SHRI DINESH SETHI,LUDHIANA vs. ITO, LUDHIANA

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 3

“3.1. Brief facts are that as per information received by the AO the appellant had deposited Rs. 3,84,43,500/- by various transfer entries in the current bank account No. 169150050800222 in the name of the appellant in Tamilnad Merchantile Bank Ltd., Ludhiana on 28/29.03.2006. The current account was opened on 27.03.2006. All the amounts were withdrawn in cash on the same date on which the transfer entries were credited. On further verification, the AO found that no return of income for assessment year 2006-07 had been filed by the appellant. The AO held that the income to the tune of Rs. 3,84,43,500/- had escaped assessment for the A.Y. 2006-07. The AO accordingly issued notice u/s 148 on 19.03.2008 which was duly served on the appellant on 20.03.2008. There was no compliance to the notice and no return in response to this notice u/s 148 was filed. The AO issued a notice u/s 142(1) dated 23.06.2008 alongwith a copy of reasons recorded for reopening the case u/s 148. This notice was served through affixture on 25.06.2008, fixing the case for ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 4 08.07.2008. Once again none attended nor any information was filed. Another notice u/s 142(1) was issued on 30.10.2008 for attendance on 06.11.2008. This notice was also served through affixture. Once again neither anybody attended nor any information was filed by the appellant. Thereafter summons u/s 131 were issued on 30.12.2008 and various details were called for. Once again there was no compliance. The AO accordingly completed the assessment u/s 144 of the I.T. Act on the basis of information available on record. The AO observed that the appellant had not filed any return of income for A.Y. 2006-07 and there was no explanation regarding the source of deposits amounting to Rs. 3,84,43,500 credited in the bank account. The AO accordingly held that these amounts were income of the appellant and added the same to the total income of the appellant u/s 69A of the I.T. Act.”

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 5 reasons for re-opening , the manner of issuing notice u/s 148 as well as 142(2). According to him, there was no proper service of notice upon him nor any notice was served u/s 143(2). All these pleas have duly been noticed by the CIT (Appeals) and thereafter, these pleas have been rejected by the CIT (Appeals). Finding of the CIT (Appeals) reads as under : “3.6. I have carefully considered the rival submissions. As regard the issue of service of notice u/s 148 and notice u/s 142(1) is concerned, it is evident from the facts on record and from the detailed report of the AO that notice u/s 148 was duly issued on 19.03.2008 and served on 20.03.2008. It is also a fact on record that the notice was served in person by the notice server at the address of the appellant. The appellant's contention that there was no notice served u/s 148 is therefore factually incorrect. It is also seen from the detailed report of the AO dated 19.07.2013 that after the service of first notice u/s 148, repeated efforts were made by the AO to serve notice on the appellant in person through notice server and through inspector but the officials were informed that the appellant was not residing anymore at that address and in the absence of any forwarding address the notices were served at the same address through affixture. It is thus abundantly clear that the appellant had been trying to evade the process of law through denial on various occasions when the notice server and the inspector tried to serve a notice or summons on the appellant. In the light of these facts and circumstances of the case the appellant's contention that the notice dated 19.03.2008 served on 20.03.2008 on an unauthorized person was an invalid service of notice is another attempt by the appellant to evade the process of law. From the facts on record it is apparent that the notice was sent at the address of the appellant and was served by the notice server in person in on individual at that address. The fact that the person receiving the notice duly signed the notice on behalf of the appellant is a sufficient evidence that the person was duly authorized to received the notice. Any denial by the appellant on this issue is a mere self serving statement. The appellant has relied upon the judgement in the case of Shri Chetan Gupta vs ACIT (supra). In that case the notice was sent at a wrong address. The address in the notice u/s 148 was not correct. In the appellant's, case, the address in the notice was correct. It is not even the appellant’s case that the address mentioned in the notice under section 148 is incorrect. The facts of the appellant's case are therefore clearly distinguishable. In the aforesaid facts and circumstances of the case I hold that there was a valid services of notice u/s 148 and u/s 142(1).

