NADEEM HASAN,DELHI vs. ITO, WARD- 46(4), NEW DELHI

आदेश /O R D E R

This appeal is filed by the Assessee against the order of the

Ld. Commissioner of Income Tax (Appeals)-16, New Delhi dated

07.08.2019 for the AY 2011-12. The assessee in his appeal raised

the following grounds: -

I.T.A.No.445/Del/2020

notice u/s 148 based on AIR/CIB Information that the assessee had

deposited cash of Rs.28,83,000/- in his Bank account during FY

2010-11 relevant to AY 2011-12. The reassessment was completed

u/s 144/147 on 10.12.2018 treating the amount of Rs.28,83,000/- as

an unexplained money of the assessee u/s 69 A of the Act. 2

I.T.A.No.445/Del/2020

of assessment as well as the addition on merits and the Ld. CIT(A)

sustained the reopening of assessment and also the addition made

u/s 69A of the Act.

Information that the assessee had deposited Rs.28,83,000/- in his

bank account during FY 2010-11 relevant to AY 2011-12 the

Assessing Officer recorded his reasons to believe that the income

had escaped assessment and after getting the approval from

Ld.PCIT the Assessing Officer issued notice dated 31.03.2018 u/s

148 of the Act. The Ld. Counsel for the assessee submits that the

reasons recorded by the AO as well as the approval issued by the

Ld.PCIT for issue of notice u/s 148 are undated. The Ld. Counsel

for the assessee referring to page 2 & 3 of the Paper Book which are

the reasons recorded for reopening of the assessment submits that

AO has categorically mentioned that the assessee had deposited

cash amounting to Rs.28,83,000/- in his account with ICICI Bank.

Ld. Counsel submits that in the reasons recorded the bank details

such as account number, nature of account and address of the

branch is not mentioned. The Ld. Counsel further submits that in

the reasons recorded it was specifically mentioned that the assessee

I.T.A.No.445/Del/2020

did not file any return for AY 2011-12. The Ld. Counsel submits that

in fact the assessee filed return of income on 30.07.2011 and the

copy of acknowledgement of filing of return was placed at page 8 of

the Paper Book. The Ld. Counsel for the assessee submits that in

the reasons recorded the AO has mentioned only one bank account,

whereas the deposits were made into two bank accounts one is

HDFC Bank and the other one is ICICI Bank. The Ld. Counsel for the

assessee submits that the AO has simply gone by the AIR Information

and no verification was made by the AO. The Ld. Counsel submits

that even the bank statements were not available with the AO when

the reasons were recorded and there is complete non-application of

mind by the AO.

