SUBHASH SINGH,JAIPUR vs. AC, BHARATPUR

PER BENCH :

These 6 appeals are directed against 6 separate orders of the ld. CIT (A) in

respect of the connected assessments framed by the AO under section 147 read

with section 143(3) of the IT Act for the assessment year 2006-07. Since the

substantive assessment and addition was made by the AO in case of Shri Subhash

Singh in ITA No. 289/JP/2016 and in the remaining cases only protective

assessments were framed, therefore, for the purpose of recording facts, this appeal

3 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

is taken as a lead case. The grounds raised in the appeal in ITA No. 289/JP/2016 are

as under :-

“ 1. The ld. CIT (A) has erred on facts and in law in upholding the validity of the assessment made u/s 147 of the IT Act, 1961.

2.1. The ld. CIT (A) has erred on facts and in law in confirming the addition of Rs. 1,21,60,335/- made by AO by treating the said cash as unexplained income of the assessee u/s 69 of the IT Act. He has further erred in confirming the addition without considering the legal contentions raised and evidences filed by the assessee by simply reiterating the observation of DDIT (Inv.)-I, Jaipur reproduced in the assessment order by holding that evidences relied by assessee are self serving in nature and a ruse to camaflogue the real source of cash.

National Agricultural Co-operative Marketing Federation of India Ltd. (NAFED). The

assessee’s only source of income was salary and interest from bank, bonds, capital

4 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

gain. There was a search by the Anti Corruption Bureau, Jaipur on 22nd May, 2005

at 3 (three) premises being House No. 20/147, Kaveri Path, Mansarover, Jaipur,

House No. 20/148, Kaveri Path, Mansarover, Jaipur and House No. 11, Kaveripuram,

Dayal Bagh, Agra. These three premises are in the names of the sister of the

assessee, father of the assessee and brother-in-law of the assessee. However, the

assessee was also residing in the premises at House No. 20/148, Kaveri Path,

Mansarover, Jaipur. As per the Seizure Memo prepared by the Anti Corruption

Bureau, Jaipur, a cash of Rs. 45,74,100/- was found at House No. 20/147, Kaveri

Path, Mansarover, Jaipur, cash of Rs. 5,53,335/- was found at House No. 20/148,

Kaveri Path, Mansarover, Jaipur and Rs. 70,32,900/- was found at House No. 11,

Kaveripuram, Dayal Bagh, Agra. The ACB recorded the statements of various

persons including the assessee. Consequently, the DIT Investigation also taken up

the case of tax evasion on account of the seizure of cash of more than Rs. 1.21

crores by the ACB and issued summon to the assessee under section 131 on 15.12.2008. The statement of the assessee was recorded on 7th February, 2009

wherein the assessee has denied the allegations of seizure of cash and submitted

that he has nothing to do with the said cash as it was found from the relatives of the

assessee and belong to them. The DIT Investigation has also obtained the relevant

documents and report of the ACB Jaipur. Consequently, the DIT Investigation has prepared the report on 28th March, 2011 which was sent to the AO for necessary

action. The AO consequently reopened the assessments of all these persons. In the

reassessment, the AO has made the addition on substantive basis of the said

amount of Rs. 1,21,60,335/- in the hands of the assessee and protective

5 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

assessments were made in the hands of the other five persons. The order of the AO

was challenged before the ld. CIT (A). The ld. CIT (A) has confirmed the addition

made in the hands of Shri Subhash Singh on substantive basis and protective

assessments framed in the name of the other five persons.

reopening of the assessment under section 147/148 of the IT Act. The main thrust

of the contention of the ld. A/R on the issue of validity of reopening is that the AO

has reopened the assessment only on the basis of the information received from

ADIT/JCIT Range Bharatpur without conducting any verification or enquiry on his

own to have the reasons to believe that income of the assessee has escaped

assessment. The ld. A/R has referred to the reasons recorded for reopening of the

assessment and submitted that though the AO has mentioned in the reasons that

enquiries were made at his end but nowhere in the assessment order there is any

discussion as to what enquiry was conducted by the AO before recording the

reasons for reopening. Thus the ld. A/R has submitted that reasons recorded by the

AO are inconsistence with the actual facts and, in fact, the AO has only gone by the

report of the DDIT Investigation, Jaipur without applying his own mind. Thus it is

evident that the AO has not made any enquiry on his own to have reasons to believe

that income of the assessee has escaped assessment, therefore, the reopening of

the assessment made on the basis of borrowed satisfaction or at the dictum of the

higher authorities is illegal and bad in law. In support of his contention, he has

relied upon the decision of the Hon’ble Supreme Court in the case of CIT vs.