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 6 3.7 As regards the issue of notice u/s 148 and the reasons thereof is concerned, it is evident from the facts on record that the AO had specific information regarding credit entries in the bank account of the appellant amounting to more than Rs. 3,00,00,000/- during the F.Y. 2005-06 which was immediately withdrawn in cash. The information received by the AO was specific. There was no ambiguity about the information. The information had a direct bearing on the total income of the appellant. The AO thereafter verified the records and noted that no return had been filed by the appellant for the assessment year under consideration. In these circumstances the AO had sufficient material on record to believe that income had escaped assessment. In these circumstances the AO was fully justified in issuing notice u/s 148 of the LT. Act. Communication received by an Assessing Officer for discharge of his official duties is valid information for issue of notice u/s 148. Reliance in this regard is placed on the following case laws:- (i) ACIT v. Kisco Casting P. Ltd. (2013) 152 TTJ 629 (Chd.) (Trib.) Where the information is factual and not false one and the same has merely been communicated to the Assessing Officer, he would be within his statutory right to invoke the provisions of section 147 r.w.s. 148.The Tribunal held that information from the investigation wing being factually correct and the assessee failed to refuse the same in any proceedings under the Act, then the Assessing Officer has jurisdiction under section 147 r.w.s. 148 of the Act and there is no infirmity and illegality in issuance of notice under section 148 of the Act by Assessing Officer. (A. Y. 2006-07) (ii) Srinivasa Khandasari Udyog Vs ITO (ITAT, Bang) 56 TD 146 (iii) ITO Vs Purushotam Das Bangur & Anr (SC) 224 ITR 362 (iv) Elphinstone Picture Palace Vs Union of India & Anr (Pat) 74 ITR 115 (v) H.A. Nanji & Co. Vs ITO (Cal) 120 ITR 593 (vi) Sohan Singh Vs CIT (Del) 158 ITR 174 (vii) Rattan Gupta Vs CIT (P&H) 234 ITR 220

Similarly, information received from other agencies like CIB, Enforcement Directorate or from other Assessing Officers constitute material for reopening of assessment and notice issued u/s 148 in these circumstances is also valid. Reliance in this regard is placed on the following decisions:- i) CGT Vs. Susheela Shanmugasundaram (Mad) 242 ITR 176 ii) ITO Vs. Gurinder Kuar (ITAT, Del) 102 ITD 189 iii) Sterlite Industries (India) Ltd. Vs. ACIT (Mad) 302 ITR 275

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 7 3.4 For acquiring jurisdiction u/s 147 of the Act, the A.O. is required to have in his possession certain material or information on the basis of which he could prima-facie have reason to believe that income escaped assessment.

The Hon'ble Delhi High Court in the case of Rattan Gupta Vs. CIT 234 ITR 2 20, observed as under:-

"At this stage, the question is not whether what is stated in the letter dated 17.02.1993, or the conclusion drawn from the appraisal report are true or not. The only question on this stage is about the relevancy of the material for formation of requisite belief. It cannot be held that the letter and the appraisal report do not constitute the relevant material. It is a different matter that during inquiry the petitioner may be able to establish that the conclusions are not correct. In our view, there is no illegality in the issue of impugned notice. "

3.5 After initiation of proceedings, the A.O. could conclude on the basis of other information and explanation of the appellant that no income had escaped assessment yet for acquiring the jurisdiction, the A.O. could still have valid basis on the basis of information available at the time of initiating action u/s 147/148 of the Act to have prima-facie reason to believe that such income escaped assessment. The information received by the A.O., as mentioned above, could very well make him prima-facie have such reason to believe that income escaped assessment. Further, as the AO has initiated the proceedings on the basis of above mentioned specific information it could not be said that the action of the A.O. was on the basis of certain surmises or conjectures only. It could also not be said that the material in possession of the A.O. could just make him have reason to suspect and not reason to believe that income escaped assessment. Moreover adequacy of satisfaction of AO is not justice-able as was held by Hon'ble Punjab & Haryana High Court in the case of Gurera Gas Cylinders Pvt. Ltd. Vs. CIT (258 ITR 170) and in case of Swaraj Engine Ltd. Vs. ACIT (260 ITR 202) following the judgment of Hon'ble Supreme Court in cash of Phool Chand Bajrang Lai Vs. ITO (203 ITR 456). The ratio of the decisions relied upon by the Ld. Counsel would, therefore, not help the case of the appellant. As discussed above on receiving the information regarding the credit entries in the bank account, the AO compared the same with the records available and noted that no return had been filed by the appellant for the assessment year under consideration. In these circumstances, the appellant's contention that there was no application of mind by the AO is also not correct. Reliance in this regard is placed on the following case laws:

