ASST CIT 4(3)(2), MUMBAI vs. NEETISH R. DOSHI, MUMBAI

आदेश / O R D E R PER R.C.SHARMA (A.M):

This is an appeal filed by the Revenue against the order of CIT(A)- 9, Mumbai dated 05/10/2015 for A.Y.2008-09 in the matter of order passed u/s. 143(3) r.w.s. 147 of the IT Act. 2. Facts in brief are that a search action u/s.132 was conducted in the ‘Satellite Group’ of cases on 19/11/2009 by investigation wing, Indore. On the basis of information received, this case was reopened by issue of notice u/s.148 on 28/03/2013.

2 ITA No.144/Mum/2016 Shri Neetish R Doshi 3. In the assessment order so framed, the AO observed that the ACTT 3(1) Indore has informed that during the search in the case of "Satellite Group" a diary "BS-8" was seized and it was observed that Shri Neetish Doshi, Director of Money Care Financing & Leasing Pvt. Ltd, has given cash to Nilesh Ajmera, Director of Phoenix Devcons Pvt. Ltd. The additions on the basis of such notings in the diary has already been made in the case of Nilesh Ajmera. Accordingly, AO made an addition of Rs.1,10,00,000/- u/s.69A by observing that it is evident from Diary found from the premises of M/s. Phoenix Devcons Pvt. Ltd., that assessee has made and receipt cash payment. 4. Addition was also made u/s.69 on account of investment in land amounting to Rs.5,00,80,000/-. This addition was made on protective basis. 5. By the impugned order, CIT(A) deleted the addition of Rs.1,10,00,000/- after observing as under:- 4.3 I have considered the submission of the appellant and the facts brought on record by the AO. The AO has relied on only the statement made by Shri Nilesh Ajmera and the material found at the time of search on Shri Niilesh Ajmera. AR states that such statement of Shri Nilesh Ajmera not corroborated by evidence cannot form the basis of addition in the hands of the appellant. In support of these propositions, AR has relied on certain case laws, the ratio of which is applicable lo the facts of present case and the same is not reproduced here for the sake, of briefs. Addition is made under sec.69A of the Act. AR contends that it is the duty of the AO to establish the fact of investment not recorded in the books of account, and then the onus of explaining the source of such investment shifts to the appellant, AR has relied on certain case law. AR further submits that the AO makes a baseless allegation on the

3 ITA No.144/Mum/2016 Shri Neetish R Doshi appellant that he has advanced the amounts in cash to Shri Nilsh Ajmera, and when the appellant denies having made any such advance in cash, the AO expects the appellant to prove that he has not made any such advance. AR contends that he can prove the fact if the amount was advanced in cash; he cannot prove the negative that he has not made any such advance. Therefore, AR contends that the; demand of the AO to prove something un-provable is wrong and improper. The AO has not produced any evidence in support of the addition. AR has produced a copy of the relevant assessment and appellate order of Shri Nilesh Ajmera. At this point, it is pertinent to note that the AO records in her reasons, “Accordingly, addition was made in the hands of Shri Nilesh Ajmera in A.Y.2008-09 treating the cash receipts as hawala transactions, un accounted / unexplained. I find that the AO in this case has relied on loose sheets found not from the premises of the appellant, but from the premises of a third party which do not handwriting of the appellant. The AO has further relied on a statement made by Shri Nilesh Ajmera, which is a third party statement. The AO has not corroborated such statement with any evidence so as to implicate the appellant. The case law relied on by the appellant in CIT v. Salelachand Agarwal 300 ITR 426 is supports the explanation of the appellant. 1 also agree with AR when he argues that in order that section 69A may apply, the AO should have discharged her primary onus of reasonably proving that the appellant advanced cash as alleged. A mere statement of a third party without any evidence cannot be used to discharge the primary onus of the AO to prove advances made in cash. The assessee cannot prove negative, he can prove positive. Therefore, the AO was not right in asking the appellant to prove that he had not made any advance in cash. 1 have also considered the assessment order and the appellant order of Shri Nilesh Ajmera. I find that the AO having jurisdiction over Shri Nilesh Ajmera has not accepted any Statement made by Shri Nielsh Ajmera where he stated that he received cash from the appellant, and as a result, ail such amounts have been added to the income of Shri Nilesh Ajmera as his income. In fact, the AO of the appellant also states that these amounts have been added to the income of Shri Nilesh Ajmera. I further notice from the appellate order passed in the case of Shri Nilesh Ajmera, which was produced by the AR that he has not received any relief in respect of Rs. 1,10,00,000 or any amount comprised therein in appeal. In view of the above facts and legal position, and for the fact that the substantive assessment having been made in respect of the impugned

4 ITA No.144/Mum/2016 Shri Neetish R Doshi additions in the hands of Shri Nilesh Ajmera and that the AO has not brought on record any material except the , statement of Shri Nilcsh Ajmera implicating the appellant, which statement has not been accepted by the AO having jurisdiction over Shri Nilesh Ajmera, it can be held the AO was not justified in making the impugned addition. The case law cited by the appellant supports this case. Accordingly AO is directed to delete the addition of Rs.1,10,00,000/-, In the result, the appellant's ground of appeal is Allowed.

5 ITA No.144/Mum/2016 Shri Neetish R Doshi 3. Leave aside producing 47(C) Mr.NivtishDoshi, the assessee has nol even tiled any confirmation or any correspondence from Mr.NeetishDoshi establishing this story of the assessee. 4. Alter giving the details of initial payments 48(H) of Rs.125 lacs, the assessee, in his submission dated 09-12-2011, straight away jumped to stale that "In other words, out of the total agreed consideration of Rs.851.58 Lakhs, payments aggregating to Rs.500.80 Lakhs was made through cash up till 15-12- 2007", No details as to how, when and through whom this payment of Rs.500.80 lacs was made in cash. No details as to how, when and through whom this payment of Rs.500.80 lacs was made in cash. No details what so ever have been filed. - 5. The assessee still went on to slate that his 57(12) claims made earlier to the effect that Mr.NitishDoshi, direclly or through Mr.RajuDoshi and Mr.K.Goyal had given him certain funds, from time to time, as investor, in the assessor's capacity as a middleman, to make investment in various properties and projects situated at Bhopal and Indore are fully correct and the same deserves to be accepted, for the reason that the providing of the funds by Mr.Nitish Doshi is evident from the various documents and loose papers seed during the course of search u/s. 132(1). This is again a very eneralized statement, so as to say, thai the statement of the assessee deserves to he accepted, merely because the assessee is saying so, without corroborating it with any cogent evidences. None of documents/loose paper indicates thai . jhese persons were land deal. 6. Therefore, the assessee's submission that 59(19) part of the investment in Bhopal land deal was financed by Shri Nitish Doshi directly or through M/s Money Care Finance & Leasing Pvt. Ltd. is false and is hereby rejected. [Emphasiss supplied by the AO 7. The assessee' scontention are in 60(9.12) italics and the reasons for rejection of the same is in bold. “Since Shri Nitish Doshi was not intended to get the property registered in

6 ITA No.144/Mum/2016 Shri Neetish R Doshi his own name, the subject properties were ultimately got registered, with the consent of Shri NitishDoshi in the name of M/s.Phoenix Leisure & Lifestyle Pvt. Ltd., for a total consideration of Rs.87.50 lakhs, under three separate sale deeds duly executed and registered on 15/01/2008. No plausible reason as to why Mr.Nitish Doshi did not intended to get the property registered in his name was given. There is no conformation from the said person. The registration was done in the name of Phoenix Leisure & Lifestyle Pvt.Ltd. with the consent of Mr.Doshi is not supported by any cogent evidence. 8. It shall, thus be appreciated by your good 61 (9.12.2) self that neither myself nor my company M/s Phoenix Leisure & Lifestyles Pvt.Lld. was required to make any payment out ot our own income. The entire payment of Rs.851.80 lacs for Bhopal land deal has been made by the assessee out of his own unaccounted income. The assessee himself has accepted that payments, in fact, have been made by him. The assessee has unsuccessfully tried to source this investment partly in the name of Mr. Nitish Doshi and Money Care and partly out of on money receipts of Phoenix DevconsPvt.I.td., which explanation stands rebutted above in the details discussion.

