Gangeshwari Metals Pvt. Ltd., New Delhi V. ITO, Ward-11(3), New Delhi

ITA 9343/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4574 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 04-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARUL SINGH SENIOR
• Keywords: Reopening of assessment; Question of law; Tangible material; Borrowed satisfaction; Set aside
• Section: 143(3); 133A; 115JB; 143(1); 73; 13; 119; 22; 131; 148; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCE) ITA NO.9343/DEL./2019 (ASSESSMENT YEAR : 2010-11) M/S. GANGESHWARI METALS PVT. LTD., VS. ITO, WARD 1 1 (3), SHOP NO.4, 169, SHIVKHAND, NEW DELHI. VISHWAKARMA NAGAR, JHILMIL, DELHI 110 032. (PAN : AABCG4856A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANDEEP SAPRA, CA REVENUE BY : MS. PARUL SINGH, SENIOR DR DATE OF HEARING : 12.10.2020 DATE OF ORDER : 22.10.2020 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. GANGESHWARI METALS PVT. LTD. (HEREI NAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 07.10.2019 PASSE D BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-15, NEW DELHI QUA THE ASSESSMENT YEAR 2010-11 ON THE GROUNDS INTER ALIA T HAT :- ITA NO.9343/DEL./2019 2 1. THAT THE IMPUGNED ASSESSMENT ORDER DATED 29/12/ 2017 PASSED UNDER SECTION 143(3) R.W.S. 147 OF IT ACT DE SERVES TO BE QUASHED/ANNULLED AS INITIATION OF PROCEEDINGS U/S 1 47/148 IS BAD IN LAW INTER ALIA BECAUSE: A) AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT SATISFACTION THAT HE HAD REASON TO BELI EVE THAT INCOME HAS ESCAPED ASSESSMENT AS REASONS HAVE BEEN RECORDED ON BORROWED SATISFACTION VIZ. LETTER DATED 27.03.20 17 ALONGWITH REPORT OF THE INVESTIGATION WING, UNIT 3(1), KOLKAT A WITHOUT MAKING AN INDEPENDENT ENQUIRIES. B) THE FIGURES RECORDED IN THE REASONS VIZ. BUYING, SELLING AND PROFIT ARE FACTUALLY INCORRECT WHICH ALSO SHOWS NON APPLICATION OF MIND ON THE PART OF THE AO. C) THERE WAS NO PROPER VALID AND LEGAL SERVICE OF NOTICE UNDER SECTION 148 OF THE IT ACT ON THE APPELLANT. D) REQUISITE SANCTION AS REQUIRED FROM THE COMPETE NT AUTHORITY UNDER SECTION 151 OF IT ACT HAS BEEN GRAN TED IN A MECHANICAL MANNER. E) THE REASONS RECORDED INDICATE THAT THE AO HAS AC TED ON MERE SURMISES AND SUSPICION FOR MAKING FISHING AND ROVING ENQUIRES. THE REQUIREMENT OF LAW IS 'REASON TO BELI EVE' AND NOT 'REASON TO SUSPECT'. F) THERE IS NO NEXUS BETWEEN THE REASONS RECORDED AND ESCAPEMENT OF INCOME. G) THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT. 2. THAT THE LD. CIT (A) ERRED ON FACTS AND IN LAW I N CONFIRMING THE ADDITION OF RS.1,31,08,895/- U/S 68 READ WITH SECTION 115BBE OF I.T. ACT AS AGAINST PROFIT OF RS. 1,49,19,900 DECLARED ON ACCOUNT OF COMMODITY TRADING. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ORIGINAL RETURN OF INCOME OF ASSESSEE AT TAXABLE INCOME OF RS.1,88,519/- WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). THEREAFTER, THE ASSESSMENT WAS REOPENED AFTER RECOR DING REASONS ITA NO.9343/DEL./2019 3 AFTER A PERIOD OF FOUR YEARS ON RECEIPT OF CERTAIN INFORMATION FORM INVESTIGATION WING OF THE INCOME-TAX DEPARTMENT FOR INITIATION OF PROCEEDINGS U/S 147/148 OF THE ACT FOR AY 2010-11. IT IS THE CASE OF THE AO THAT FROM THE REPORTS OF FORWARD MARKET C OMMISSION (FMC), IT WAS FOUND THAT ON THE NATIONAL MULTI COM MODITY EXCHANGE (NMCE) PLATFORM, THERE WERE BOGUS CLIENTS WHO WERE USED TO MAKE MARKET ARTIFICIALLY INCREASED AND THE CLIENTS WHO USED THE PLATFORM BOOKED CONTRIVED LOSSES THROUGH THE PR E-MEDIATED SYNCHRONIZED TRADES AND IT WAS ALSO FOUND THAT SUCH CONTRIVED LOSSES BOOKED ON NMCE WERE USED TO SET OFF THE OTHE R GENUINE PROFITS BOOKED ON OTHER WELL REGULATED EXCHANGES IN ORDER TO EVADE THE TAXES. CONSEQUENTLY, DIRECTORATE OF INVESTIGAT ION, AHMEDABAD PUT UNDER SCRUTINY 85 ENTITIES WHO BOOKED LOSSES MO RE THAN RS.10 CRORES ON NMCE. INVESTIGATION WING PREPARED THE LI ST OF BENEFICIARIES AS PER INFORMATION PROVIDED BY THE IN VESTIGATING DIRECTORATE AND THE ASSESSEE WAS FOUND TO BE ONE OF THE BENEFICIARIES OF TAKING BOGUS PROFIT AS PER TRANSAC TIONS UNDERTAKEN IN AY 2010-11. AO ACCORDINGLY RECORDED THE REASONS THAT BOGUS PROFIT HAS BEEN TAKEN BY THE ASSESSEE TO ADJUST THE BROUGHT FORWARD LOSSES AND NO TAX HAS BEEN PAID. EVEN IN MAT PROVI SION, NO TAX HAS BEEN PAID BY THE ASSESSEE AND PROCEEDED TO HAVE REASONS TO BELIEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF T HE ASSESSEE TO ITA NO.9343/DEL./2019 4 DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSA RY FOR AY 2010- 11, THE INCOME CHARGEABLE TO TAX TO THE EXTENT OF A CCOMMODATION ENTRY AMOUNTING TO RS.1,37,250/- HAS ESCAPED ASSESS MENT WITHIN THE MEANING OF SECTION 147/148 OF THE ACT AND THERE BY FRAMED THE ASSESSMENT BY MAKING ADDITION OF RS.131,08,895/- U/ S 68 OF THE ACT AND ACCORDINGLY FRAMED THE ASSESSMENT U/S 143 ( 3) READ WITH SECTION 147 OF THE ACT. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING THE APPEAL WHO HAS UPHELD THE REOPENING U/S 147/148 OF THE ACT AND HAS ALSO CONFIRMED THE ADDITION BY WAY OF D ISMISSING THE APPEAL. FEELING AGGRIEVED BY THE ORDER PASSED BY T HE LD. CIT (A), THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUND NO.1 5. BEFORE PROCEEDING FURTHER, THE REASONS RECORDED BY THE AO TO INITIATE PROCEEDINGS U/S 147/148 OF THE ACT FOR AY 2010-11 ARE EXTRACTED FOR READY PERUSAL AS UNDER :- ITA NO.9343/DEL./2019 5 REASONS RECORDED IN THE CASE OF M/S. GANGESHWARI M ETALS PVT. LTD. A.Y. 2010-11 FOR INITIATING PROCEEDINGS U/S 147/148 OF THE INCOME-TAX ACT, 1961 