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 8 Jawand Sons Vs. CIT 326 ITR 39 P&H Under section 147 of the Act, after its amendment with effect from April 1, 1989, wide power has been given to the Assessing Officer even to cover cases where the assessee had fully disclosed the material facts. The only condition for action is that the Assessing Officer should have reason to believe that income chargeable to tax had escaped assessment. Such belief can be reached in any manner, and is not qualified by a pre-condition of full and true disclosure of material facts by the assessee as contemplated in the pre-amended section 147(a) of the Act. 3.8 Keeping in view the aforesaid facts and circumstances of the case the AO was fully justified in issuing notice u/s 148. These grounds of appeal are accordingly dismissed.”

7.1 The ld. counsel for the assessee has filed a brief synopsis apart from advancing arguments in the Court. His brief synopsis read as under: “1. This is a case of assessee, whose case was reopened u/s 148 and the exparte assessment was framed by the Assessing Officer, since no notice u/s 148 or 142(1) had been served upon the assessee. The brief facts of the case are as under:- i). The first ground of appeal is general in nature and ground No. 2 & 3 deal with the fact that no notice u/s 148 had been served upon the assessee and there is no reason to believe for taking recourse to section 148 and ground No. 4 8t 5 is the reference to the fact that even no notice u/s 142(1) or 143(2) has been served upon the assessee. FACTS ABOUT SERVICE OF NOTICE U/S 148 ii). The assessment proceedings were framed exparte, since no notice either u/s 148 or 142(1) or 143(2) had been served upon the assessee. It was only when the huge demand was raised by the Assessing Officer by passing an order u/s 144 vide order, dated 17.12.2008 and in April, 2012, the assessee came to know of certain demand raised against him and then, he applied for the relevant papers and also sought all the documents from the file of the department and thereafter, he then filed an appeal before the Worthy Commissioner of Income Tax (Appeals), Ludhiana. iii). We have filed paper book on the basis of attested copies of the documents as received from the Assessing Officer on 3rd of May, 2012. iv). It has been agitated that no notice u/s 148 was served upon the assessee or any of his representative and, therefore, the whole proceedings are void abinitio. Copy of the notice is at page 1 of the paper book.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 9 v). The signature on the notice are of some person, whose name starts from alphabet "K" and we had stated before the C(T(A) that there is no person in ' the family of Sh. Dinesh Sethi with the alphabet "K". vi). The signatures of the assessee can be seen from the account opening form as placed at page 9 of the paper book and also at pages 5, 6, 7 & 17 of the paper book, which is an account opening form in the name of M/s R.S.Trading Co. and cheques issued by the assessee at pages 15,16, 17. vii). The CIT (A) has not disputed the above fact and has confirmed the addition, without meeting the challenge of the assessee that no notice u/s 148 was served upon the assessee as per page-1 of the paper book. viii). Even, subsequently, notices u/s 142(1) at page 2, it has been stated that the assessee has shifted to Delhi and then at page 3, there is affixture order , without any independent witnesses and at page 2, it is stated that assessee shifted to Delhi and which is not correct. It is stated that the assessee never shifted to Delhi and the address given in the notice is of his residential address. ix). The contention of the assessee have been reproduced by the CIT (A) in para 3.2 at page 3 to page 11 of his order, read with detailed submission before the CIT (A) at pages 40 to 64 of the paper book read with other submissions on pages 71 to 79, 84 to 87 & 88 to 90 and which are being relied upon and the finding of the CIT (A) is there in para 3.6 of the order. x). The Assessing Officer and CIT (A) has stated that the notice, dated 19.03.2008 was served on 20.03.2009. The issue is that, when the assessee . challenges any service of notice, then the department has to prove beyond any iota of doubt that the notice had been served upon the person, who have been authorized to receive the notice. This view has been taken by the Chandigarh Bench of the ITAT in similar and identical circumstances in the case of "Vijay Karan Hotel P. Ltd.", in which, it has been held in that case that there was no valid notices served, as the signatures of the recipient, though resembled with signatures of the MD, but were not actual signatures of MD. Thus, it was held that department has failed to prove the service of notice. Reassessment was quashed on the ground of improper service. The copy of the judgment is in the Judgment Set at pages 1 to 5. Reliance is being placed on the judgement of Chandigarh Bench of the ITAT in the case of Sh. Ajit Kumar Lakra, copy placed at pages 118 to 131 of Judgement set and in that case also, according to the department, there was service of notice and which was received by some person on behalf of "Super Fine Knitters" and the assessee had challenged that service. The finding of the Hon'ble Bench is there in para 10, at page 125 and after relying upon various judgements, it has been held that there was no valid service of notice and since this is a jurisdictional requirement, the proceedings were held to be invalid.