All the above findings of facts show that the theory that the appellant advanced Rs.5,00,80,000/- in cash to Shri Nilesh Ajmera has not been accepted in the assessment of Shri Nilesh Ajinera. The AO of Shri Nilesh Ajmera has not only not accepted the theory, he has unequivivocally rejected the theory. 5.3.2. 1 further notice that even Shri Nilesh Ajmera has not categorically said that he received cash from Shri Nitish Hoshi; instead, he has repeatedly said that he received cash from Nilesh Doshi/ Rahul Doshi / K.GoyaL Thus, there is no clear allegation by Shn Nilesh Ajmera that he received cash from only Shri Nilish Doshi. 5.3.3. 1 still further note the fact that when the assessment of Shri Nilesh Ajmera was challenged in appeal, Shri Nilesh Ajmera changes his stand and states that he received - from the appellant. This is evident from the following finding CIT(A) deciding the appeal of Shri Nilesh Ajmera.

7 ITA No.144/Mum/2016 Shri Neetish R Doshi Particulars of the Amount Mode Remarks (Rs) sources of payment 71,85,000 M/s Phoenix Through Duly recorded in the books of Leisrue& Cheque Liieslyle Pvt.Ltd. Account of M/s. Phoenix Leisure & Lifestyle Pvt. Ltd., Through -do- 16,00,000 Cash M/s Money Care 1,00,00,00 Through Leasing & 1'inance 0 cheque Pvl.Ltd. Through Cash Funds provided 1,70,00,00 0 by ShriNitesh Doshi/Sh ri Raju Doshi/ Shri K Goyal Shri Nilesh Ajmera 4,93,73,00 Through (appellant) – out of 0 Cash the funds of Rs.5 crores received and retained on bhelaf of M/s. Phoenix Devcons Pvt. Ltd.,

Total 8,51,58,00 0

It is pertinent Lo note that the C1T(A) vide Appeal No.ClT(A)-7/iT-921/ll-12/921 dated 28/03/2013 has confirmed the addition of Rs.1,70,00,000/- to the income of Shri Nilesh Ajmera. 5.3.4. In fact there are various decisions where il has been held that merely because a person's name is found recorded in somebody else's records, the first person cannot be condemned based on the record ot a third person. (i) In this regard, reference is made and reliance is placed in the case of -ITO v.Balaram Jaktar (2005) 98 TT Asr 924 where it was held as under: Though the assessee wits charge-sheeted on allegation of receipt of Rs. 17 lakhs but . prosecution resulted into futility us the assessee was discharged of the offences by the Special judge and the said decision was later on affirmed by the High Court and the Supreme Court .In the ground that there was no evidence against the assessee except diary, note book and loose sheet with regard to

8 ITA No.144/Mum/2016 Shri Neetish R Doshi payment and it was held that evidence of such a nature could not be converted into legal evidence against the assessee. Therefore, the very foundation of initiation of reassessment proceedings disappeared in the instant case and, accordingly, the addition would also not survive, there was no recovery made at the instance or persistence of the' assessee. The revenue relied only upon diary and charge-sheet framed by the CBI The whole case of the revenue would collapse the moment assessee was discharged of the sole allegation of receipt of Rs. 17 lakhs. The abbreviated form allegedly recorded in diaries was not explained by any material. It could resemble to name of other person also who was similarity in name. Unless it was proved through corroborative evidence that entries were having any nexus with the assessee, addition could not be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appeared that findings of the Assessing Officer were, based on suspicion which could not lake place of legal proof. The Assessing Officer admitted before the Commissioner (Appeals) that the Department had no other evidence except those diaries, 'therefore, it was a case of no evidence against the assessee as whatever evidence was available was not considered by the High Court and the Supreme Court to have any/ evidentiary value. No corresponding entries in the books of account or in the form of accretion in assets were found or proved by the Assessing Officer. The Assessing Officer never produced 'J' before the assessee for cross examination. The assessee in his reply to the show cause notice before the Assessing Officer specifically requested to produce the persons who had made the statement against the assessee for cross-examination but no person was produced for cross-examination. Therefore, whatever material was collected at the back of the assessee could not be read in evidence against the assessee. It is settled laa' that tj any material is collected by the income-tax authorities at the back of the assessee then opportunity to controvert the same should have been given to the asssessee. Therefore, in the instant case, (whatever material was collected by the Assessing Officer could not be read in evidence against the assessee. The fact was conceded by the Assessing Officer before the Commissioner (Appeals) that except the copies of the documents recovered by the CBl there was no other material-found against the assessee. The Supreme Court in its various decisions has held that the evidence is to be judged by considering the surrounding circumstances and by applying the test of human probabilities. However, in the facts of the instant case, only diaries were recovered which were having only abbreviated forms without further explaining or mentioning anything and, therefore, it was not considered as evidence by the High Court and the Supreme Court. If the test of human probabilities was applied in favour oj the assessee, then it could be inferred that 'J' might have recorded the entries in abbreviated forms in diary without the knowledge of the assessee. Therefore, under such circumstances, the revenue could not be justified in making any addition against the assessee. Therefore, the revenue had no cogent or sufficient material evidence on record to support the findings of the Assessing Officer and, thus, there was no reason

9 ITA No.144/Mum/2016 Shri Neetish R Doshi for interfering with order of Commissioner (Appeals). It was to be accordingly, confirmed."

A} In this regard, further reference is made and reliance is placed in the case of - -Arjunsingh v. Asst. Dir. of I.T. 246 ITR 363 where it was held as under: "The permanent address of the addressees was not of Delhi bill was of Bhopal, as they in the description of their address in the array of the petition in the writ petition clearly stated their address as Bhopal, which was their permanent address and New Delhi was shown as present address as the assessee was a Member of Parliament. In view of it, it ill came from the month of the Department that the permanent address of the assessee was of Delhi, and as such the High Court had no territorial jurisdiction. Further, carious-orders relating to assessment to income-tax am! wealth-tax, and also the impugned notices issued by the ITO under section '148 of the 1961 Act and the WTO under section '17 of the '1957 Act indicated the permanent address of the assessee, which undisputedly was within the jurisdiction of the instant court. Thus, the objection regarding residence criteria for the purpose of territorial jurisdiction of the instant Court, failed and so far as the action undertaken by the Valuation Officer by issuance of notices was concerned, it was not consequential/subordinate action as the order of the ADIT (Investigation), Delhi, only equipped the Valuation Officer though illegally with the authority for exercising power under section 131(1)(d) of the 1961 Act, which, he otherwise under the facts and circumstances of the instant case was not possessed of, it could not, in any manner, be the factor for the ouster of territorial jurisdiction of the instant Court us so far as the matter relating to the order of reference by the ADIT (Investigation), Delhi, issuing direction to the Valuation Officer was concerned, it was between them and not between the assessees and the ADIT (Investigation), Delhi, as the order of the ADIT (Investigation), Delhi, was neither addressed to nor was served on communicated to the assessees nor its cause was effected at Delhi with which they had no direct concern. The concern of the assessees arose on the basis of the notices issued by the Valuation Officer, which, in fact, so far us they were concerned, gave rise to the cause of action to them. The preliminary objection was sans substance and was to be rejected and it was held that, so far as the assessees were concerned, the cause of action to them had arisen within the territorial jurisdiction of the instant Court in regard to which the instant Court had jurisdiction. The Department while raising rising the question of territorial jurisdiction of the High Court, developed the argument relating to the question of jurisdiction of convenience for ouster of territorial jurisdiction of the instant Court, that the investigation wing of Income-tax Department, which was looking into the allegations, relating to the hawala money and its investment in the house, was at Delhi and the shirting point for investigation / enquiry was in virtue of the order of the Supreme Court dated 30-1-7996, passed in Writ Petition -Vineel Nrain v. Union of India AIR 1996 SC 3386. The order of-the Supreme Court dated 22-2-1996, obviously related to curbing the multiplicity of similar public interest litigation petitions in the Supreme Court as well as in the various High Courts so to save time. Thai order, however, did not stop any individual from approaching the High Court or the Supreme Court qua his individual grievances or invasion of or attempt for invasion of personal rights. Apart from it, the said PIL petition in the Supreme Court did not deal with the rights of an individual and no probe in the matter was made or to be made by the Supreme Court except to direct proper investigation of the crime