Greenworld Corporation, 314 ITR 81 (SC) and submitted that the Hon’ble Supreme

6 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

Court has held that by no stretch of imagination a higher authority can interfere with

the independence of the assessing authority which is the basic feature of any

statutory scheme involving adjudicatory process. The ld. A/R has also relied upon

the Hon’ble Jurisdictional High Court in the case of CIT vs. Shree Rajasthan Syntex

Ltd., 313 ITR 231 (Raj.) as well as in the case of CIT vs. Smt. Sohan Devi Sodani,

303 ITR 342 (Raj.). Thus the ld. A/R has submitted that reopening of the

assessment is not valid and liable to be quashed.

reopening of the assessment merely on the basis of report of the Investigation Wing

as a result of investigation carried out at a third party but the investigation was done

first by the ACB, Jaipur and thereafter by the Investigation Wing of the Department

in the case of the assessee himself. Various documents, the cash of Rs.

1,21,60,335/- seized by the ACB as well as the statements of the assessee and other

relatives recorded by the Investigation Wing constitute a tangible material to form

the belief that the income assessable to tax has escaped assessment. He has relied

upon the orders of the authorities below.

2005 at the various premises belonging to the assessee and his relatives. Though

the premises House No. 20/147 Kaveri Path, Mansarover, Jaipur and House No.

20/148, Kaveri Path, Mansarover, Jaipur are in the names of the father of the

assessee and sister of the assessee, however, the assessee was also residing along

with his father at premises House No. 20/148, Kaveri Path, Mansarover, Jaipur.

7 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

Therefore, at least the cash found at the premises where the assessee was residing

prima facie constitute a tangible material which has a direct nexus to the belief that

the income assessable to tax has escaped assessment. It is not a simple case of

report of ADIT but the cash of more than Rs. 1.21 crores was found at the various

premises and more than Rs. 50,00,000/- was found at the premises where the

assessee was also residing. Therefore, the report of the ACB Jaipur coupled with the

investigations carried out by the ADIT of the Revenue Department, constitute a

tangible material to form a reasonable belief that the income assessable to tax has

escaped assessment. It is pertinent to note that the assessee was a General

Manager working in the National Agricultural Co-operative Marketing Federation of

India Ltd. and the only known source of income of the assessee was salary income

and, therefore, recovery of huge amount of more than Rs. 50,00,000/- from the

premises at Jaipur along with the seizure report/memo prepared by the ACB prima

facie sufficient to form a reasonable belief that the income assessable to tax has

escaped assessment. The ld. CIT (A) has considered this issue in para 4.4 to 4.7 as

under :-

“ 4.5. I have perused the assessment order as well as remand report of the AO, submissions made including judicial citations and cross reply of the appellant and find that AO had issued notice to the appellant before initiating reassessment proceedings. Re-assessment proceedings were started on the basis of material available on record. I find that AO had issued the notice u/s 148 based on the material found during the course of search conducted by the ACB and discrepancies noticed in the income declared by the appellant. The AO

8 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

has given reasonable opportunity of being heard to the appellant before initiating the re-assessment proceedings. The AO has discharged the duty which lay upon him before initiating the reassessment proceedings. 4.6. However, the case laws relied upon by the appellant does not have applicability to the facts of the present case. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an in-built idea of fairness to taxpayer (Asst. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC). In determining whether commencement of reassessment proceedings is valid, the court has only to see whether there is prima facie some material on the basis of which the Department opened the case. The sufficiency or correctness of the material is not a thing to be considered at this stage as held by the Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO (1999) 236 ITR 34 (SC), Great Arts (P) Ltd. v. ITO (2002) 257 ITR 639 (Delhi). The assessee cannot challenge sufficiency of belief- ITO v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 4.7. Thus, in view of these facts, I hold that AO had rightly initiated the proceedings u/s 147/148 of the IT Act.”

Hence, in view of the above discussion, we do not find any reason to interfere with

the impugned order of the ld. CIT (A), qua this issue.

addition was made on the basis of a ACB Report and not on the basis of any

material to establish that the cash found during the search belongs to the assessee.

He has referred to the statements of the various persons recorded by the ACB as

well as by the Investigation Wing of the Revenue Department wherein it was

9 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

explained by each of the persons the source of the cash found with them at the time

of search. Therefore, except the report of the ACB as well as the report of the

Investigation Wing, there was no other evidence with the AO to establish that the

cash found during the search belongs to the assessee and further each and every

penny found during the search was explained with the supporting evidence. The ld.

A/R has referred to the statements of these persons as well as the evidence to show

that the source of the cash found during the search was duly explained by these

persons. Further, he has submitted that once these persons have accepted the cash

belonging to them and also explained the source, then there was no basis to treat

the said cash belongs to the assessee. The assessment was also completed in case

of those persons and the AO has accepted the source explained by those persons.