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 10 While delivering the above judgment, the Hon'ble Bench has relied upon number of judgments and it was held that, since there was no proper service of the notice, the whole proceedings were held to be void abinitio. xii). Similarly, in the other judgments of Amritsar Bench & Delhi High Court, wherein the notice u/s 148 was received by the employee of the assessee or by the brother of the assessee, it has been held that there was no proper service of notice. The copy of the judgment is in the Judgment Set at pages 6 to 9 & 10 to 13 of the Paper Book. The Punjab & Haryana High Court in the case of CIT Vs Avtar Singh as reported in 304 ITR 333, has held as under:- "Held, the Commissioner (Appeals), as well as the Tribunal had recorded a pure finding of fact, after considering the material available on record to the effect that notice under section 148 of the Income-tax Act, 1961, was actually not served upon the assessee for the assessment year 1998-99, which was a condition precedent for making reassessment or recomputation under section 147. The reassessment proceedings were not valid." The copy of the judgment is in the Judgment Set at pages 34 to 36. xiv). In our case, neither the person, whose signatures are there is an employee or a family member, which we have challenged at the first instance and, therefore, the service of notice is bad in law. Similarly, in the other judgment, it has conclusively held that the department had to prove that there was proper service of notice as per copy of the judgments are placed at pages 14 to 25 & 26 to 30 of the Judgment Set. If the department is not able to prove the proper service of notice, then the whole proceedings are void abinitio. xv) Reliance is being placed on the judgment of Lucknow bench of the ITAT, as reported in 114 TTJ 706, copy placed at pages 31 to 33 of the Judgment Set, wherein, it has been held that when the assessee took the plea that there was no proper service upon him, it is for the revenue to place the relevant material to substantiate the plea that the assessee was served with a proper notice. In our case, despite our challenge to the service of notice, nothing has been proved against us. xvi). The CIT (A) has just stated that the address of the appellant was correct and that repeated efforts were made by the Assessing Officer to serve the notice, which finding is incorrect, because no repeated attempts had been made to serve the notice u/s 148 and neither it is borne out from the order of the Assessing Officer/CIT(A) and this is incorrect finding of CIT(A). xvii) As regards the notice u/s 142(1) or 143(2), there is no proper service by affixture, since it is not supported by two independent witnesses, which is the requirement of CPC and, thus, the assessment framed u/s 144 is also liable to be cancelled, since there has been no valid service of notices either copy of the alleged affixture order is at page 2 & 3 of the Paper Book.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 11 xviii). Our facts are more stronger, compared with the other cases, because in some of the cases, it has been held that even though the notice is served upon the employee or family member, but since they were not authorized to receive the notice, the service of notice was bad in law. In our case, identity of the person receiving the notice is not at all linked to the assessee. xix) The finding of the CIT (A) that the person receiving the notice duly signed the notice on behalf of the appellant as per finding given by the CIT (A) is again out of context and not borne out from the record as to who is the said person. There is no proof or finding that the assessee has been trying to evade the process of law through denial, which finding of the CIT(A) is totally void abinitio and not based on any finding given by the Assessing Officer in the order. The facts of the various cases totally support the case of the assessee. Therefore, it is requested that the assessment proceedings may, please, be quashed. xx). Similarly, the service of notice u/s 143(2) by/affixture is not proper, since there are no independent witnesses and it is not a valid service as per rules of CPC and there are many other judgments on this issue as well as per copies placed in the Judgment Set at pates 37 to 39 of ( Bombay Bench), 40 to 43 (Delhi Bench), 44 to 45 (Kerala High Court), 46 to 48 (Lucknow Bench), 49 to 51, 52 to 54 (Both Paper Book. & H High Court) & 55 to 59 (Mumbai Bench). Thus, the assessment as framed by the Assessing Officer is bad in law and not sustainable.