10 ITA No.144/Mum/2016 Shri Neetish R Doshi in the hawala case by the Central Bureau of Investigation. The order was directed against investigation and prosecution and the said criminal case, however did not direct or permit for reopening of the closed chapter of finalised assessment or for making an investigation/enquiry blindly under action 131(1A) of the 1961 Act in relation to the matter in respect of which, assessment was completed long back and as per charge sheet in hawala money was alleged to have been disbursed during She periods April, 1988 to March 1990 and August 1990, whereas the-construction of the house was completed much anterior to that period, i.e., in March, 1987, and the Income-tax assessment wherein investment in and cost of construction of the house was also involved, completed on 28-9-1987, wherein all the allegations, including the allegations about the investment of unaccounted money were considered by the IAC on n reference from the ITO u/s. section 144A, which were found false and the finding was recorded that there was no truth in the allegations against the assessee that he had acquired huge assets out of the income from undisclosed sources. So far as the High Court was concerned, it is a certain of the Constitution find its jurisdiction cannot be made dependent upon the convenience of any person or authority, howsoever high or low, and its jurisdiction could not be excluded for the purpose of convenience that the investigation wing of the Income-tax Department which was at New Delhi, was also looking into the complaint. The principle that the jurisdiction of a constitutional Court cannot, in any manner, be made subservient to the convenience of any part, however, high or low it may be including the Government or its Department to the Us; and it can also not be ousted on the basis of the convenience so to create, in such a situation, a new type of jurisdiction called the jurisdiction of convenience. The Supreme Court in its order dated 22-2-1996, stopped all the High Courts from entertaining PIL petitions in relation to the hawala case in which, in fact, the direction was for avoiding the overlapping proceedings in the name of public interest litigation. Thus, the subsidiary submission in regard to ouster of territorial jurisdiction of the High Court on the plea of jurisdiction of convenience was sans substance and was to be rejected, holding that, in the facts and circumstances of the case, there could not be jurisdiction of convenience for the department to Site detriment of the assessees for curtailment of their right66. The assessee in the petition had clearly stated that ADIT (Investigation) was neither the Assessing officer nor had any jurisdiction to make a reference to Valuation officer for any purpose under the provisions of the Act. That statement had not been denied specifically by ADIT in the counter affidavit filed by him and it had not been disclosed that he had been conferred the jurisdiction for the purpose of making enquiry or investigation throughout the territory of India or throughout the territory of the Stale. Sub-section (1A) of section 131 of the 1961 Act clearly speaks of the jurisdiction in regard to the authority/officer who has reason to suspect that any income has been concealed or is likely to be concealed by a person or class of persons within his jurisdiction and, as such, the concealment must exist within the jurisdiction of the authority/officer who has reason to suspect. Firstly, the valuation of the house, the construction of which was completed in the month of March, 1987, and subsequent thereto, no additions or alterations were made, could not, in the circumstances of the instant case, came within the meaning of concealment of income or likelihood of concealment, in the instant case, the entire allegation was that the income as invested in the house was not disclosed to the income-tax authorities at Bhopal. Even in view of it, the ADIT (jurisdiction) Delhi, had no jurisdiction to issue any such direction to the Valuation Officer at Bhopal for determining valuation of the house, as on construction period and even subsequent/thereto.

11 ITA No.144/Mum/2016 Shri Neetish R Doshi

The other requirement under sub-section (1A) of section 131 of the 1961 Act is that the authorities/officers mentioned therein in whose jurisdiction the income is alleged to have been concealed or is likely to he concealed, must have reason to suspect winch in fact, is a condition precedent for the exercise of power and such reason or suspicion must be based on tangible material on the record and legally cognizable and not merely some hearsay accusation, conjectures and surmise. In the instant case, the ADIT (Investigation) had stated that he had the reason to suspect on account of the order of the Supreme Court in Vineet Nardin's case (supra) but the perusal of the order of the Supreme Court clearly indicated that it had not, at all, given any such reasons which might, in any case, from reason to suspect against the assessee Á’ and / or against his wife, or any other person against whom the criminal investigation proceeded on the basis of the jain diaries wherein even the name of the assessee-wife did not at all, find mention and in its order dated 30-1- 1996, the Supreme Court clearly stated without any ambiguity, to the effect that it was not concerned with the merits of the accusations or the individuals alleged to the involved, but only with the performance of the legal duly by the Government agencies to fairly, properly and fully investigate into every such accusation against every persons, and to take the logical final action in accordance with law. 'Thus, it wass found that the said order of the Supreme Court could not be treated under section 13l(IA) of the 1961 Act and ADIT (Investigation had no reason to suspect on the basis of any material on the record what to say of tangible material legally cognizable and the allegations which found place in the charge-sheet in the hawala case jell in the category of hearsay-accusation based on conjectures and surmises, as the Special Court, Delhi, not finding them even prima facie material, discharged the assessee on 28-5-1997. Thus, the investigation in the hawala case wherein on the basis of the jam diaries, seized during the investigation, charge-sheet filed after investigation before the Special judge, Delhi, on the basis whereof case was registered, could not constitute reason to suspect for ADIT (Investigation) under section I'M(IA) of the 1961 Act as it was only at the investigation stage and on charge-sheet being pled -before the Special judge, Delhi, no material was found even for the purpose of framing any charge against the assessee as a consequence whereof discharged him us then- was no tangible material and under the circumstances, the shelter tinder the order of the Supreme Court, for the purpose that the ADIT (Investigation) Delhi, had reason to suspect, tens misfounded as the Supreme Court even did not consider the aspect of disbursement of any money to the assessee that to say of concealment or likelihood of concealment and did not express its opinion in either way; which, establishes beyond doubt that ADIT (Investigation) Delhi has no reason to suspect that any income had been concealed or 'was likely to be concealed by the assessees. Sub- section (1A) has provided the manner and it is a well-settled Principle of law that either the tiling should be done in the manner provided or not at all. The charge- sheet filed on the basis of the Jain diaries contained no material, what to say of tangible material and at that time, there was no such material before the ADIT, Delhi, on the record, except the bald accusation, founded on some entries in the jain diaries, winch continued the names in abbreviated form on the basis of which the CBI filed the charge-sheet before the Special Judge, Delhi, who after considering the matter on the merits, did not consider the same as material even for the purpose of framing the charge sheet against 's 'A' who was discharged and for the purpose of reason to suspect it could, at all, not be the material. Thus, the position boiled down that whatever might be the interpretation of sub-section (1A) of section 131 of the '1961 Act in regard to its scope, it was to be held that the ADIT (Investigation), Delhi, had no tangible material on Iris record for the purpose of reason to suspect