NAME OF THE ASSESSEE M/S. GANGESHWARI METALS PVT. LTD. PAN AAACM0267E STATUS COMPANY ASSESSMENT YEAR 2010-11 THE ASSESSEE COMPANY HAD FILED RETURN OF INCOME ON 17.09.2010 DECLARING A TOTAL INCOME OF RS.L,88,519/ -, WHICH HAS BEEN ADJUSTED AGAINST BROUGHT FORWARD LOSSES AND NE T TAXABLE INCOME OF RS NIL HAS BEEN RETURNED. EVEN THE BOOK P ROFIT U/S 115JB HAS BEEN DECLARED AT RS NIT. THE RETURN WAS P ROCESSED US 143(1} AND THE CASE OF THE YEAR UNDER CONSIDERAT ION WAS NOT COMPLETED IN SCRUTINY ASSESSMENT. INVESTIGATION WING, UNIT-3(1), KOLKATA. VIDE LETTER DATED 17.03.2017 HAS FORWARDED A REPORT ON SYSTEMATIC EVA SION OF TAXES DURING THE FY 2009-10 (AY 2010-11) THROUGH BO GUS COMMODITY TRADING. AS PER THIS REPORT, A SURVEY AC TION U/S 133A OF THE IT ACT WAS CONDUCTED BY PR DIRECTOR OF INCOME TAX (INVESTIGATION). AHMEDABAD AT THE PREMISE OF NA TIONAL MULTI COMMODITY EXCHANGE (NMCE) AND BACKUP OF THE NMCE TRADE WAS TAKEN. AFTER ANALYSIS OF THIS DATA, 85 ENTITIES WERE IDENTIFIED WHO HAD BOOKED CONTRIVED LOSSES IN EXCESS OF RS.40 CRORES AND INFORMATION WAS SHARED WITH DIRECT OR GENERAL OF INCOME TAX (INV), KOLKATA. ON THE BASIS OF ABOVE INFORMATION, INVESTIGATION WERE CARRIED OUT IN THE CASE OF 50 ENTITIES WHICH REVEALED THE FOLLOWING : (I) SUMMONS U/S 131 OF I.T. ACT, 1961 WERE ISSUED TO AL L THE 50 CONCERNED ENTITIES TO FURNISH DETAILS OF THEIR BUSINESS/PROFESSION, BALANCE SHEET. P/L ACCOUNT, IT R ETC MOST OF THE SUMMONS RETURN UNSERVED (II) IN SOME CASES INSPECTOR WAS DEPUTED TO SERVE THE SUMMONS BUT THE SAME COULD NOT BE SERVED AS THE ENTITIES WERE NOT FOUND AT THEIR ADDRESS (III) FURTHER, IT WAS FOUND THAT MOST OF THEM DID NOT FIL E INCOME TAX RETURN FOR THE CONCERNED AY AND SOME OF THEM WHO FILED ITR DID NOT CLAIM THIS LOSS IN THEIR RETURN OF INCOME. (IV) MANY OF THE ENTITLES SUCH AS BARBARIK OEALCORN PVT LTD., AVENUE DEALERS PVT LTD, ANAND SHARE BROKING PVT LTD, DARPAN COMMOSALES PVT LID. DIGNITY TIE UP PVT LTD., FAIRDEAL VINCOM PVT. LTD. GULISTAN VANIJY A PVT. LTD., JACKSON INVESTMENTS LTD., SINNA INFRA BU ILD PVT. LTD., QUISCOPE DEALERS PVT. LTD., GITANJALI UD YOG ITA NO.9343/DEL./2019 6 PVT. LTD., MATRIBHUMI COMMERCIE PVT. LTD., PINNACLE COMMODITIES PVT. LTD. ARE FOUND TO BE SHELL COMPANI ES WHICH ARE MANAGED AND CONTROLLED BY THE VARIOUS KOLKATA BASED ENTRY OPERATORS LIKE SHRI DEVESH UPADHYAY, SHRI PANKAJ AGARWAL, SHRI SUBHASH AGARWAL, SHRI PRAKASH JAJODIA ETC. (V) IT WAS FOUND THAT MOST OF THE TRADING WERE DONE THROUGH MEMBER/BROKER OF NMCE WHO WAS PENALIZED/SUSPENDED BECAUSE THEY WERE FOUND TO BE INVOLVED IN ARTIFICIAL TRADING OF SHARES BY MISUSE OF NMCE PLATFORM IKE HANU COMMODITIES PVT. LTD., M/S. KISSAN COMMODITIES PVT. LTD., JACKSON INVESTMENTS LTD., SHYAM SHREE COMMODITIES PRIVATE