RAGHUBIR SINGH PUNIA,NEW DELHI vs. ITO, WARD 30(8), NEW DELHI., NEW DELHI

5. That under the fact and in circumstances of the case the Ld. CIT(A) erred in law as much as in fact in upholding the initiation of reassessment proceedings in as much as he has failed to follow the mandate given in the decision of Hon'ble Supreme Court in the case of GKN Drive Shaft (lndia) Ltd. Vs ITO, 269 ITR 19 (SC).

6. That under the facts and in circumstances of the case the Ld.CIT(A) erred in law as much as in fact in upholding the addition of Rs.29,49,000/- u/s 69A of Act, by treating the amount of cash deposited in the bank account as unexplained. Such addition is bad in law and section 69A has no applicability in the facts

I.T.A.No.2252/Del/2024 and circumstances of the case.

7. That under the facts and in circumstances of the case the Ld.CIT(A) erred in law as much as in fact as he has failed to appreciate the submissions of the appellant made vide reply dated 12-12-2019 along with which all necessary documents and justification in support of total cash deposited of Rs.29.49 Lakh with United Bank of India were filed. The addition made by the AO was required to be deleted in view of the explanation submitted by the assessee.

8. That under the facts and in circumstances of the case the Ld. CIT(A) erred in law as much as in fact upholding the addition of Rs.29,49,000/- without application of his own mind as he has failed to appreciate that the assessee was not statutorily required to maintain books of account and also that the evidences were submitted to support the explanation like, bank statement showing withdrawals and deposits; data-wise cash flow statement was also submitted; the purpose of withdrawal was also submitted and also the reason for redeposit of the said amount into the said account. Therefore, it has been wrongly observed by the Ld. CIT(A) at page 31 of the impugned order that these were not submitted.

9. That under the facts and in circumstances of the case the Ld. CIT(A) erred in law as much as in not accepting the ground relating to the invalidity of the assessment order on account of jurisdictional aspect u/s 127 of the Act.

10. That under the facts and circumstances of the case the Ld. CIT(A) has erred in law as much as in fact in holding that issue regarding levy of penalty u/s 271(1)(c) of the Act is premature, therefore, need not be to adjudicated.

upholding the levy of tax demand of Rs.18,06,250/- on an assessed income of Rs.39,90,720/- which include interest u/s 234A, 234B, 234C. No such tax and interest is leviable as no income other than returned income arises in the hands of the assessee.

12. That the present appeal is being belatedly filed. The application for condonation of delay is being filed separately and is prayed to be admitted.

13. That each of the above ground is independent and without prejudice to the other grounds of appeal preferred by the Appellant.

14. The Appellant craves leave to add, after, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal.”

2. The Ld. Counsel for the assessee, at the outset, submits that the appeal has been filed with the delay of 100 days and the assessee has filed petition for condonation of delay explaining the reasons for the delay in filing the appeal. Referring to the condonation petition the Ld. Counsel submits that the assessee was not aware of the order having been passed by the Ld.CIT(A)-NFAC as the registered e-mail address at the portal of the assessee is of the company in which the assessee is a Director and the e-mail, if any, received on such e-mail from the Ld.CIT(A) never came to the knowledge of the assessee. The assessee has been diligent in pursuing the matter which is apparent from the assessment proceedings and also first appellate proceedings the assessee has 4

I.T.A.No.2252/Del/2024 always complied with all the notices and submitted the relevant submissions and the details as and when required. Therefore, the Ld. Counsel submits that the delay in filing the appeal is neither willful nor wanton but for the circumstances explained above and, therefore, he prayed for condoning the delay in filing the appeal.

Reliance was placed on the decision of the Hon’ble Supreme Court in the case of Katiji (1987) 167 ITR 471 (SC).

3. On hearing both the parties and perusing the petition for condonation of delay filed by the assessee it is observed that the assessee had reasonable cause in not filing the appeal in time and therefore the delay in filing of appeal is hereby condoned and the appeal is admitted.

4. Referring to ground no.1 of grounds of appeal the Ld. Counsel for the assessee submits that assessee challenged the order of the Ld.CIT(A)-NFAC in upholding the initiation of reassessment proceedings in as much as the CIT(A) has failed to appreciate that the reasons recorded to initiate the reassessment proceedings did not meet the requirement of law and therefore reassessment proceedings were invalid. Ld. Counsel for the assessee referring to page 24 of the Paper Book submits that the reasons recorded for reopening of assessment by the AO u/s 147 of the Act are vague. 5

I.T.A.No.2252/Del/2024 Ld. Counsel submits that in the reasons recorded the AO stated that an information was received from the office of ITO, Ward 33(1) that the assessee has deposited cash of Rs.10 lakhs or more in savings bank account during the FY 2011-12 pertaining to AY 2012-13. Ld.