NO REASON TO BELIEF FOR ISSUANCE OF NOTICE U/S 148 The 2nd ground on which, the notice u/s 148 has been challenged is that there 2. was no independent application of mind by the Assessing Officer and even in the copy of the reasons, it has been stated that there were certain transfer entries in the account of the assessee and the amount has been withdrawn by way of cash and since the assessee had not filed his return and, therefore, the proceedings u/s 148 have been initiated. This finding is totally incorrect, because the reasons itself do not reflect that how the income has escaped assessment and then there are no cash deposits.

4. Thus, from the above, it is very clear that in the reasons, nothing has been stated as to how the transfer entries has come into the account of the assessee, ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 12 has led the Assessing Officer, the reason to believe that the income of the assessee has escaped assessment. The transfer entries could be on account of various reasons and without mentioning those reasons to believe in the reasons recorded by the Assessing Officer, it cannot be led automatically that the Assessing Officer has 'reason to believe' that the income has escaped assessment. The facts in the present case are absolutely covered by the judgment of the Amritsar Bench of the ITAT in the case of Sh. Amrik Singh at pages 92 to 117 of judgement set, wherein, the same issue was there, that there were cash deposits in the bank account of the assessee and he was not being assessed to tax as per copy of the reasons in that case are there at page 112 and the relevant finding is from pages 113 to 117 of judgment set. While giving this judgement, some judgements of different High Courts have been followed. Then, there is another judgment in the case of "Surinder Mohini Bawa", placed at pages 132 to 144 of Judgement Set and relevant pages are 133 and 134 and finding is there at pages 141 and 143 5. Lastly, another judgment is there of the "Amritsar Bench" in the case of "Sh. Gurpal Singh", placed at pages 145 to 158, relevant pages are 145 to 147 and the earlier judgment as cited above has been taken note off and also the reasons are recorded in that case have been mentioned at pages 156 to 158 of judgment set and such reasons are same as per assessee.

6. Reliance is also being placed on the judgment of Chandigarh Bench in the case of Smt. Sarika Jain, copy placed at pages 61 to 72, Krome Agro Feed Pvt. Ltd., copy placed at pages 73 to 76 of Judgement Set and the other judgments being relied upon are at pages 77 to 81, 82 to 88 and 89 to 91 of the Judgement Set. Thus, on this ground too, the proceedings initiated u/s 148 are bad in law.

7. Notwithstanding the , by way of ground No. 6, we have challenged the addition on merits and for which, the facts in brief are as under:- i). The Assessing Officer has stated in the reasons that there are transfer entries in the bank account of the assessee and then, the cash has been withdrawn. Thus, there is a evidence that all the relevant papers are in the file of the Assessing Officer. ii). We have given our submissions on merits to the CIT (A), which are there from pages 54 to 59 of the paper book and part of it, reproduced by the CIT (A) in para 4.2 at pages 16 to 22 of the order and finding has been given by the CIT(A) in para 4.6. iii). Actually, the facts are that the assessee had opened a bank account, which was introduced by Sh. Rakesh Goyal of 'Canon Industries Pvt. Ltd' and who has also a business interest in M/s Shirdi Overseas Import and Export group of concerns and the signatures are there of Mr. Rakesh Goyal on various cheques as issued by M/s Shirdi Overseas Import and Export, which were deposited in the bank account of M/s R.S. Trading Co. and such signatures on cheques pages