12 ITA No.144/Mum/2016 Shri Neetish R Doshi before passing the stud order directing the Valuation officer for valuing the cost of the house and the order passed by him was without jurisdiction. Apart from that, the expression has reason to suspect that any income lifts been concealed, or is likely to be concealed clearly refers to a pre-assessme.nl stage and in the instant case, 'where true and full facts and particulars and material facts were duly disclosed us regards the cost of construction of the house and source of income am! its investment, there could arise no question of concealment of income or likelihood of concealment and it was not even the case of ADIT (Investigation) Unit the income had been concealed by the assessed 'A'. The officers mentioned in sub-section (1) of section 131 of the 196'1 Act are possessed of the power of the Civil Court regarding discovery, production of evidence, etc. in relation to the judicial proceedings before them in regard to the assessment and there was no question of repetition of those officers performing judicial function in sub-section (1A) of section I31,but the power under section 131(1A.), is exercised notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority, for the purpose of the items enumerated in clauses (I) to (v) mentioned therein. But under the power of such search and seizure under section 132, the concerned authority cannot exercise power as enumerated in clauses (a), (b), (c ) and (d) of section 131 (1), on the basis of the reasons to believe consequent upon information in his possession in regard to the undisclosed. Income or property in regard to the income or properly which is concealed or is likely to be concealed, sub-section (1A) of section 131,empowers him or makes him competent for exercise of power, in his jurisdiction, as conferred under sub-section (1A) for proceeding against such person or class of persons for making enquiry or investigation relating to concealed income provided he has reason to suspect. Thus, the power under section IM(IA) of the 1961 Act cannot be said to be an independent power in itself but is the power for the purpose of making enquiry and investigation relating to any income which has been concealed or is likely to be concealed by any person or class of persons, equipping him with the powers regarding discovery, production of evidence, etc. as provided under sub-seclion (I) of section 131. The expression 'Before he, i.e., authorised officer, takes action under clauses (i) to (v) of section 132(1)" is material and relevant, that is the power regarding discovery, production, etc., as prodded under sub-section (1) of section 131 can be exercised by the authorised officer before exercise of the power of search and seizure in clauses (i) to (v ) of section 132(1). In fact, it is in the process of search and seizure tj concealment of the income by some or other person or group of persons is found. The power under sub-section (1A) of section '131 of the 1961 Act is only an enabling power regarding discovery, production of evidence, etc. before entering into the actual exercise of search and seizure under section 132, such a power under section 131(1A) cannot be exercised for the purpose of reopening of the assessment under section 147. Under section 132(1) the Director General, or Director or Deputy Director as may be authorised in this behalf by the Board, in consequence of information in his possession, has reason to believe about items in clause (c), i.e., undisclosed income or property, then, or Director or Chief Commissioner or Commissioner may authorise any Deputy Director, Deputy Commissioner, Assistant Director or Assistant Commissioner of Income-tax or such Deputy Director or Deputy Commissioner empowered by the Board, as the case may be, authorise Assistant Director, or Assistant Commissioner, to enter. Since under section 131(1A) the power is exercised by the authorities not acting in a judicial manner for that reason, the authorities to act judicially as mentioned in section 132(1), i.e., Chief

13 ITA No.144/Mum/2016 Shri Neetish R Doshi Commissioner or Commissioner. Deputy Commissioner; Assistant Commissioner ITO are not mentioned. In section 131(1A) the Assistant Director is the person who is vested-with the relevant jurisdiction by virtue of directions or orders issued under sub section (1) or sub-section (2) of section 120 but the power on the Assistant Director could be conferred by the Board having regard to the criteria of (a) Territorial area; (b) Persons or class of persons; (c) Income or classes of income; and (d) cases or classes of cases.

Reasonable belief that income has escaped assessment is the sine qua non for initiation of reassessment proceedings. Such a belief must be that of an honest and reasonable person based upon reasonable grounds and the Income-tax Officer may act under the Section on direct or circumstantial evidence, but not on mere suspicion, gossip or rumour. In the present case, facts and circumstances show that the position is so. Apart from this, it is worth noticing that nothing new has come out except manipulation and putting old wine in new bottles. It is a settled principle, including that of law, that the greater includes the smaller and if the revaluation of the house was to be done then, why it was not done within four years and the concerned person has failed to discharge its burden and has not acted in coming to reason to believe that of an honest man and reasonable person disclosing the fact the assessee failed to disclose fully and truly material facts necessary for the assessment of that particular assessment year, i.e., 1987-88. The assessment having been completed after reference under Section 144A in accepting the report of the valuer who in his valuation report submitted by the assessee in support of the return and thereafter a lapse of about ten years the valuation of the property, i.e., the house to be done through the valuation cell that too not on any new material or foundation on the basis that some report is obtained from the patwari regarding income from agricultural properties when in the proceeding the report of the Tahsildar who is a superior class, i.e., Gazetted Officer, was relied on and accepted or obtaining of the affidavit of the same valuer after about ten years, who is under the thumb of the department making some deviation though no such material was supplied along with notice , under Section 148 under 1961 Act or under Section 17 of the 1957 Act to the assessees. The position of law both under the Act 1961 and the 1957 Act is merely the same as well as the context in the instant case. The obtaining of the valuation report in respect of the house afresh about after about ten years from the valuation cell is ex facie not bonafide one even under the law. Such valuation report from the valuation cell cannot be taken into account for reopening of assessment. Even the change of opinion by the patwari, who is subordinate person from that of earlier opinion of Tahsildar in regard to agriculture income in respect of which, accepting the report, finding of correctness recorded about ten years earlier and it could not even otherwise fall within the category of non-disclosure of material facts by the assessee.

14 ITA No.144/Mum/2016 Shri Neetish R Doshi

The admission of the department that the purpose of investigation / enquiry was to collect primary facts clearly follows that "it has no reason to suspect" and the entire exercise -is devoted towards a fishing and roving enquiry, not otherwise permissible under the law on the basis of charge-sheet in hawala case no investigation or enquiry under Section 131(1A) could be made by the Assistant Director of Income-tax (Investigation), Delhi, and no valuation of the house can be made now by the Valuation Officer as the very alleged allegation of charge becomes non est on the discharge of assessee. The Department’s submission that the petition under article 226 of the Constitution was to prevent investigation against concealed income for which it had reasons to suspect, might not be entertained, as the assessee had got the remedy for redress, depending upon initial action to be taken. It had no substance. The assessees are always free to approach this court and the petition under article 226 of the Constitution can be presented not only after the petitioner's rights have been invaded but also when they have been threatened with immediate peril. The very foundation of concealment of hawala money ceased to survive and even otherwise in the hawala case, allegations of disbursement of the amount are subsequent to the construction of the house. This argument is accordingly sans substance and is rejected The basic question before the Inspecting Assistant Commissioner in the reference under Section 144A of the Act was as to whether the valuation report be accepted or reference be made to the Departmental Valuation Cell which the Inspecting Assistant Commissioner, after considering the matter on the merits, considering the primary and material facts as disclosed by the assessee, came to the conclusion that the valuation report was fair and correct, based on relevant consideration and material and no reference to the valuation cell was necessary and by issuing the notices in question an unsuccessful attempt is made for reviewing the earlier orders simply by changing the opinion which is impermissible under the law. The materials under the law which can be the basis for reason to believe should be such materials which are definite, precise, based on solid, factual foundation and not merely hearsay, gossip, surmises and conjectures. The Legislature acts by keeping in consideration the principles of law judicially propounded. The abuse of power is inevitable, if uncontrolled power is conferred. If the Government Department is given a blank cheque, the day will certainly come when they will overdraw. Thus, limitations on the exercise of power are put on the principle that the unbridled, uncontrolled and unlimited power will put an end to rule of law. On the said principle, Parliament did not give a blank cheque rather to the income-tax authorities to appropriate while exercising

15 ITA No.144/Mum/2016 Shri Neetish R Doshi power under the Act. The powers which are given by Parliament to the public authority are given to them as it were upon the trust that it is not for the personal benefit of the official concerned but for the benefit of the public that of course is assumed upon which Parliament may grant such power at all, though the statute need not say so. It is a general principle (like the principles of natural justice) which, the court takes for granted wherefrom it follows that every power conferred on the public authority is conferred upon the condition that it will be used only for good and sufficient reasons in the public interest If the, reasons are irrelevant, ununderstandable or based upon mistake of law or facts or inspired with malice, latent or apparent, then, the power is being exercised outside the arena within which the Legislature intended that it should be confined and the doctrine of ultra vires is enough to establish illegality. The expression "recording his reasons for doing so" under Section 148(2) and "reasons to believe" under Section 147(1) are synonymous in character as both are to be recorded in writing and if the reasons to believe that the income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped and if reasons to believe in respect of escapement of assessment is empowered to assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this Section then if the reasons for making the order are reduced, however briefly, to writing, it will also help the assessee in appreciating the circumstances which make the very foundation for assessment or reassessment and it will also help the court in determining the bona fides of the order/notice for action if and when the same is challenged in court as mala fide not for good and sufficient reason in the public interest or not for the purpose of the Act or having been exercised out of the arena or purpose within which the Legislature intended that it should be confined or for irrelevant undesign-able considerations or based upon the mistake of law or fact and will also help the court in determining the bona fides of reasons to believe in which case the doctrine of ultra vires sufficiently establish illegality, Thus, when law requires reasons to believe under Section 147 affecting prejudicially and assessee who can challenge it in court, it ceases to be mere administrative action as it is for opening or reopening the assessment already done and the vice or violation of principles of natural justice on account of omission to communicate the reasons to believe is not expiated. The following purpose about the requirement of reasons to believe under Section 147 of the Act can be propounded as hereunder as the exercise thereunder is after the close of the assessment proceedings and in the present case, after reference under Section 144A of the Act : . . . that the assessee, the aggrieved