Even in case of the cash found at the premises House No. 11, Kaveripuram, Dayal

Bagh, Agra, the brother-in-law of the assessee has explained the cash belong to the

business entities and it was also recorded in the books of business entities. He has

referred to the assessment orders of the business entities wherein the said cash was

duly recorded in the books of account and the AO has accepted the said cash in the

books of those entities. Thus once the AO has accepted the source of cash found

during the search as belong to various business entities, then the same cash cannot

be treated as undisclosed income of the assessee. As the ld. A/R has submitted that

the AO has framed the assessment on the basis of the report of the Investigation

Wing without carrying on any independent enquiry or investigation during the

assessment proceedings, therefore, the order framed by the AO and addition made

in the hands of the assessee is not sustainable in law when the AO has not brought

10 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

on record any fact or evidence to prove that the cash belongs to the assessee and it

is an undisclosed income of the assessee. He has referred to the assessment order

in case of M/s. Kaveri Cold Storage & Ice Factory, which is a partnership firm and

Shri Rajveer Singh, the brother-in-law of the assessee is the partner in the said firm

and explained the source of the cash found at House No. 11, Kaveripuram, Dayal

Bagh, Agra being the cash belonging to the said partnership firm. The AO while

completing the assessment in case of M/s. Kaveri Cold Storage & Ice Factory, has

accepted that the cash of Rs. 70,32,900/- pertains to the partnership firm and no

addition was made in the hands of the said partnership firm. Hence, the ld. A/R has

submitted that the addition made is without any evidence and based on the report

of the Investigation Wing is not sustainable.

below and submitted that in the report of the ACB, the fact was clearly established

that the cash were found from the various bags and suitcases which were opened

only taking the locking code from the assessee which shows that entire cash found

during the search belongs to the assessee though it was kept at different places. He

has further contended that the ld. CIT (A) has examined this issue after considering

the remand report of the AO and, therefore, there is a finding based on the relevant

facts and evidence that the cash of Rs. 1,21,60,335/- found during the search by the

ACB Jaipur belongs to the assessee and it was an undisclosed income of the

assessee.

11 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

record. The reassessment proceedings were initiated by the AO on the basis of

report of the Investigation Wing. However, in the assessment proceedings, the AO

has referred only the report of the Investigation Wing and no separate enquiry or

investigation was conducted by the AO during the assessment proceedings. The AO

has only referred to the report of the Investigation Wing which in turn is based on

the search memo of ACB, Jaipur wherein all the facts were narrated as how the cash was found during the search conducted by the ACB Jaipur on 22nd May, 2005. We

have gone through the entire assessment order running into 15 pages. The AO has

reproduced the report of the Investigation Wing which in turn refers to the search

memo of the ACB and the finding of the AO is only at page 15 as under :-

“ Thus, in view of the above facts the total seized amount of Rs. 1,21,60,335/- is unexplained in term of section 69 of the I.T. Act. Therefore, same is added to the total income of the assessee on substantive basis.”

Thus it is clear that the AO has neither conducted any enquiry nor brought any other

evidence or material on record to prove that the cash found by the ACB from these

three premises belongs to the assessee and it was an undisclosed income of the

assessee. The AO has reproduced the said information received from the

Investigation Wing in 14 pages and thereafter has added the said amount of Rs.

1,21,60,335/-. It is a settled proposition of law that the assessment order framed

12 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

on the basis of the report of the Investigation Wing without conducting an

independent enquiry by the AO lacks the supporting evidence to substantiate the

decision of the AO. Though the AO has not conducted any enquiry during the

assessment proceedings, however, the facts remain that a cash of Rs. 1,21,60,335/-

was found during the search conducted by the ACB Jaipur and since this fact is not

in dispute, therefore, the question whether the said cash is an undisclosed income of

the assessee was required to be examined on the basis of an independent enquiry

to be conducted by the AO. The report of the ACB though is a relevant material

evidence, however, since the said report is only a report and not a decision as the

same is subjected to scrutiny of the court of law in the trial which is yet to be

conducted and, therefore, until and unless the fate of the report of the ACB is

decided by the court of law, the said report cannot be the sole basis of the

assessment framed by the AO. We further note that the report of the Investigation

Wing has not brought any new fact but it is just reproduction of the facts as

recorded by the ACB in the search memo. Thus the report of the ACB has to be

tested the scrutiny of the court of law in the trial and, therefore, the said report can

be relevant material but cannot be a sole basis for assessment. Accordingly, we are

of the considered view that the AO has not conducted a proper enquiry in this

matter as no independent examination or investigation was carried out by the AO

prior to the completion of the reassessment. Hence, we set aside this matter to the

record of the AO for denovo assessment after conducting a proper enquiry and

investigation and allowing a proper opportunity of hearing to the assessee.

13 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

ITA Nos. 290 & 560 to 563/JP/2016.

respective amounts found from the possession of those persons. Since these

assessments made on protective basis are consequential to the assessment framed

on substantive basis in the hands of Shri Subhash Singh, therefore, in view of the

fact that the matter in case of Shri Subhash Singh is set aside to the record of the

AO, the assessments framed on protective basis in the hands of these five persons

are also set aside to the record of the AO on the same terms as in the case of Shri

Subhash Singh.

Order is pronounced in the open court on 31/10/2018.

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Jaipur Dated:- 31/10/2018. Das/

14 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.

आदेश की प्रतिलिपि अग्रेषित@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

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15 ITA Nos. 289, 290, 560 to 563/JP/2016 Shri Subhash Singh, Bharatpur and Others.