approval without any application of mind and the approval is

undated. The Ld. Counsel submits that the reasons have been

recorded by the AO on the strength of factually incorrect premise

that the assessee did not file any return for the year under

consideration, whereas as a matter of fact assessee had already

filed his return for the year under consideration u/s 139(1) on

30.07.2011 declaring income of Rs.1,53,663/-. The Ld. Counsel

further submits that prior to issue of notice u/s 148 dated

I.T.A.No.445/Del/2020

31.03.2018 the assessee had been served with a notice dated

03.08.2012 seeking information about the filing of return of income

for the year under consideration and the assessee vide his reply

dated 03.09.2012 informed the Income Tax Officer, Ward 30(2),

New Delhi that he has already filed return of income on 30.07.2011

vide acknowledgement no. 3001000609. Ld. Counsel submits that

copy of notice and the reply of the assessee are placed at pages 6

and 7 of the Paper Book. Therefore, the Ld. Counsel for the

assessee submits that as the matter of record that the fact of filing

the return of income by the assessee for the year under

consideration was very much within the knowledge of the AO at the

time of recording of reasons as the individual transaction statement

for the FY 2010-11 dated 10.03.2018 containing the details of AIR

Information as well as details of filing return of income for the year

under consideration is very much available on record. Therefore,

the Ld. Counsel for the assessee submits that the reasons recorded

for reopening by the AO suffer from a material factual discrepancy

and goes to the root of the matter and renders the reasons to

nullity and void. Therefore, it is submitted that any proceedings

emanating from void reasons are nothing but illegal and void and, as

I.T.A.No.445/Del/2020

such, is liable to be quashed. In support of the above contention

the ld. Counsel placed reliance on the following decisions: -

reopening of assessment was only on the basis of AIR Information

and since there is no application of mind by the AO, the

reassessment proceedings are void ab initio and are liable to be

quashed. The Ld. Counsel for the assessee placed reliance on the

following decisions in support of the above contention:

accorded his approval u/s 151 of the Act acted in a mechanical

manner without due application of mind. Ld. Counsel submits that

the Ld. AO has acted in casual and mechanical manner without

independently applying his mind on the AIR Information and the

material available on record. It is submitted that the individual

transaction statement (ITS) of the assessee dated 10.03.2018,

wherein AIR Information is reported it has been categorically

mentioned that assessee has made cash deposits into two banks but

I.T.A.No.445/Del/2020

the AO in his reasons has mentioned that cash deposit has been

made only in ICICI Bank. In the ITS it has been shown that the

assessee had filed return of income for the year under consideration

on 30.07.2011 with acknowledgement no. 609 declaring taxable

income of Rs.1,53,660/- but the AO in his reasons has stated that

the assessee did not file any return of income.

recorded reasons it is noticed that the reasons recorded is undated

as the date of recording of reasons by the AO is not mentioned.

Therefore, in the absence of date on the reasons recorded it cannot

be made out that the reasons were recorded prior to issue of notice

u/s 148 or thereafter.

has reopened the assessment simply based on AIR Information

without any verification of facts and without applying his own mind

to the information, if any, collected before recording the reasons.

It is also submitted that Ld. PCIT also accorded approval which is

also undated without any application of mind. For the proposition

that an approval granted without an application of mind is bad in

law reliance is placed on the Delhi High Court decision in the case

of PCIT vs. N.C. Cables Ltd. [391 ITR 11]. 7

I.T.A.No.445/Del/2020

of the authorities below.

below and the case laws relied on. The first contention of the

assessee is that the assessment was reopened without application of

mind and on wrong assumption of facts. The reasons recorded for

reopening of assessment by AO are as under:

REASONS TO BELIEVE IN THE CASE OF SH. NADEEM HASAN, PAN:ACCPH8788G FOR AY 2011-12 1. The department is having information that the assessee has deposited cash of Rs.28,83,000/- with ICICI Bank Ltd. during the FY 2010-11 relevant to AY 2011-12. 2. It appears that entire investment of Rs.28,83,000/- is unaccounted and it is likely that there is an escapement of income of more than Rs.1 lakh.

I.T.A.No.445/Del/2020

Provided…….. Explanation 2.- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income tax”. 5. It is pertinent to mention that in the case of CIT Vs. Nova Promoters & Finalise Private Limited [ITA No. 342 of 2011] dated 15.02.2012, the Hon’ble Delhi High Court which is the jurisdiction High Court has held that as long as there is a ‘live link’ between the document/information which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- “We are aware of the legal position that at the stage of issuing the notice u/s 148 the merits of the matter are not relevant and the Assessing Officer at that stage is required to form only a prima facie opinion that income chargeable to tax has escaped assessment”. 6. Further more, in the case of Jyoti Goyal vs. ITO (ITA No. 1259/Del/2010), the Hon’ble ITAT Delhi held that: “As regards, the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment, sufficiency of such information cannot be gone into while deciding the issue of validity of reopening. The Assessing officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement with finding of the Ld. CIT(A) that the reopening of assessment u/s 147 of the Act, was valid”. 7. The live link between the material available on ITD system and the reasons for belief that income has escaped assessment has been sufficiently demonstrated. Since, no assessment has been completed u/s 143(3) of the Act, and period of 4 years has elapsed, hence, the proposal is forwarded to the Pr. Commissioner of Income Tax-16, New Delhi for consideration and necessary approval in accordance with the proviso appended with section