16 ITA No.144/Mum/2016 Shri Neetish R Doshi party, in the proceeding before the Assessing Officer acquires knowledge of the reason and in a proceeding before the High Court or Supreme Court, since there is no right of appeal or revision, it has an opportunity to determine that the reasons which persuaded the authority to pass an order adverse to his interest were erroneous, irrational or irrelevant and the obligation of reason to believe and conveyed to the party concerned operates, as a deterrent against possible arbitrary action by the quasi-judicial or the executive authority invested with judicial powers. The phrase "reasons to believe" is much stronger both in intent and content as compared to the words "reasons to suspect". Further the reasons to believe must be based on objective and relevant materials and not those which are extraneous and merely opinion or ipse dixit by the officer, vague, farfetched, fanciful, remote information or only allegation. It is a settled position that there should be a clear nexus between material and reasons to believe. In the instant case, on the basis of material placed it is clear that there is no definite material amounting to be the nexus between the material and reasons to believe that the income chargeable to tax escaped assessment, or it may be said that there is no material available with the department to hold that the petitioners failed to disclose material facts truly and fully. It cannot be said that there was definite material whatsoever. For the assessment year 1987-88 the non-disclosure of which may amount to reasons to believe in regard to which the department owes the burden to show and establish that such facts amounting to undisclosed income were in existence during the relevant period covered by the assessment year 1987-88 and the material in respect thereto were not disclosed by the assessee. The present is a case where there was no such material or evidence, whatsoever, on the record. Apart from this, there exists no material of any definite and precise nature as to what was the quantum of the alleged income escaped during the relevant assessment year 1987-88 from assessment on the basis whereof the maximum period of limitation as provided under Section 149 of the Act could be invoked. The counter affidavit as filed in response to the amended petition does not disclose any material which might amount to reasons to believe, and not only this, the reports of the materials on which reasons to believe are founded, should also be disclosed in the counter affidavit and in the instant case, the Department failed to disclose any such cogent and definite material which could be the basis for reason to believe as per the requirement of law. The materials should be in existence at the time of the formation of the opinion in regard to "reasons to believe". At the time of initiation of proceedings under Section 148 of the Act, as well as under Section 17 of the 1957 Act, only the reasons recorded under Section 148(2) of the Act

17 ITA No.144/Mum/2016 Shri Neetish R Doshi and Section 17(2) of the 1957 Act on the basis of cogent and definite material would be seen to ascertain whether the reasons to believe based on material exist or do not exist. The department cannot therefore justify or rely upon the additional materials for forming part of reasons to believe of the Assessing Officer.

The assessee submitted that the report of the Income-tax Officer, Rewa, his inspector in regard to the agriculture income, dated March 24, 1998, referred to the Assistant Director of Income-tax (Investigation), Delhi, dated March 27, 1998, and the Assistant Director of Income-tax, New Delhi, dated March 28, 1998, have not been made part of the "reason to believe "nor made available to the Commissioner of Income- tax/Wealth-tax under Section 151 of the Act and under Section 17 of the Wealth-tax Act nor are they brought on the record of the petition by means of counter affidavit and thus alleged reasons to believe are mainly and certainly conjectural inferences and as such the same cannot amount to "reasons to believe" and the so-called reasons of belief of the Assessing Officer ex facie are not such materials which may appropriately be described as material for reasons to believe, as they are : firstly, false, nonexistent and misleading assumption of facts without any solid and concrete foundation of materials based on facts. Secondly, those are only in the nature of inference of remote nature, not based on any cogent material having any relevance. At the best, they could be categorised only as hearsay, gossips, rumours, conjectures and surmises, and also mala fide, but cannot be categorized as material for the purpose of treating as reason of belief. The Department has admitted that the revaluation was being sought so that the material may be collected and in the written submissions filed before this court, it was further specifically admitted that the exercise of revaluation was to collect primary facts so that the action of reopening of assessment may be considered, which apparently on the date of formation of the reasons to believe and recording of reasons under sections 147 and 148(2), did not constitute material for making revaluation. Since they had a preconceived mind to somehow reopen the assessment, they have cited all sorts of flimsy, frivolous and untenable reasons, which on their own admission are not based on material or facts which have been taken aid of. 39. Further the requirement of obtaining sanction from the Commissioner of Income-tax/Wealth-tax under Section 151 of the Act and under Section 17 of the 1957 Act is of extreme importance constituting" safeguards and not only the Assessing Officer has formed these reasons to believe in the most mechanical manner without application of mind as the sequence of events and the timings would conclusively demonstrate but the materials were also not made available to the Commissioner of Income-tax whose powers to grant

18 ITA No.144/Mum/2016 Shri Neetish R Doshi sanction for reassessment process sought to be invoked. The two page letter/annexures enclosed with the format, would show that merely vague unspecific conjectures and surmises styled as "reason to believe" alone were forwarded to the Commissioner and not the alleged three reports on which the Assessing Officer is said to have based his reasons. The Commissioner had no opportunity to apply his mind to the actual materials and, accordingly, the sanction accorded by him is vitiated. The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter .of recording sanction as he merely wrote on the format "Yes, I am satisfied" which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material. The assessee disclosed all the primary facts in his return which were subjected to detailed and exhaustive enquiry, when the original assessment was made and it could not be said to be a case where it could be said that the facts were not disclosed. The assessee’s case was that there was absolutely no material to show that the facts constituting the reasons to believe were in existence during the period of relevant assessment year and there was no question of non-existence of the material facts. If the Department were to suggest that subsequently, some more addition, alteration, improvement, installations, developments as alleged, when the same being admitted by the petitioners, have been made out in subsequent period of time, following the assessment year, the assessee could not have been expected to disclose those materials in his return or for that matter, the approved valuer in his valuation report. The specific challenge is given by the assessees that the reasons to believe based on record are not material at all when tested on the anvil of legal principles evolved by the Supreme Court in the various decisions aforementioned. The petitioners' case is not that those reasons are not sufficient or adequate, but their case is that the said reasons are not reasons at all. Apart from this, there is absolutely no material as to the quantum of income alleged to have escaped from assessment during the assessment year 1987-88 and there is absolutely no basis for material in support of the imaginary fanciful inflated amount shown for the reason of belief in a stereo-typed manner. There is absolutely no basis or material to support the same and unless there is definite germane material to show the actual quantum of income alleged to have escaped, the Department is not justified to assume for the sake of its benefit for having the maximum period of limitation prescribed under Section 149 of the 1961 Act and Section 17 of the 1957 Act. It could not be the material that some affidavit is obtained from the private valuer who is under the influence, thumb and control of the

19 ITA No.144/Mum/2016 Shri Neetish R Doshi department or any report is obtained from the Patwari in the face of evidence and the certificate in regard to the agricultural income given by the Tahsildar, who is a gazetted and higher Revenue Officer, and which was accepted by the Inspecting Assistant Commissioner during the course of proceedings pending before him under Section 144A of the Act, and also by the Assessing Officer and the same was not challenged by way of revision or otherwise during the span of about ten years. Therefore, the notices under Section 148 of the Act and Section 17 of the Wealth-tax Act cannot be allowed to sustain as they suffer from legal infirmity and they deserve to be quashed. In the instant case, no material had been brought on the record that the notice u/s.148 of 1961 Act as well as notice under Sction 17 of the 1957 Act, was sent by registered post as alleged, on March 31, 1998. The letters were issued on April 1, 1998, and the department have failed to establish the fact by filing the postal receipt regarding the despatch of the notice by registered post to all the three assessees in the two writ petitions, on March 31, 1998. It required for drawing adverse inference and the case of the respondents cannot be accepted unless the same is proved beyond doubt by bringing cogent material in that regard, on the record of the petition, but since it has been stated on affidavit that notices were sent by registered post acknowledgment due on March 31, 1998, which fact has not been denied in rejoinder affidavit it is held that the notices were issued to all the petitioners by registered post on March 31, 1998, and as such, notices: so issued were not barred by time on this ground. In consequence thereupon, action could be initiated or taken against the petitioners in both the petitions on the basis of such notices if, in fact, issued on March 31. 1998 So far as the issuance of notice by post is concerned, as is already stated, the respondents have failed to establish that the same was issued on March 31, 1998 by filing postal receipts. Rather, contrary, it is established that the same was issued on April 1, 1998 ; as the copy of the said notice is being sent by registered post and the same contains the date on the left side of the signature of the issuing authority as April 1, 1998, and it also indicates that another copy is being served through the income-tax inspector and the third copy is being served through chartered accountant. Then, the notice being sent to chartered accountant, under the provisions of Section 282, was not the mode of service and so the sending of the notice through the income-tax inspector is also not in consonance with the requirement of Section 282 of the Act as the same were not issued and served as if it were the summons issued by the court under the Code of Civil Procedure, 1908. Since the statement is made on affidavit that the notices were issued on