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 13 21 onwards match with the introduction of the account of M/s. R.S. Trading Co. at page 9 of the paper book by Sh. Rakesh Goyal. iv) Copy of Bank Account of M/s R. S. Trading Co. is at pages 10 to 13 of the paper book and which is as per department's file. v) Then, there is a copy of bank account of M/s Shirdi Overseas Import and Export, which was also with the Assessing Officer placed at page 14 of the paper book and then from pages 15 to 39 are the cheques issued to M/s R.S. Trading Co. by M/s Shirdi Overseas Import and Export signed by Sh. Rakesh Goyal and the transfer vouchers of the bank for which, the copies were taken from the department and, thus, it is apparent that the amount was transferred from the bank account of M/s Shirdi Overseas Import & Export owned by Mr. Rakesh Goyal and then, the cash was withdrawn by way of self cheques, which is evident from pages 10 to 11 of the paper book and all these evidences were there with the Assessing Officer also and during remand proceedings, though on two dates, we could appear but then, we went with a reply to the Assessing Officer on 26th of December, 2013, which copy is placed at pages 84 to 87 of the paper book. He had refused to admit the same since, he had stated that he had already sent the remand report. Reference may made to the affidavit furnished to the CIT (A). vi). But nevertheless, the facts and circumstances clearly state that the amount was from accounted for sources i.e. of 'M/s Shirdi Overseas Import and Export' and we have provided the address of the person concerned namely Sh. Rakesh Goyal of M/s Shirdi Overseas Import and Export for verifying the above said facts and asked the CIT(A) to direct the Assessing Officer to summon Sh. Rakesh Goyal as per copy of letter at page 63 & 64 of the Paper ' Book. It has been submitted by the Assessing Officer that Sh. Rakesh Goyal did not appear in response to notice u/s 131 during assessment proceedings as per page 68 of the paper book and no fresh summons were issued to him and no further efforts were made either by the Assessing Officer or by the CIT (A) and we had way of letter, dated December, 2013 placed in paper book pages 71 to 77 and reference is made to page 74, where a request had made that Sh. Rakesh Goyal of M/s Shirdi Overseas Import and Export may be examined and which the CIT (A) has totally ignored, despite there were ample evidences on record and, thus, there was never credit in the bank account of the assessee out of his own sources nor it was out of his income and from the banking record, it is prove beyond any iota of doubt that the whole amount was transferred from group companies of Sh.Rakesh Goyal, which is supported by an affidavit placed at page 60 of the paper book filed before the CIT(A) and, thus, the addition u/s 68 is not required to be made. vii) Copy of the bank account of 'M/s Shirdi Overseas Import & Export' is placed at pages 78 to 79 of the Paper Book and, in fact, which conclusively proves that the said amount as credited in the bank account of M/s R.S. Trading Co. placed at page 10 are from the bank account of 'M/s Shirdi Overseas Import & Export' and which cheques has been signed by Sh. Rakesh Goyal as stated above. The assessee had only signed cheque book and given to Sh.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 14 Rakesh Goyal, who has conducted the transactions and, thus, on merits also, no addition is called for.

7.2 Certain other brief synopsis are also available on the record which was filed in 2022. We have taken note of that submissions also. He emphasized that AO was not possessing any information which can enable him to form a belief that income has escaped assessment. He further contended that copy of notice issued u/s 148 of the Income Tax Act is available on page No. 1 which was received by somebody whose name started with letter ‘K’. There is no one in the family whose name started with ‘K’. Therefore, this notice was never received by the assessee, hence no proper service was affected upon the assessee.

7.3 Similarly, copy of a notice dated 23.06.2008 issued u/s 142(1) is available on page No. 2 of the Paper Book but Process Server has reported that taxpayer has left the house and went to Delhi. The notice was thereafter alleged to be served by Affixture, but house number has been wrongly mentioned. The copy of the reasons is available on page 4 of the assessment order which do not indicate any specific

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 15 exposition of the mind of the AO for harbouring the belief that income has escaped assessment. Thus, much emphasis was made by the ld. counsel for the assessee in pointing out defects in the reasons for re-opening as well as the manner in which notice was served upon the assessee.

7.4 In support of his contention, he relied upon large number of decisions which are placed in Volume-I of Paper Book running into 302 pages. In other words, ld. counsel for the assessee has placed on record roughly 42 number of judgements on the record wherein issues regarding re-opening of the assessment was dealt with. He prayed that re-assessment be quashed and additions be deleted.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 16 Mercantile Bank wherein credit entries of a huge amount amounting to Rs.3,84,43,500/- has been transmitted. This Current Account was opened on 27.03.2006 and after transmission of cash from M/s Shirdi Overseas Import & Export, it was withdrawn on the very same day and account was closed. The AO got the information that a transaction of Rs.3.84 Cr has taken place in a current account which is correspondingly not recognized in the Income Tax Return of any person managing M/s R.S. Trading Corporation. Hence, he has sufficient material to form a belief that income has escaped assessment because he has to verify the source of this deposit and ultimately who is the beneficiary. Therefore, as far as recording of reasons is concerned, we do not find any error in the order of the AO. We have perused page No. 1 to 4 of the Paper Book wherein efforts were made to serve the notice upon the assessee but it is a classic example to demonstrate as to how ordinary functioning of the AO could be interfered and whittled down. A conscious application of mind would demonstrate that all these steps were taken deliberately and intentionally because assessee has not come