I.T.A.No.445/Del/2020

151(1) of the IT Act, 1961 for issuance of notice u/s 148 of the IT Act. Sd/- (Prem Pal Singh) Income Tax Officer Ward 46(4), New Delhi.”

stated that assessee has deposited cash of Rs.28,83,000/- with ICICI

Bank Ltd. during the relevant assessment year i.e. 2011-12. On

perusal of the ITS dated 10.03.2018 which is placed at page 1 of the

paper book filed by the assessee it suggests that assessee had

deposited Rs.11,68,500/- in HDFC Bank Ltd. and Rs.17,14,500/- in

ICICI Bank Ltd. In the reasons recorded the AO stated that entire

investment of Rs.28,83,000/- is unaccounted and it is likely that

there is an escapement of income of more than Rs.1 lakh. The AO

also records that assessee has not filed return of income for the AY

2011-12 and, therefore, he satisfied that he has reasoned to belief

that the assessee has not fully disclosed his income and income to

the extent of Rs.28,83,000/- has escaped assessment. These are

the only reasons recorded for reopening of assessment of the

assessee. However, on perusal of the copy of acknowledgement of

return of income filed by the assessee which is placed at page 8 of

the paper book, it is clear that the assessee has filed his return of

income on 30.07.2011 declaring income of Rs.1,53,660/- vide

I.T.A.No.445/Del/2020

acknowledgement no. 3001000609. This fact was also recorded in

the ITS dated 10.03.2018 which is very much available with the AO

when the reasons were recorded and notice was issued u/s 148

dated 31.03.2018. Therefore, it is abundantly clear that based on

wrong assumption of facts the AO believed that the income of the

assessee had escaped assessment. Firstly as per AIR information AO

was of the view that there is a deposit of Rs.28,83,000/- in ICICI

bank which is factually wrong since there were deposits in two bank

accounts one is ICICI and the other is HDFC Bank. Secondly, the

assessee even though filed return of income the AO records that no

return was filed by the assessee and, therefore, income had

escaped assessment. It is also observed that the reasons recorded

are undated and, therefore, it is doubtful as to whether these

reasons recorded were before issue of the notice u/s 148 or

thereafter. The AO in the reasons also records that he has

demonstrated the live link between the materials available on ITD

System and the reasons for belief that income had escaped

assessment. However, the facts as recorded above suggest that

there is no live link between the material available and the reasons

for belief that income had escaped assessment. From perusal of the

reasons recorded for reopening of assessment it is noticed that the

I.T.A.No.445/Del/2020

reasons recorded only based on AIR Information and nothing else.

The AO has not verified the facts, not examined the bank

statements and formed belief that income had escaped assessment

prior to issue of notice u/s 148 of the Act. There is complete non-

application of mind by the AO.

that income has escaped assessment the AO ought to have formed

an opinion on the basis of the material possessed by him exhibiting

the facts that income has escaped assessment. A perusal of the

reasons recorded for reopening of assessment in this case would

indicate that the basis of reasons recorded is AIR Information stating

cash deposits of Rs.28,83,000/- as an unexplained investment and

also that the assessee did not file any return of income for the year

under consideration. It is pertinent to mention that the AO has not

analyzed the information in right perspective and sought to reopen

by conceiving a wrong fact that the assessee did not file return of

income and, as such, the bank deposit represents unexplained

investment. The mere information from annual information returns

which is made as the basis for reopening without describing the

contents of information i.e. when was the statement received, the

bank account details and most importantly copy of bank account

I.T.A.No.445/Del/2020

which is made as the basis of reopening was never gone through by

the AO while recording the reasons. This is very much clear from

the reassessment order that the AO recorded a finding that during

the course of assessment proceedings information u/s 133(6) of the

Act were called from HDFC Bank Ltd. and ICICI Bank and there was

no compliance made by both the banks till date. Therefore, the AO

never had with him any copy of bank statement before recording of

reasons for reopening of assessment and issue of notice u/s 148.

