TH E ASSESSEE ON 02/11/2010 PRESUMED THAT IN MOST PROBABILITY SHARES WOULD HAVE BEEN TRANSFERRED IN NOVEMBER 2010. HOWEVER NOTHING IS BR OUGHT ON RECORD TO SUBSTANTIATE THAT THE SHARES WERE TRANSFERRED IN TH E MONTH OF NOVEMBER 2010 ON THE CONTRARY THE ANNUAL RETURN FILED BY THE SELLER OF THE SHARES M/S BHARATNET TECHNOLOGY LIMITED CLEARLY ESTABLISHED THAT THE TRA NSFER OF THE SHARES TOOK PLACE ON 10/05/2010 AND EVEN THE CERTIFICATE ISSUED BY TH E PRACTICING COMPANY SECRETARY ALSO CONFIRMED THAT THE SHARES WERE TRANS FERRED ON 10/05/2010 AND NOT IN THE MONTH OF NOVEMBER 2010 AS PRESUMED BY THE A. O. THEREFORE ON MERITS ALSO THE ADDITION MADE BY THE A.O, ON THE BASIS OF PRESUMPTION AND BY INVOKING 17 THE PROVISIONS OF SECTION 56(2)(VIIA) OF THE ACT WH ICH WERE APPLICABLE W.E.F 01/06/2010, WAS NOT JUSTIFIED. IN VIEW OF THE AFORE SAID DISCUSSION, WE ARE OF THE VIEW THAT ON MERITS ALSO THE ADDITION MADE BY THE A .O. AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. THEREFORE, BY CONSIDERING THE TOTALITY OF THE FACTS, WE ARE OF THE VIEW THAT THE REOPENING MADE BY THE A.O. ON THE BASIS OF SUSPICION WAS NOT VALID AND THE ADDITION MADE BY INVOKING THE PRO VISIONS OF SECTION 56(2)(VIIA) OF THE ACT WHICH WERE NOT APPLICABLE TO THE FACTS O F THE ASSESSEES CASE, WAS NOT JUSTIFIED. ACCORDINGLY THE SAME IS DELETED. 21. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRONOUNCED IN THE OPEN COURT ON 10/07/2019 ) SD/- SD/- (SANJAY GARG) (N.K. SAINI) JUDICIAL MEMBER VICE PRESIDENT DATED : 10/07/2019 AG COPY TO: 1.THE APPELLANT, 2. THE RESPONDENT, 3. THE CIT(A), 4. THE CIT, 5. THE DR