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 17 forward anywhere with clean hands, either before CIT (Appeals) or in the Statement of Facts. He has been unnecessarily pointing procedural defects , but his credentials are doubtful from the very first step. In the current account, huge amounts were credited and withdrawn on the same day and account was closed. After appreciating the overall nature of this transaction coupled with the efforts of the AO in fulfilling the statutory compliance of service of notice, we are satisfied that there is no ambiguity in service of notice upon the assessee. As far as the huge number of judgements relied by the ld. counsel for the assessee are concerned, we do not deem it necessary to recite and recapitulate the propositions laid down in them but it would be sufficient to say that if it is demonstrated that no service was effected upon the assessee, then no re-assessment could be framed. The moment we arrive at a conclusion that valid service was duly effected upon the assessee, not only through Process Server but by Affixture also, then no judgement would be helpful to the assessee. Therefore, this ground of appeal is rejected.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 18

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 19 was withdrawn in cash on the same dates. It is also a fact on record that the account was opened only on 27.03.2006. It is also an undisputed fact that the appellant had not filed any return of income for the relevant assessment year. In the given facts and circumstances of the case it was incumbent upon the appellant to explain the sources of credit entries in his bank account. In this regard specific opportunities were granted to the appellant by the AO during the assessment proceedings but the appellant failed to avail the opportunities and submit an evidence with regard to the source of these deposits in the bank account. The appellant's submissions that these were transfer entries received through bank accounts and therefore explained is not tenable. Merely because the amounts were received through banking channels does not imply that the sources of deposits in the bank accounts stand explained. It is a matter of common knowledge that people resort to multiple layers of transfer entries wherein a cash is deposited in one bank account and thereafter same amount is transferred through number of other accounts. The onus is on the appellant to show the source of any receipts in the books of account or in the bank account. The appellant having received the amounts of Rs.3.84,43,500/- in his bank account, the onus was on the appellant to prove the source of this amount. If he had any dispute regarding the liability for tax pertaining to this amount, it was for him to show either that the receipts was not income or that if it was exempt from taxation. The appellant having failed to explain that the amount received was not income and having failed to give any evidence regarding the source of this amount, the AO was entitled to treat this amount as taxable income. Reference in this regard may be made to the case of CIT vs. Lachhman Das Oswal 126 ITR 446 (P&H) in this case the Hon'ble High Court held as under:

"...the matter has since been authoritatively settled by the Supreme Court in Kale Khan Mohammad Hanif v. CIT[1963] 50 ITR I, wherein it was held (p. 4): " ... that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof the Income- tax Officer is entitled to treat it as taxable income." In view of this authoritative pronouncement by the Supreme Court, in the absence of adequate explanation of the sources of all the amounts in dispute, the ITO was entitled, in law, to treat it as income. " 4.7 The appellant’s contention that he had handed over blank unsigned cheque books to Shri Rakesh Goyal of Shirdi Exports is a mere self serving statement. The appellant has not given any evidence in this regard. In any case this does not explain the source of deposits in the bank account of the appellant. 4.8 The appellant’s affidavit filed during the course of appellate proceedings on this issue is also not sufficient evidence in support of appellant’s contention. The affidavit filed by the appellant is a mere self serving statement and in the absence of independent verification of this affidavit and confirmation of the contents of the affidavit by the appellant, this affidavit cannot be relied upon. The ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 20 Hon'ble Punjab & Haryana High Court in of 2007 dated 27/03/2008 in the case of M/s Blowell Auto Pvt. Ltd. on the similar facts and circumstances did not believe the version of the assessee as contained in the affidavit. 4.9 Reliance in this regard is also placed on the case Smt.Gunwanti Bai V CIT (1983) 12 Taxman 86 (MP) and the case of Ram Rattan V CIT (1983) 13 Taxman 309 (All). The observations of the Hon'ble High Courts are applicable to the facts of the present case. The Hon'ble Madhya Pradesh High Court held that "An affidavit is a piece of evidence, which alongwith other material on record, has to be taken into consideration by the Tribunal, before arriving at a finding. However, a statement by a deponent can be held to be un-reliable by the Tribunal either on the basis of cross examination of the deponent or by reference to other material on record, leading to the inference that the statement made in the affidavit cannot be held to be true."