Therefore, without going to the contents of the entries in the bank

accounts merely deposits cannot be treated as income escaping

assessment.

there is no nexus between the prima facie inferences arrived in the

reasons recorded and the information. The information was

restricted to cash deposit in bank account but there was no material

much less tangible, cogent, credible and relevant material to form a

reason to believe that cash deposits represented income of the

assessee. The reasons recorded in the present case at best can be

treated to be reasons to suspect which is not sufficient for

reopening the assessment u/s 148 of the Act. The requirement of

I.T.A.No.445/Del/2020

application of mind is missing in the present case on the face of it in

the reasons recorded.

has been held that if there was no independent applicable of mind

by AO to tangible material and reasons, failed to demonstrate link

between tangible material and formation of reason to believe that

income had escaped assessment and, therefore, reassessment was

not justified.

vs. DCIT (supra) held that if reasons recorded for issue of notice u/s

148 are factually incorrect that cannot therefore, form the basis for

the belief that income had escaped assessment. Similar view has

been taken by the Hon’ble Gujarat High Court in the case of Sagar

Enterprises vs. ACIT (supra).

the Hon’ble High Court held that reopening only on the basis of

information received that the assessee has introduced unaccounted

money in the form of accommodation entries without showing in

what manner the AO applied independent mind to the information

renders the reopening void. In the case on hand also the AO simply

relied on the AIR Information and not made any verification of facts

I.T.A.No.445/Del/2020

and independent application of mind to the materials available on

record to come to conclusion that there is an escapement of income

in assessee’s case.

issued permission to reopen the assessment without going into the

facts available on record. Even in the Form for seeking approval, in

Column 8, the AO records that no return has been filed by the

assessee even though factually incorrect and the PCIT did not apply

his mind while granting approval as he has simply gone by what is

recorded by the AO which is factually wrong. The satisfaction

recorded by the PCIT is in mechanical manner and without

application of mind.

ITR 665] the Hon’ble Delhi High Court held as under:

“12. In the present case, having started off on a wrong note that the original assessment was scrutinized and an order was passed u/s 143(3) of the Act, the Assessing Officer proceeded to put up the note to the Director of Income Tax as is evident from the title of the note but, through the Additional Director of Income Tax. Both the Additional Director of Income Tax and the Director of Income Tax appear to have concurred with the reasons for reopening the assessment but without applying their minds to the fact that the return originally filed was only processed u/s 143(1) of the Act and not under section 143(3) of the Act. Had the Additional Director of Income Tax realized this mistake, he would not have put up the file further for the approval of the Director of Income Tax. Clearly, therefore, at the level of Additional Director of Income Tax there was non-application of mind. Had the Director of Income Tax realized the mistake, he would have declined to make a noting and would have returned the file to the Additional Director of Income Tax drawing his attention to section 15

I.T.A.No.445/Del/2020

151(2) of the Act which did not require any further approval by the Director of Income Tax where the return originally filed is only processed under section 143(1) of the Act. On the contrary, the Director of Income Tax again recorded his concurrence with the views of the Assessing Officer and the Additional Director of Income Tax. Therefore, at the second level also plainly there was non-application of mind.” 20. In view of the above discussion, I hold that the reassessment

made u/s 144 r.w.s. 147 by the AO is bad in law. Thus, the

reassessment order is quashed. As I have allowed the appeal of the

assessee on preliminary ground of jurisdiction of reopening of

assessment various other grounds raised by the assessee including

grounds on merits are not decided as they become only academic at

this stage.

indicated above.

Order pronounced in the open court on 18/05/2022

Sd/- (C.N. PRASAD) JUDICIAL MEMBER Dated: 18.05.2022 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order

Assistant Registrar, ITAT: Delhi Benches-Delhi