20 ITA No.144/Mum/2016 Shri Neetish R Doshi March 31, 1998, by registered post, the sending of notices are accepted in the absence of denial. Indisputably, the impugned notices under the Act as well as the 1957 Act, were issued for the assessment year 1987- 88 and the date on the notice is March 31, 1998was to whether the same are within the frame of time limit for notices as provided under the Act as well as under the 1957 Act. the condition under Sub-section (1), Clause (a) of Section 149 of the 1961 Act is that one must be an assessee and his assessment must have been done under Sub-section (3) of Section 143 of the Act and this condition, so far as assessee and his son are concerned, was satisfied but the question arose, according to the time limit and for that time limit, Sub-clause (iii) of Clause (a) of Sub-section (1) of Section 149. The notice related to the period-assessment year 1987-88 and the ten years from March 31, 1987, are completed on March 31, 1997, whereas the notices impugned are alleged to have been issued on March 31, 1998.

Likewise was the position of the assessee’s son, provided the quantum of the amount which had escaped assessment from the assessment year 1987-88 amounted to or was likely to amount to rupees one lakh or more for that assessment year. In the impugned notice, neither it had been disclosed as to under which Clause and sub-clause, the power was exercised nor the amount had been disclosed. Even in the counter affidavit filed no amount, on which jurisdiction was depended, separately in the notices had been disclosed qua these two individual assessees and the son, for the assessment year 1987-88 regarding which the allegations of escapement of income is made. The position of assessee’s wife was different, as she was not assessed to income-tax and in her case Clause (b) of Sub-section (1) of Section 149 of the Act could be made applicable provided the requirements of Clause (iii) thereof were satisfied. The relevant assessment year shown is 1987-88 and the period should not be more than ten years from the end of the relevant assessment year. But even in her case, the amount on which the jurisdiction is dependent, has not been disclosed that the income chargeable to tax which has escaped assessment for that assessment year amounted to or was likely to amount to rupees fifty thousand or more for that year, i.e., the assessment year 1987-88. The house was the joint house constructed jointly on the basis of joint contribution and the sources of income of assessee-wife was only agricultural whereas the sources of income of assessee-A were other than agriculture also. Even in her case, the ten years' period expired on March 31, 1997, from the end of the relevant assessment year 1987-88 and the end of the relevant assessment year is March 31, 1987. Likewise is the position under the 1957 Act. The assessee and his son were assessed to wealth-tax and the relevant assessment year in their

21 ITA No.144/Mum/2016 Shri Neetish R Doshi case in the impugned notice was 1987-88 and ten years' period expired on March 31, 1998. The words used are "not more than ten years" which signifies within ten years and so was the position of wife, under Sub-clause (iii) of Clause (b) of Sub-section (1A) of Section 17 of the 1957 Act but here also, the impugned notice does not disclose the quantum of the amount which has escaped assessment and the limit whereof which confers jurisdiction is rupees ten lakhs. In that view of the above, the impugned notices issued under Section 148 of the Act and Section 17(1) of the 1957 Act are without jurisdiction and no action thereupon can be taken as the same are without jurisdiction. In the instant case, no privilege was claimed by the Department and, as such, it was obligatory on the Department to have disclosed by means of counter affidavit all the materials to the assessee. It had been stated in the application that "in order to be fair to all concerned including the petitioners, the answering respondents are disclosing the reasons recorded in the file which are based upon cogent material available on record such as : (i) Report of the Income-tax Officer, Rewa, and his inspector that the agricultural income shown by the petitioners was overstated in the return of income.(ii) Report of the Assistant Director of Income-tax Investigation), Delhi, on his discreet enquiries that investment of at least rupees five lakhs has been made in constructing the boundary wall of Kerwa Dam property which was not shown by the approved valuer in his report as affirmed by him in his statement, (iii) Statement of approved valuer, (iv) Report of the Assistant Director of Income-tax (Investigation) and Additional Director of Investigation about discreet enquiries." The report of the Income-tax Officer, Rewa, and his inspector that the agricultural income shown by the assessees was overstated in the return of income, had not been filed by the department even along with the said application and the contents of the report have not been disclosed for no reasons even though it was not a privileged document and no privilege was claimed regarding it. It amounts to the non- disclosure of the report to the petitioners. Further, the alleged reason is stated to be the reasons of belief of the Assistant Commissioner of Income-tax, Circle-I, Bhopal, under Section 147/148 of the 1961 Act and the same was based on the report of the Income-tax Officer, Rewa, pursuant to the commission under Section 131 of the Act and in regard to it, it was submitted by learned counsel for the petitioner that no commission under Section 131 can be issued as no assessment proceedings were pending and the assessment of the petitioner having been concluded and closed, the power under Section 131 of the Act was neither available nor could be exercised, at that stage ; and, as such, the report, if any, is, therefore, void ab initio and in law it has to be

22 ITA No.144/Mum/2016 Shri Neetish R Doshi treated as non est, though the same has not been brought on the record of the writ petition. The said report does not constitute reasons to believe whatsoever as the same is absolutely vague, utterly conjectural and speculative. The report could not be based on facts which might be misleading as regards cultivation of 11 years ago and there is no reasonable scientific, definite and objective method by which the said officers could have so ascertained the same after the lapse of long period of about a decade. This cannot be said to be a material whatsoever, as to what was the extent of cultivation during the previous year relevant to the concerned assessment year 1987-88, especially in the background that regarding it, at the time of original assessment for the year 1987- 88, a report of the assessment done under Section 143(3) read with Section 144A of the Act was submitted wherein the material facts regarding the agricultural income was shown and in respect whereof, the certificate of the Tahsildar who was also the Revenue Gazetted Officer, was filed and the same was accepted by the Inspecting Assistant Commissioner of Income-tax to whom a reference under Section 144A of the Act was made and also by the Income-tax Officer who made the assessment and also on the basis of the answer to the reference under Section 144A of the Act, the Wealth-tax Officer also relied on. Further, the Income-tax Officer, Rewa, has not and indeed could not have vouchsafed about the extent of agricultural operations and agricultural income of ten years past in the year 1987-88 as he is presumed to have conducted his enquiry only in the month of March, 1998. The agricultural income of petitioner No. 2, Smt. Saroj Singh, was truly and correctly disclosed in relation to the subsequent assessment years, i.e., 1988-89 to 1995-96, and the same has been accepted by the Assessing Officer which are matters of record and, therefore, ex facie, the report of the Income-tax Officer, Rewa, is false and misleading and irrelevant, not constituting the material. The calculation of the quantum of agricultural income made by the Assessing Officer is wholly conjectural, without any rational basis, speculative and based on hearsay. From the contents of the reasons recorded by the Assistant Commissioner of Income-tax in his note dated August 30, 1998, it clearly appears that the report of the Income-tax Officer, Rewa, was based on certain subsequent events which took place much after the relevant previous years, and he appears to have based his report on the basis of land appearing now to be covered by plantation but the same has been done only recently and there was no plantation during the concerned previous year relevant to the assessment year 1987-88 and the entire land was under cultivation during that year. Regarding the report of the Assistant Director of Income-tax (Investigation), Delhi, which was alleged to have been made by him on