4.10 Reliance is also placed on the following case laws: (i) CIT V Shri Gurjeet Singh, In this case vide order dated 25-1-2012, the Hon'ble ITAT held that the statements made by any party, in the affidavit must, invariably be not construed as sacrosanct and reliable, unless corroborated by cogent and credible evidence. (ii) CIT Vs. Shri Ravinder Pal Singh, Prop M/s Ravinder Glass House, In this case, vide order dated 21.06.2011, Hon'ble ITAT held as under: "This is a case where the assessee claims to hand over the amount to Balwinder Singh through cheques but the money is found to have been withdrawn in cash from the bank account of Balwinder Singh. The whole story rings false right from the beginning to end. As regards the affidavit filed by Balwinder Singh, the law is fairly well settled. Affidavits are not included in the definition of "evidence " in the Evidence Act but are admissible if the conditions of Order XIX, CPC are satisfied. Rule 2 of order XIX CPC empowers the Court to order for cross examination of the deponent. The AO ordered the assessee to produce the deponent, namely, Balwinder Singh for cross-examination but Balwinder Singh was not produced before him. It is well settled that if the party fails to produce the deponent for cross-examination despite the order of the Court, affidavit of the deponent filed in the Court has to be ignored. Without prejudice to the aforesaid, the AO has rightly not attached any credibility to the affidavit for the reasons that the circumstances surrounding the case are completely inconsistent with that is stated in the affidavit. There is no evidence on record to establish that Balwinder Singh was at all appointed Sewadar of Gurdwara by an authority competent to appoint Sewadar in a Gurdwara.

In the facts of the case before us the assessee claims that it had received certain amount on behalf of another person who in turn is in charge of a Gurdwara and he was out of country, the said amount remitted by the Sangat being in the form

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 21 of foreign exchange, after encashment was deposited in his bank account, which latter was returned to the said person by cheque. The assessee has tried to explain the source of money deposited in his bank account, without evidence. Mere explanation is not sufficient to discharge the onus cast upon him under the Act. Repeated opportunities were allowed to the assessee to prove its stand but except for filing an affidavit of Baba Balwinder Singh and producing some alleged encashment certificate, the assessee has not established the veracity of his explanation. The affidavit of a third person is mere self serving evidence unless the same is backed by some other evidence justifying the nature of the transaction or the concerned party appears in person to verify its contents. We find that though several opportunities were allowed by the AO but the assessee failed to avail of the same. " 4.11 In the appellant’s case also, inspite of repeated opportunities given by the AO, the appellant failed to appear and confirm the contents of the affidavit. Moreover, in the given facts and circumstances of the case, the affidavit of the appellant denying the knowledge of any source of deposits in his bank account is a mere self serving statement. The declaration by the appellant in the affidavit that the transactions in the said bank account were done by M/s Shirdi Overseas Import and Export is without any supporting evidence. 4.12 Keeping in view the aforesaid facts and circumstances of the case and the appellant having failed to explain the source of deposits in his bank accounts through transfer entries in spite of specific opportunities having been provided during the course of appellate proceedings, the action of the AO in holding that the amount deposited in the bank account amounting to Rs. 3,84,43,500/- was unaccounted income was fully justified. Thees grounds of appeal are accordingly dismissed.”

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 22

(c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty.

(i) and (Income-tax Officer,)**** ****

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 23 (iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits: Explanation 1.- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of Clause (c) of this subsection, be deemed to represent the income in respect of which particulars have been concealed”.

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 24 the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation-I to Section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeals); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to playa if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second

ITA 376/CHD/2014 & ITA 338/CHD/2017 A.Y. 2006-07 25 situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation-1 appended to Section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee, for the purpose of Section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.