LIMITED, MARINA COMMOTRADE PRIVATE LIMITED, MOTISONS COMMODITEIS PRIVATE LIMITED, D.M. FINANCE, JET AIR AGENCIES PVT. LTD. ETC. FURTHER THESE MEMBERS/BROK ERS CREATED DUMMY ENTITIES TO ACCOMMODATE BOGUS LOSS. (VI) SOME OF THE ENTITIES/BENEFICIARIES WHO TOOK ESPECIA LLY PROFIT FROM THESE 50 ENTITIES WAS CHECKED RANDOMLY AND IT IS FOUND THAT THEY HAD NOT FILED THEIR INCOME TA X AND DID NOT SHOW INCOME EARNED THROUGH COMMODITIES PROF IT FOR THE CONCERNED ASSESSMENT YEAR. BASED UPON INVESTIGATION, THE INVESTIGATION WING HA S PREPARED A LIST OF BENEFICIARIES AND AS PER INFORMATION PROV IDED BY THE INVESTIGATION DIRECTORATE, THE ASSESSEE IS ONE OF T HE BENEFICIARY AND HAS TAKEN BOGUS PROFIT AS PER FOLLOWING TRANSAC TIONS DURING AY 2010-11 :- TOTAL BUYING RS.37,26,450/- TOTAL SELLING RS.38,63,700/- TOTAL PROFIT RS. 1,37,250/- THE ABOVE INFORMATION PROVIDED BY THE INVESTIGATION WING WAS EXAMINED THE REGARD TO THE RECORD OF THE ASSESS EE. IT IS SEEN THAT THE ASSESSEE HAS SHOWN PROFIT ON COMMODITY TRA NSACTION IN EXCESS OF THE ABOVE MENTIONED AMOUNT. FURTHER, IT IS SEEN THAT THE ABOVE BOGUS PROFIT HAS BEEN TAKEN TO ADJUST THE BROUGHT FORWARD BUSINESS LOSSES AND NO TAX HAS BEEN PAID BY THE ASSESSEE. EVEN IN THE MAT PROVISIONS NO TAX HAS BE EN PAID BY THE ASSESSEE. THUS BY THIS PROCESS, THE ASSESSEE G AS INTRODUCED ITS UNACCOUNTED MONEY INTO BOOKS OF ACCOUNTS, WITHO UT PAYING ANY TAXES, IT IS APPARENT THAT THERE HAS BEEN A FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY AL L MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR ABOVE ASSESSMENT YEAR 2010-11. ITA NO.9343/DEL./2019 7 KEEPING IN VIEW THE ABOVE FACTS, I HAVE REASON TO B ELIEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT FOR ABOVE ASSESSMENT YEAR 2010-11, THE INCOME CHARGEABL E TO TAX TO THE EXTENT OF ABOVE MENTIONED ACCOMMODATION ENTRY AMOUNTING TO RS.1,37,250/- AS MENTIONED ABOVE HAS E SCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE ACT. MOREOVER, AS THE CASE PERTAINS TO A PERIOD BEYOND F OUR YEARS FORM THE END OF RELEVANT ASSESSMENT YEARS FOR ISSUI NG THE NOTICE U/S 148, NECESSARY APPROVAL/ SANCTION MAY KINDLY BE ACCORDED BY THE PR. COMMISSIONER OF INCOME TAX-4 DELHI, IN V IEW OF THE AMENDED PROVISION OF SECTION 151 W.E F. 01.06.15. SUBMITTED FOR KIND PERUSAL AND APPROVAL AS PER PROV ISION OF SECTION 151 (2) OF THE INCOME-TAX ACT, 1961. SD/- ITO, WARD 11(3). NEW DELHI DATED: 27/03/2017 6. REFERRING TO THE REASONS RECORDED BY THE AO FOR THE PURPOSE OF REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT, LD. AR FOR THE ASSESSEE CONTENDED INTER ALIA THAT THE AO HAS NOT A PPLIED HIS MIND BY VERIFYING THE INFORMATION RECEIVED FROM THE INVE STIGATION WING OR BY MAKING INDEPENDENT ENQUIRIES BEFORE RECORDING THE