23 ITA No.144/Mum/2016 Shri Neetish R Doshi the basis of so-called discreet inquiries alleging investment of at least Rs. 5 lakhs made in constructing the boundary wall of the property which was not shown by the approved valuer in his report as affirmed by him in his statement, it was submitted by learned counsel that the said report has not been placed on the record. But it has been alleged that at least investment of Rs. 5 lakhs has been made in constructing the boundary wall, and the same has not been shown by the approved valuer in his report, which is false and baseless assumption of facts which do not exist at all and is therefore misleading. The assessee categorically submitted that there is no boundary or compound wall whatsoever constructed around the house and the land appurtenant thereto and consequently, the question of its non-mention in the report of the approved valuer did not arise. Not only this, in the report, the valuer has specifically stated that no compound wall has been constructed and no boundary wall whatsoever was constructed around the house or land appertaining thereto. The Assistant Director of Income-tax (Investigation), Delhi, has assumed the existence of boundary wall without any basis whatsoever and the question of making any undisclosed investment in the construction of boundary wall does not arise, at all. The report of the Assistant Director of Income-tax (Investigation), the "reasons to believe" of the Assessing Officer and the affidavit before this court are therefore false and not at all based on facts. In view of this, and as a necessary corollary, the question of construction of boundary wall and investment on the same during the previous year relevant to the assessment year 1987-88 also does not arise. This factor cannot be called to be a basis for "reasons to believe" or to be the material for the basis for reasons to believe within the meaning of Section 147 of the Act as well as under Section 17 of the 1967 Act. In the affidavit filed on behalf of Department, it had been stated by Assistant Commissioner of Income-tax, Bhopal, that they belonged to the assessment wing of the Department at Bhopal and the investigation wing of the Department concerned with the investigation and enquiry under Section 131(1A) is at New Delhi. These were distinct and independent authorities operating and functioning separately as per rules and law applicable to them. The answering department was not required under law to consult the investigation wing of the Department while arriving at a statutory decision under Section 147/148 of the Act and under Section 17 of the Wealth-tax Act which is based on the material available on record. The position of the evidence collected by the investigation wing under Section 131(1A) or otherwise was similar to evidence collected by any other authority under Section 119 of the Act and further it was stated that it is denied that any roving or fishing enquiry was made either by the Assistant Commissioner of Income-tax, Circle-I, Bhopal, or the Commissioner of Income-tax, Bhopal. The Assistant Commissioner of Income-tax/Assistant Commissioner of Wealth-tax, Circle-I, Bhopal, is the Assessing Officer holding jurisdiction over the assessee and thus was fully empowered to

24 ITA No.144/Mum/2016 Shri Neetish R Doshi issue notices under Section 148 of the Act and under Section 17 of the 1957 Act in their cases. On the basis of material available on record, he had reasons to believe that income chargeable to tax has escaped assessment in the assessment year 1987-88 in the case of the petitioners, and after independently and objectively applying his mind to the material available on record, the Assessing Officer duly recorded the reasons within the meaning of Section 147 of the Act and submitted a proposal for obtaining the sanction of the Commissioner of Income- tax, Bhopal, as provided for in Section 151 of the 1961 Act. In the affidavit filed by respondent No. 7, it was stated that he, neither directed nor proceeded nor prevailed upon any officer much less the Assessing Officer to initiate proceeding's under Section 147/148 of the 1961 Act and other allied provisions. The Assistant Commissioner of Income-tax, Bhopal, who recorded his satisfaction for initiating proceeding's under Section 147/148 of the 1961 Act, thus, did so independently after forming" opinion in respect of the subject-matter and with the approval of the Commissioner of Income-tax, Bhopal, and so far as the action taken by the assessment wing at Bhopal was concerned, it was an independent action taken by the Commissioner of Income-tax, Bhopal, and his officers under the provisions of the Act in view of the independent satisfaction recorded by them in their files, and these facts indicate that the Assistant Director of Income-tax (Investigation), Delhi, was instrumental in the initiation of the proceedings under Section 147/148 of the 1961 Act. In said application, the material was shown to have been available on the record and the statement of the approved valuer had not been filed even with the said application and has not been brought on the record of the writ petitions and it is denied that the statement of the approved valuer furnishes any material much less "reasons to believe" under Section 147 of the 1961 Act. Moreover, the statement is said to have been recorded after a lapse of ten years and that too in a most suspicious and surreptitious manner as the approved valuer is the person allowed to function by the Department and further since there were no assessment proceedings pending, there was no question of recording of the statement of the approved valuer on oath under Section 131 of the 1961 Act. The department was obliged to disclose all the materials and reasons to believe when specific challenge was made by the assessees for its non- existence in the petition and particularly in view of the nature of the allegations of malice. The department could not take subterfuge to the plea of confidentiality of the identity and the names of the informants and source of information. That only showed the suspicious character of the information, which is bound to be in the nature of hearsay, gossip, and conjectures, without any definite and cogent materials. The department was not entitled to rely upon and press into service any information or material, which had not been disclosed by them along with their counter affidavit and the same having not been brought on the record, could not be used behind the back of the petitioners, without

25 ITA No.144/Mum/2016 Shri Neetish R Doshi giving them an opportunity of examining their truthfulness, authenticity and relevance, so as to fall in the category of "reasons to believe" under Section 17 of the Wealth-tax Act and under Section 147/148 of the 1961 Act. So far as the question of construction of boundary wall or compound wall is concerned, it has already been stated that the reply has already been given. The respondents have deliberately not disclosed the note on which the alleged statement of the approved valuer is said to have been recorded. If it has been recorded after February 10, 1998, without the disclosure of the date, the same cannot be treated as material in the eye of law as the interim order of this court was in operation after February 10, 1998. Since no boundary wall has been constructed the question of investing the amount in the construction of the boundary wall and fencing in the previous year relevant to the assessment year 1987-88 did not arise and further the question of the registered valuer not disclosing" the same also did not arise. The water pump, RCC work for overhead storage tank, filling up and levelling of the land for construction of the main building had already been dealt with in the approved valuer's report. As regards tubewell, there is absolutely no evidence that the same was dug and installed in the previous year relevant to the assessment year 1987-88. Further, there was no material to show prima facie any investment on filling and levelling of land other than that covered in the main building and also there is absolutely no material of any investment in the alleged filling and levelling of the land in the previous year relevant to the assessment year 1987-88 so also of the plantation. There were no servant quarters at all. The rear portion of the garage was being used as servant quarters. These are merely hearsay and baseless assumptions and therefore did not constitute material and so not amount to "reasons to believe" and there is no material regarding investment of more than Rs. five lakhs in the property over and above the declared cost of construction. The report of the Assistant Director of Income-tax (Investigation), Delhi, dated March 28, 1998, is not based on facts and the same is false and baseless and misleading, apart from being absolutely vague, not disclosing even the bare minimum facts and cannot therefore amount to "reasons to believe". There was no separate building of office ever constructed or existing besides the main building and this assumption is totally baseless without any material and no such material has been brought on the record. The allegations not founded on facts were mala fide and they could not be imaginary, arbitrary or fanciful only with a view to cover up the case within the period of limitation as provided under the 1961 Act and the1957 Act Regarding the electrification by underground lines and H. T. lines, there is no material whatsoever and the allegations of investment of more than Rs. 10 lakhs on the same does not arise. The usual concealed wiring in the building has been provided for which the valuer has

26 ITA No.144/Mum/2016 Shri Neetish R Doshi already made valuation according to the fixed norms, and the same has been considered in the valuer's report and accepted in the assessment proceedings and also about the allegations of laying of the pipeline from Dam after the purchase and occupation of the land. There is an open pipeline from Dam which existed at the time of purchase of land. Therefore, it does not constitute material much less reasons to believe. There is no material on the record regarding installation of any mode of telecommunication system for which underground lines had been fitted worth Rs. 5 lakhs. The usual internal telephone wiring has already been considered in the approved valuer's report. However, an EPABX system has been installed in February/March, 1993, at a cost of Rs. 24,875 for which payment was made by Drafts dated February 10, 1993, and March 30, 1993. The expenditure was incurred by assessee-son, one of the co-owners which is duly accounted for. The allegation of making more than Rs. 5 lakhs investment on this system was not only false but also baseless and mischievous. Further, there is no material whatsoever suggesting plantation involving investment of more than Rs. 5 lakhs, though subsequent to the construction and occupation of the house, some plants from time to time over a period of nearly ten years were planted by incurring only nominal expenditure, but there was absolutely no material whatsoever much less "reasons to believe" that the plantation worth Rs. 5 lakhs was done and that too in the previous year relevant to the assessment year 1987-88. Thus, it was clear that there had been total non-compliance of the provisions of Section 147/148 of the Act and also the provisions of Section 151 of the Act and Section 17 of the Wealth-tax Act, in relation to approval. Both, the Commissioners of Income-tax and Wealth-tax have mechanically purported to grant approval for reassessment and his satisfaction was neither legal nor objectively based on relevant and full material, as was established that all relevant materials including reports were not even placed before nor did he have time to apply his mind independently and objectively, as it was done so without the delay for sending his approval as the file was sent to him on March 31, 1998, and the approval was given the same day and the file reached back the office of the Assessing Officer the same day. The authorities at one time took shelter of the order of the Supreme Court in PIL matter in Writ Petition of Vineet Narain’s case (supra) as against assessee’ A’ and his wife which was taken as ground for suspicion and on the basis whereof, the Assistant Director of Income- tax (Investigation), Delhi, directed the Valuation Cell, Bhopal, for finding out the valuation of the house and also the subsequent addition, alteration, etc., made subsequent to the completion of the house on March 31, 1987, whereupon the Valuation Officer issued joint notices to them but no such notice was issued to assessee-son which was itself indicative of the fact that the entire case was on the basis of the charge-