Counsel for the assessee submits that the AO in the reasons recorded did not mention the exact amount of escapement and also did not mention in which bank account the assessee has deposited cash. The AO also did not mention on which date the assessee has deposited cash and the reasons recorded are completely vague about the transactions of cash deposits. Therefore, the Ld. Counsel submits that the case of the assessee was reopened on mere information available from accountable information management system regarding cash deposit of Rs.10 lakhs or more in the savings bank account maintained by the assessee without any documentary evidence and enquiry and merely on suspecision.

5. The Ld. Counsel further referring to page 31 of the Paper Book which are the objections filed against reasons recorded u/s 147 of the Act submits that these objections were uploaded on 08.12.2019 by the assessee and the AO has not disposed of these objections which is in violation of the decision of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO [259 ITR 19] and I.T.A.No.2252/Del/2024 therefore the reassessment order passed u/s 143(3) r.w.s. 147 of the Act is invalid and void ab initio.

6. On the other hand, the Ld. DR strongly supported the orders of the authorities below.

“In this case, an Information has been received from the office of the I.T.O, Ward-33(1) in this case assessee has deposited cash of Rs.10,00,000/- or more in saving bank during the F.Y.201I-12 pertaining to assessment year 2012-13.

I.T.A.No.2252/Del/2024

I.T.A.No.2252/Del/2024

"All that is required for the Revenue to assume valid jurisdiction u/s 148 is the existence of cogent material that would lead a person of normal prudence, acting reasonably, to an honest belief as to the escapement of income from assessment." Also, in the case of Phoolchand Bajrang Lai vs. 1TO 203 ITR 456 (SC), the Hon'ble Apex Court has held that: "An assessment completed u/s 143(3) but later on Information received which was indefinite, specific and reliable and the AO duly recorded the reasons for his belief that the assessee had not fully and truly disclosed particulars of his income and hence there was escapement of income. Held that the reopening of the case was valid." Also, in the case of Raymond Woollen Mills Ltd. 236 ITR 34 (SC), the Hon'ble Apex Court has held that: "Assessee did not include certain direct manufacturing costs and fiscal duties in the valuation of closing stock. This came to light in the subsequent years assessment proceedings. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The’ sufficiency or correctness of the material is not a thing to be considered at the stage of issue of notice u/s 148." Furthermore, in the case of Jyoti Goyal vs ITO (ITA No. 1259/De 1/2010), the Hon'ble ITAT Delhi held that "As regards the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment. Sufficiency of such information cannot be gone into while deciding the issue of validity of reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement

I.T.A.No.2252/Del/2024 with the finding of the Ld. CIT (A) that the reopening of assessment u/s 147 of the Act was valid."

I.T.A.No.2252/Del/2024 goes to show that the AO do not possess any credible information to form a belief that income had escaped assessment.

The Tribunal while holding so observed as follows: - “11. On careful perusal of the reasons, it is noticed that the AO nowhere stated which branch of the HDFC Bank and the account number of bank account in which the cash deposits of Rs.1,25,46,000/- is made. It is very much clear that while recording the reasons for reopening the AO is not in position of even the bank statement where he has alleged that the assessee made cash deposits to the tune of Rs.1,25,46,000/-. Perusal of the assessment order also reveals that ultimately on verification of bank statement the AO could only find that the cash deposits were only to the tune of Rs.64,67,000/-. This clearly shows that the AO has not applied his mind for recording reasons that the income had escaped assessment to the tune of Rs.1,25,46,000/-. There is complete non-application of mind by the AO. It appears that AO has not cross verified the information which he possessed with that of the bank statement before recording the reasons as there are factual inconsistencies in the reasons recorded. The proceedings initiated u/s 148 and the reasons suggests that reopening was attempted on mere suspicion that the income to the tune of Rs.1,25,46,000/- had escaped assessment.

12. In the case of Rajiv Aggarwal Vs. ACIT (395 ITR 255) held as under: -

I.T.A.No.2252/Del/2024 “Secondly, the Assessing Officer’s belief that income of an assessee has escaped assessment must be based on tangible material. It has been explained in a number of decisions that there must be a “close nexus” or “live link” between tangible material and the reason to believe that income has escaped assessment. It follows that the material on the basis of which reassessment proceedings can be initiated must be credible material which could lead to such belief. Clearly, an unsubstantiated complaint cannot be the sole basis for forming a belief that income of an assessee has escaped assessment. Even in cases where the Assessing Officer comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an assessee has escaped assessment, form a believe that income of the assessee has escaped assessment. Plainly, in this case, the assessee had not acquired any material to form such belief. On the contrary, when it is pointed out to the Assessing Officer that SHPL had not assigned any policy to Rajiv Agarwal, the said fact was completely overlooked. Similarly, in the case of Vijay Laxmi Agarwal, the Assessing Officer failed to take into account the fact that the assessee had paid a sum of Rs.2,08,000/-, which was more than surrender value of the policy, for assignment of the policy in her favour. This too was completely ignored by the Assessing Officer.”