REASONS; THAT INFORMATION RECEIVED FROM THE INVESTIGATION WI NG IS NOT A TANGIBLE MATERIAL PER SE AND AS SUCH, THE REASONS H AVE BEEN RECORDED ON BORROWED SATISFACTION; THAT SANCTION / APPROVAL BY THE PRINCIPAL CIT HAS ALSO BEEN ACCORDED IN MECHANICAL MANNER; THAT THERE IS NO SPECIFIC ALLEGATION AGAINST THE ASSESSE E THAT HE HAS FAILED TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR FRAMIN G ASSESSMENT; THAT EVEN ON MERITS ADDITION MADE U/S 68 IS NOT SUSTAINA BLE AND RELIED UPON THE DECISION RENDERED BY THE COORDINATE BENCH OF THE TRIBUNAL ITA NO.9343/DEL./2019 8 IN CASE OF RANDEEEP INVESTMENT PVT. LTD. VS. ITO IN ITA NO.4991/DEL/2014 ORDER DATED 06.07.2018 . 7. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ORDER PASSED BY THE AO AS WELL AS LD. CIT (A) AND F URTHER CONTENDED THAT MODUS OPERANDI OF THE ASSESSEE AND O THER MEMBERS OF THE NMCE IS TO BOOK THE BOGUS PROFITS AND ADJUST THE SAME AGAINST BROUGHT FORWARD LOSSES AND RELIED UPON THE DECISION RENDERED BY HONBLE SUPREME COURT IN CASE OF RAYMOND WOOLEN MILLS LTD. VS. ITO (1999) 236 ITR 34 SC . 8. BARE PERUSAL OF THE REASONS RECORDED EXTRACTED I N THE PRECEDING PARA GOES TO PROVE THAT NAME OF THE ASSES SEE AS A BROKER HAS NOWHERE MENTIONED IN THE REASONS RECORDED. REA SONS HAVE BEEN RECORDED BY THE INVESTIGATING OFFICER WITHOUT MAKING ANY VERIFICATION OF FACTS AND FIGURES FORWARDED BY THE INVESTIGATION WING WHAT TO TALK OF CONDUCTING INDEPENDENT ENQUIRY . BECAUSE IN THE REASONS RECORDED ASSESSEE IS SHOWN TO HAVE EARN ED PROFIT OF RS.1,37,250/- FROM TRADING COMMODITIES ALLEGEDLY AS BOGUS PROFIT DURING 2010-11 WHICH IS EXTRACTED AS UNDER :- TOTAL BUYING RS.37,26,450/- TOTAL SELLING RS.38,63,700/- TOTAL PROFIT RS. 1,37,250/- ITA NO.9343/DEL./2019 9 9. LD. AR FOR THE ASSESSEE TO PROVE THE FACT THAT T HE REASONS RECORDED ARE VAGUE AND FACTUALLY INCORRECT TAKEN US TO THE AUDITED BALANCE SHEET, PROFIT & LOSS ACCOUNT AND SCHEDULE I X, SALES AND OTHER INCOME, AVAILABLE AT PAGES 13 TO 32 OF THE PA PER BOOK, PARTICULARLY SCHEDULE IX DEPICTING SALES AND OTHER INCOME, AVAILABLE AT PAGE 27 OF THE PAPER BOOK, WHICH SHOWS THAT ASSESSEE HAS BOOKED PROFIT FROM COMMODITIES AT RS.149,19,900 /- AND NOT RS.1,37,250/-. THIS FACT GOES TO PROVE THAT THE AO HAS PROCEEDED MERELY ON THE BASIS OF REPORT GIVEN BY THE INVESTIG ATION WING AND HAS NOT PREFERRED TO VERIFY THE SAME FROM THE AUDIT ED FINANCIALS BROUGHT BEFORE HIM BY THE ASSESSEE AND IN THESE CIR CUMSTANCES, IT IS DIFFICULT TO BELIEVE THAT HE HAS APPLIED HIS MIND B EFORE RECORDING THE REASONS REQUIRES FOR INITIATING THE PROCEEDINGS U/S 147/148 OF THE ACT. 10. AFORESAID FACT OF NON-APPLICATION OF MIND BY TH E AO IS FURTHER STRENGTHENED FROM THE APPROVAL ACCORDE D BY THE PRINCIPAL CIT FOR