27 ITA No.144/Mum/2016 Shri Neetish R Doshi sheet in the hawala case against assessee-A which after his discharge from the Case C. C. No. 16 of 1996, dated May 28, 1997, becomes non est and, as such, no proceedings on the basis of the said notice could be allowed to be proceeded with further. The issuance of the notices under Section 148 of the 1961 Act and Section 17 of the 1957 Act to assessee clearly established the non-bona fide on the part of the department as they did so after having realised after discharge of assessee from the hawala case, the Department would not be successful in carrying out the enquiry/investigation against assessee’A’ and therefore, the order was passed for reopening of the long closed and finalised assessment in respect of income-tax as well as wealth-tax. Thus, if the Department wanted to proceed on some objective material then, it has not been explained as to why it took such a long span of about ten years and if there was some such substance and material, the same could have been opened within four years and the quantum of limit for four years would not have come in the way of the Department as assessment could be opened for the greater amount during this limit of four years' period. Further, it was an attempt to destroy the finality as envisaged by the Legislature. In the instant case, the facts and circumstances clearly went to indicate that an attempt had been made to violate the said policy of law especially in the circumstances that there has been no omission or failure on the part of the assessee in the instant case to make full and true disclosure. The obtaining of the information regarding agricultural income after about ten years, could not be treated as material leading to the omission or failure on the part of the assessee as it was not unusual that the people often differ as regards what inference could be drawn from given facts. The two orders of the Supreme Court in the said PIL petitions were dated November 30, 1996, and February 22, 1996, and also the hawala receipts were subsequent to these orders and subsequent to July 3, 1997, which also indicates that the hawala case had no relevance. The facts indicate that the two proceedings are being attempted by way of action under Section 131(1A)/ 131(1)(d) read with Section 132 of the Act and under Section 148 of the Act and under Section 17 of the Wealth-tax Act and two simultaneous proceedings cannot be initiated as they pertain to different objects. It is also interesting to note that uptil April 3, 1992, when the matter was agitated before the Rajya Sabha, the case of the Department was that there has not been any escapement of income from assessment and in this background, it was for the department to have established beyond reasonable doubt that what necessitated the Department in the year 1998 to proceed for reopening of the assessment relating to the income-tax as well as wealth-tax and also proceeding against assessee-wife who was neither assessed to income- tax nor wealth-tax as she was not assessable being the recipient of agricultural income. The hawala money transaction charge against

28 ITA No.144/Mum/2016 Shri Neetish R Doshi assessee ‘A’ related to the period April, 1988, to March, 1990, and August, 1990, and the wealth-tax assessment which included the house tax, was done on April 3. 1992, i. e., subsequent to the hawala case transaction of money charges and the reply of the respondent was that the Jain hawala case before the Supreme Court was a subsequent development and it vanished on discharge of assessee ‘A’ from charges. 1990, and August, 1990,annd the wealth-tax assessment which included the house- tax, was done on 3-4-1992, i.e., subsequent to the hawala case transact ion of money charges and the reply of the department was that the hawala case before the Supreme Court was a subsequent development and it vanished on discharge of the assessee 'A' from charges. The assessment of income-tax of the assessee which included the matter relating to the cost of the land and valuation of the house and the source of income and reference to the valuation cell was duly considered in the reference under section 144A in relation to the assessment years 1985-86, 1986-87 and 1987-88 by the IAC, Bhopal, and the assessment was made by Bhopal, under section 143(3) rend with section 144 A of the 1961 Act on 28-9-1987, which not having been challenged in any forum by the revenue became final. And the assessee wife, since was not having income from the taxable source, i.e., other than agriculture, was not assessed. Likewise, the assessee was also assessed to wealth-tax for the assessment years 1981-82 to 1991-92 by the Assistant Commissioner of Wealth-tax, on 3-4-1992, under section 16(3) of the 1957 Act holding that the reference to the valuation cell was not necessary and also the assessee-son was also assessed to wealth-tax for the assessment year 1987-88 by the WTO on 28-9-1987, under section 16(3) of the 1957 Act and those assessments relating to wealth-tax not having been challenged by the Department in forum available under the law became final. In the preliminary reply filed on behalf of department, it was stated that the hawala case before the Supreme Court was a subsequent development in point of lime. It by itself indicated that the department proceeded against the assessees on the basis of hawala case and not on satisfying the requirement under section 131(1A) of the 1961 Act and in that view of the matter also since the hawala case had come to an end, so far as the assessee was concerned, the same had nothing to do, as lie was discharged. Apart from that, neither the assessee's wife and the assessee's son had am/ concern with the hawala case and even otherwise, could not be taken in aid against them. Thus, the impugned notices were invalid, null and void. After the order of discharge, there remained nothing to think even against the assessee. The Department, for reasons best known to the concerned officers, unfairly, illegally and without jurisdiction, issued notices under section 148 of the 1961 Act dated 31-3-1988, against the assessee, his wife and his son as well as under section 17 of the 1957 Act. In view of the above, the writ petitions deserved to be allowed." Similarly, in the case of CBI v.'V.C. Sliukla&Ors (SC) 1998 SC 1406, third party statements/ notings in diaries against the accused were not appreciated by the Hon’ble Court. 5.3.5. In the present case except for the statement of Shri Nilesh Ajmera, the AO has not brought on record any appreciable evidence. The third party's statement, unless corroborated with evidence, cannot be relied on for the purpose of making addition in another person's assessment- In view of the given facts of the present case and Judicial Pronouncement referred by the appellant and also judicial Pronouncements

29 ITA No.144/Mum/2016 Shri Neetish R Doshi discussed by me, it will be difficult to uphold the protective addition made by the AO. Therefore, the AO is directed to delete the addition of Rs,5,00,80,000/-. In the result, the appellant Ground of appeal on above issue is Allowed.

30 ITA No.144/Mum/2016 Shri Neetish R Doshi assessee, there is no justification for making addition of this amount which have already been added in the hands of the third party from whose premises loose sheets were found. The detailed finding so recorded by CIT(A) at para 4.3 has not been controverted by learned DR by bringing any positive material on record, accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the said addition. 11. We also observe that protective addition has been made by the AO u/s.69A on the plea that assessee has advanced cash to Shri Nilesh Ajmera. Substantive addition has been made in the hands of Shri Nilesh Ajmera. The CIT(A) has deleted the same by observing that in the present case except statement of Shri Nilesh Ajmera, the AO has not brought on record any appreciable evidence to substantiate the addition in the hands of the assessee more appropriately when addition has already been made in the hands of Shri Nilesh Ajmera. As per our considered view a third party’s statement, unless corroborated with evidence cannot be relied on for the purpose of making addition in another person’s assessment. The CIT(A) relied on various judicial pronouncements and after applying the same to the facts of the present case deleted the protective addition made in the hands of the assessee. The detailed finding so recorded by CIT(A) at para 5.3 has not been controverted by learned DR by bringing any positive material on record, accordingly, we do not find any reason to interfere in the order of CIT(A).

31 ITA No.144/Mum/2016 Shri Neetish R Doshi