13. Following the said decision and also the decision of the jurisdictional High Court in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (395 ITR 677) the coordinate bench of the Tribunal in the case of RN Khemka Enterprise Pvt. Ltd. Vs. ITO (ITA No.7244/Del/2019) dated 12.08.2021 held that if there is non-application of mind in recording reasons, the AO could not be said to have reason to believe to justify reopening of assessment. While holding so the Tribunal observed as under: -

I.T.A.No.2252/Del/2024 "30. We find that Hon’ble Delhi High Court in the case of Pr. CIT vs Meenakshi Overseas Pvt. Ltd. reported in 395 ITR 677 (Del.) has quashed the reassessment proceedings on the ground that the reasons recorded by the AO failed to demonstrate link between tangible material and formation reason to believe that income had escaped assessment. 1 relevant observation of the Hon’ble Delhi High Court from paras 19 to 38 read as under:- “19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material.

I.T.A.No.2252/Del/2024 belief or the reason to believe that income has escaped assessment.

15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered

I.T.A.No.2252/Del/2024 against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe’ read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/ companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes:

1. 1. To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc.

2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:...." 29.2 The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which I.T.A.No.2252/Del/2024 entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded: "The transactions involving Rs.27,00,000/-, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs.27,00,000/ - has escaped assessment as defined by section 147 of the Income Tax Act. Therefore, this is a fit case for the issuance of the notice under section 148.” 29.3The Court was not inclined to interfere in the above circumstances in exercise of its writ jurisdiction to quash the proceedings. A careful perusal of the above reasons reveals that the AO does not merely reproduce the information but takes the effort of revealing what is contained in the investigation report specific to the Assessee. Importantly he notes that the information obtained was fresh’ and had not been offered by the Assessee till its return pursuant to the notice issued to it was filed. This is a crucial factor that went into the formation of the belief In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee. He does not also examine the return already filed to ascertain if the entry has been disclosed therein. 30.1 In Commissioner of Income Tax, New Delhi v. Highgain Finvest (P) Limited (2007)

I.T.A.No.2252/Del/2024

164 Taxman 142 (Del) relied upon by Mr. Chaudhary, the reasons to believe read as under: "It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996- 1997, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt

18.11.96 305002 5,00,000

Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 20

I.T.A.No.2252/Del/2024 30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that there was prima facie material for the AO to come to the conclusion that the Assessee had not made a full and true disclosure of all the material facts relevant for the assessment.

32. In Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del) it was held that "therefore, even if it is assumed that, in fact, the Assessee"s income has escaped assessment, the AO would have no jurisdiction to assess the same if his 21

I.T.A.No.2252/Del/2024 reasons to believe were not based on any cogent material. In absence of the jurisdictional pre-condition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise."

I.T.A.No.2252/Del/2024 to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment."

31. We find, following the above decision, the Coordinate Benches of the Tribunal are taking the consistent view that when there is non- application of mind by the AO to the report of the 23

I.T.A.No.2252/Del/2024 Investigation Wing, such reassessment proceedings are not in accordance with law and such reopening proceedings have been quashed. Since, in the instant case, the AO has not applied his mind as there is non-identification of the deponents, non- mentioning of middleman if any, absence of details in the form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the considered opinion that there is complete non-application Of mind by the AO to the information received from the Investigation Wing. Therefore, in view of the decision of the Hon’ble Delhi High court in the case of Pr. CIT vs Meenkashi Overseas Pvt. Ltd. (supra), the reassessment proceedings are not in accordance with law.

14. To compound matters further the in the assessment order the AO has, instead of adding a sum of Rs.78 lakh, even going by the reasons for reopening of the assessment, added a sum of Rs.1.13 crore. On what basis such an addition was made has not been explained.”

I.T.A.No.2252/Del/2024

Thus, the reassessment made u/s 143(3) r.w.s. 147 of the Act is hereby quashed in view of the above discussion. Ground no. 1 of grounds of appeal of the assessee is allowed.

11. Since the reassessment order is quashed on the legal issue of vague reasons and non application of mind and not inclined to go into the other legal issues as well as the merits of the addition/disallowance made in the reassessment order as it would be of only academic in nature at this stage.