INITIATING PROCEEDINGS U/S 147/14 8, AVAILABLE AT PAGE 39 OF THE PAPER BOOK. LD. PRINCIPAL CIT ACCOR DED THE APPROVAL AS UNDER:- ON GOING THROUGH THE MATERIAL AVAILABLE AND THE RE ASONS RECORDED BY THE ASSESSING OFFICER, I AM SATISFIED T HAT IT IS A FIT CASE FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT, 1 961. ITA NO.9343/DEL./2019 10 11. WE ARE OF THE CONSIDERED VIEW THAT WHEN AO WAS NOT EVEN AWARE AS TO THE ACTUAL PROFIT EARNED BY ASSESSEE FR OM COMMODITIES AND THIS FACT HAS ALSO NOT BEEN VERIFIED BY THE PRI NCIPAL CIT FROM AUDITED FINANCIALS OF THE ASSESSEE, THEN IT IS DIFF ICULT TO BELIEVE AS TO HOW AND UNDER WHAT CIRCUMSTANCES HE HAS MADE HIMSEL F SATISFIED TO PROCEED AGAINST THE ASSESSEE U/S 147/148 OF THE ACT. SO, THE ENTIRE PROCESS AS TO INITIATING THE REOPENING IS ME RELY MECHANICAL WITHOUT ANY APPLICATION OF MIND BY THE AO AS WELL A S SANCTIONING AUTHORITY, PRINCIPAL CIT, WHICH HAS VITIATED THE EN TIRE PROCEEDINGS. 12. HONBLE DELHI HIGH COURT IN CASE OF PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. 395 ITR 677 (DEL.) WHILE DECIDING THE IDENTICAL ISSUE HELD THAT, AFTER RECEIPT OF REPORT FROM THE INVESTIGATING OFFICER, AO WHO FORM THE REASONS TO BELIEVE MUST HAVE APPLIED INDEPENDENT MIND AND NOT TO REPRESENT THE REPORT OF INVESTIGATION. 13. HONBLE DELHI HIGH COURT IN CASE OF PRINCIPAL CIT VS. RMG POLYVINYL (I) LTD. 396 ITR 5 (DEL.) HELD THAT INFORMATION RECEIVED FROM INVESTIGATION WING CANNOT BE CONSIDER ED AS TANGIBLE MATERIAL PER SE FOR FURTHER ENQUIRY MADE BY THE AO BY RETURNING FOLLOWING FINDINGS :- HELD, DISMISSING THE APPEAL, THAT NO LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASONS TO BELIEV E THAT INCOME HAD ESCAPED ASSESSMENT, COULD BE DISCERNED. THE INF ORMATION ITA NO.9343/DEL./2019 11 RECEIVED FROM THE INVESTIGATION WING WAS NOT TANGIB LE MATERIAL PER SE WITHOUT A FURTHER ENQUIRY HAVING BEEN UNDERT AKEN BY THE ASSESSING OFFICER, WHO HAD DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEEDING ON THE ERRONEOUS PREMISE THAT THE ASS ESSEE HAD NOT FILED A RETURN FOR THE ASSESSMENT YEAR, 2004-05, WH EN IN FACT IT HAD. IN HIS ASSESSMENT ORDER, THE ASSESSING OFFICER HAD, INSTEAD OF ADDING A SUM OF RS.78 LAKHS, EVEN GOING BY THE R EASONS FOR REOPENING OF THE ASSESSMENT, ADDED A SUM OF RS. 1.1 3 CRORES AND THE BASIS FOR SUCH ADDITION HAD NOT BEEN EXPLAINED. NO ERROR WAS COMMITTED BY THE APPELLATE TRIBUNAL IN HOLDING THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 WAS BAD IN LAW. NO QUESTION OF LAW AROSE. 14. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE AN D FOLLOWING THE AFORESAID DECISIONS RENDERED BY HONBLE DELHI H IGH COURT, WE ARE OF THE CONSIDERED VIEW THAT FIRSTLY REASONS TO BELIEVE RECORDED BY THE AO, WHICH IS REPLICA OF INFORMATION RECEIVED FROM THE INVESTIGATION WING, CANNOT BE A TANGIBLE MATERIAL P ER SE SUFFICIENT TO FORM REASONS TO BELIEVE; THAT EVEN FIGURES OF BU YING, SELLING AND PROFIT BOOKING QUA COMMODITY TRADING, RECORDED AT P AGE 2 OF REASONS TO BELIEVE, ARE NOT IN ACCORDANCE WITH TH E AUDITED FINANCIALS OF THE ASSESSEE COMPANY WHICH SHOWS THAT THERE IS ABSOLUTELY NO APPLICATION OF MIND ON THE PART OF TH E AO BEFORE RECORDING THE REASONS TO BELIEVE; THAT IN THE THIRD LAST PARA OF REASONS TO BELIEVE, THE AO RECORDED THE FACT THAT T HE INCOME CHARGEABLE TO TAX TO THE EXTENT OF AFOREMENTIONED A CCOMMODATION ENTRY AMOUNTING TO RS.1,37,250/- HAS NO NEXUS WITH THE ADDITION OF RS.1,31,08,895/-; THAT WHEN THE ASSESSEE HAS SHOWN TO HAVE EARNED THE PROFIT OF RS.1,49,19,900/- ON ACCOUNT OF COMMOD ITY TRADING, THE ITA NO.9343/DEL./2019 12 ADDITION ON THIS ACCOUNT OF RS.1,31,08,895/- U/S 68 IS PART AND PARCEL OF TOTAL PROFIT EARNED BY THE ASSESSEE WHICH HAS BEEN DECLARED AS INCOME, THE VERY INITIATION OF PROCEEDI NGS U/S 147/148 OF THE ACT IS BAD IN LAW, HENCE NOT SUSTAINABLE. 15. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THE REOPENING U/S 147/148 OF T HE ACT FOR THE AY 2010-11 WAS NOT LEGAL, HENCE QUASHED AND GROUND NO.1 IS DETERMINED IN FAVOUR OF THE ASSESSEE. GROUND NO.2 16. LD. AR FOR THE ASSESSEE CONTENDED THAT EVEN THE ADDITION MADE BY THE AO U/S 68 TO THE TUNE OF RS.1,31,08,895 /- IS NOT SUSTAINABLE ON MERITS FOR THE REASONS INTER ALIA TH AT THE ADDITION HAS BEEN MADE MERELY ON THE BASIS OF REPORT OF INVESTIG ATION WING WHICH HAS NEVER BEEN CONFRONTED TO THE ASSESSEE; TH AT DOCUMENTARY EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE TO PROV E THE PROFIT ON COMMODITY TRADING HAVE NEITHER BEEN EXAMINED NOR CO NTROVERTED BY THE AO; THAT THERE IS NOT AN IOTA OF EVIDENCE ON FILE TO PROVE THAT THE ASSESSEE HAS ROUTED HIS OWN UNACCOUNTED MONEY I N THE GARB OF PROFIT ON COMMODITY TRADING; THAT THE COPIES OF REP LIES FILED BY R.K. COMMODITIES SERVICES (P) LTD., RELIED UPON BY THE AO, HAVE NEVER BEEN SUPPLIED TO THE ASSESSEE NOR HE HAS BEEN CONFRONTED WITH THE SAME. ITA NO.9343/DEL./2019 13 17. AS DISCUSSED IN THE PRECEDING PARAS, IT IS UNDI SPUTED FACT THAT THE ASSESSEE HAS DECLARED PROFIT OF RS.149,19,900/- ON ACCOUNT OF COMMODITY TRADING DURING THE YEAR UNDER ASSESSMENT WHEREAS AO/CIT (A) HAVE MADE/CONFIRMED ADDITION ON ACCOUNT TO THE TUNE OF RS.1,31,09,895/- U/S 68 READ WITH SECTION 115BBE OF THE ACT. ADDITION MADE BY THE AO/CIT (A) ON ACCOUNT OF ALLEG ED PROFIT IN COMMODITY TRADING TO INTRODUCE ITS UNACCOUNTED MONE Y AND TO EVADE TAXES IS MERELY ON THE BASIS OF SURMISES BECA USE FIGURE OF RS.1,31,08,895/- MADE AS ADDITION DOES NOT FIND MEN TION IN ANY OF THE AUDITED FINANCIALS OF THE ASSESSEE. ASSESSEE H AS SHOWN TO HAVE EARNED THE PROFIT ON ACCOUNT OF COMMODITY TRADING A T RS.1,49,19,900/- AS IS EVIDENT FROM THE FINANCIALS/ SCHEDULE, AVAILABLE AT PAGE 27 OF THE PAPER BOOK ON WHICH INC OME-TAX HAS BEEN PAID. 18. ASSESSEE HAS DULY BROUGHT BEFORE THE AO/CIT (A) THE DOCUMENTS VIZ. COPY OF ACCOUNT OF THE ASSESSEE COMP ANY IN THE BOOKS OF R.K. COMMODITIES (P) LTD. AS WELL AS COPIE S OF ACCOUNTS OF ASSESSEE COMPANY IN THE BOOKS OF SMRAT COMMODITY BROKER PVT. LTD. WITH WHOM TRADING OF RS.59,56,410/- AND RS.89, 63,490/- RESPECTIVELY WAS MADE AND THESE DOCUMENTS ARE AVAIL ABLE AT PAGES 75 TO 118 OF THE PAPER BOOK. SURPRISINGLY, ALL THE SE DOCUMENTS HAVE NOT BEEN EXAMINED NOR CONTROVERTED BY THE AO A S WELL AS LD. ITA NO.9343/DEL./2019 14 CIT(A). MOREOVER, ALL THESE TRANSACTIONS ARE PROVED TO HAVE BEEN MADE THROUGH BANKING CHANNELS FROM THE ASSESSEES H DFC BANK STATEMENT, AVAILABLE AT PAGES 119 TO 133 OF THE PAP ER BOOK. 19. AO REPORTED TO HAVE ISSUED NOTICES U/S 133 (6) ON 07.12.2017 TO NMCE HEAD OFFICE, AHMEDABAD AND MCX B UT REPLY RECEIVED THERETO HAVE NEVER BEEN CONFRONTED T O THE ASSESSEE NOR COPIES THEREOF HAVE BEEN SUPPLIED. THIS ISSUE WAS SPECIFICALLY RAISED BY THE ASSESSEE BEFORE THE LD. CIT (A), AS I S EVIDENT FROM THE SUBMISSIONS MADE TO LD. CIT (A), AVAILABLE AT PAGES 1 TO 10 OF THE PAPER BOOK, TO DIRECT THE AO TO SUPPLY COPY OF SAID REPLIES BUT NO COGNIZANCE HAS BEEN TAKEN BY THE LD. CIT (A) ON THE REQUEST OF THE ASSESSEE. 20. WHEN ASSESSEE HAS SPECIFICALLY PROVED ON RECORD THAT IT HAS EARNED PROFIT OF RS.59,56,410/- ON COMMODITY TRADIN G THROUGH R.K. COMMODITIES (P) LTD. REGISTERED WITH NMCE BUT AO HA S WRONGLY TAKEN THIS AMOUNT AS RS.41,45,405/- AND TREATED THE SAME AS THE PROFIT EARNED BY THE ASSESSEE THROUGH MANIPULATIONS WITHOUT EXAMINING THE EVIDENCE AVAILABLE ON FILE, IT IS PRO VED ON RECORD THAT ALL THESE DOCUMENTS WERE PLACED BEFORE THE AO BY TH E ASSESSEE VIDE LETTERS DATED 06.12.2017 AND 29.12.2017, AVAIL ABLE AT PAGES 73 & 74 AND 134 TO 136 RESPECTIVELY OF THE PAPER BOOK, BUT HE HAS NOT DRAWN ANY ADVERSE INFERENCE AGAINST THE CLAIM OF TH E ASSESSEE. ITA NO.9343/DEL./2019 15 RATHER AO AS WELL AS LD. CIT (A) KEPT ON ESSAY WRIT ING SPREE ON THE BASIS OF SURMISES IN MAKING THE IMPUGNED ADDITI ON BY COMPLETELY IGNORING THE EVIDENCE AVAILABLE ON RECOR D, HENCE ADDITION MADE BY THE AO AND CONFIRMED BY THE LD. CI T (A) IS NOT SUSTAINABLE ON MERIT ALSO. SO, THIS GROUND IS DETE RMINED IN FAVOUR OF THE ASSESSEE. 21. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF OCTOBER , 2020. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 22 ND DAY OF OCTOBER, 2020 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-15, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.