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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ : NEW DELHI
PER SHAMIM YAHYA, ACCOUNTANT MEMBER :
This appeal by the assessee is directed against the order of ld. CIT (Appeals)-28, New Delhi dated 29.03.2019 pertaining to AY 2009-10.
The assessee has raised the following grounds of appeal :-
“1. On the facts and circumstances of the case and in law, the CIT (A) has erred in holding that the AO has formed his belief for recording the reasons and reopening the assessment proceedings on the basis of wrong premises.
2. On the facts and circumstances of the case and in law, the CIT (A) has erred in holding that the initiation of assessment proceedings u/s 147 and issuance of notice u/s 148 of the Act
3. On the facts and circumstances of the case and in law, the CIT (A) has erred in holding that the reopening of assessment proceedings and subsequent assessment proceedings are bad in law and without jurisdiction thereby quashing the reassessment proceedings.
4. On the facts and circumstances of the case and in law, the CIT (A) has erred in holding that the grounds taken by the appellant on merit remain academic only and not required to be adjudicated.”
Briefly stated, the facts of the case are that the case was reopened and the order was passed under section 143 (3)/148 of the Income-tax Act, 1961 (for short 'the Act'). A sum of Rs.1,95,00,000/- was added as undisclosed income.
Against the above addition, assessee challenged the same before the ld. CIT (A) on account of both validity and merits of the case. Ld. CIT (A) decided the issue of reopening in favour of the assessee, hence he did not adjudicate upon the merits of the case.
Against this order, Revenue is in appeal before us. We have heard both the parties and perused the records.
The reasons recorded in this case are as under :-
“Sub : Reasons for reopening of assessment u/s 147 in the case of M/s. Yamuna Builders Pvt. Ltd. for the AY 2009-10 - regarding ./2019 The Asstt. Commission of Income tax, Central Circle 26, New Delhi vide letter No.ACIT/CC-26/20 IS-16/2020 dated 21st March 2016 (received in this office on 28th March 2016) has informed that a search & seizure operation was carried out on 11.9.2013 in the case of AKN Group of cases. It has further been informed that a hard disc had been found at the residential premises of Sh. Naresh Gupta, Deed Writer & Advocate and page 79 of the appraisal report of Investigation Wing states that M/s Yamuna Builders Pvt Ltd. (PAN: AAACY336SP) has paid Rs.1.95 crores in cash to Sh. Narpat Chand Jain during the F.Y.2008-09 (A.Y.2009-10) to purchase a property. The assessee has filed its return of income for the year under consideration, i.e., A.Y 2009-10 on 20.9.2009 vide acknowledgement No.88824790200909 declaring loss of Rs.23,95l/-. The return of income was processed u/s 143(1) of the Act on 29 10.2010. The case was not selected for scrutiny. On perusal of the return reveals that no investment in property has been declared. Therefore, I am satisfied that assessee has not disclosed complete facts w.r.t. the investments and source of cash payment of Rs.1.5 crores. Hence, 1 am of the view that the income amounting to Rs.l.5 crores has escaped assessment within the meaning of Section 147/148 of the Act. Hence, to protect the interest of revenue and to tax the aforesaid amount, action is required to be taken U/s 147 of the Income Tax Act in the case.”
Ld. CIT (A) in his order found that reasons recorded have glaring defects and assessment so framed cannot be said to be valid. The order of ld. CIT (A) read as under :-
“4. I have considered the facts of the case, reasons recorded by AO and the submissions of the appellant. From the reasons recorded, it reflects that AO was in possession of information received from Asstt. CIT, Central Circle- 26 that there was a search and seizure operation carried out in the case of AKN Group wherein a hard disk was found at the residential premises of Shri Naresh Gupta, Deed Writer & Advocate ./2019 wherein it was mentioned that the appellant M/s. Yamuna Builders Pvt. Ltd had paid Rs. 1.95 crore in cash to Shri Narpat Chand Jain during F.Y. 2008-09 (A.Y. 2009-10) to purchase a property. It is further reflected from the reasons that while recording the satisfaction in the 3rd paragraph, AO has changed the figure of cash payment from Rs. 1.95 crore to 1.50 crores. It is further revealed from the assessment order that he has changed the name of recipient also and held the unexplained investment of Rs. 1.95 crore in the name of Shri Ajay Sharma, not in the name of Shri Narpat Jain as mentioned in the satisfaction note. Thus, the reasons recorded and consequent assessment completed are full of contradictions giving wrong figures and wrong names in the case of appellant. During the remand proceedings also, when the AO was asked to reconcile the aforesaid figures of amounts and also the names, he commented altogether on different issue of admissibility of additional evidence and failed to give clarification on wrong facts. In view of these facts, it is clear that the AO has formed his belief for recording the reasons and reopening the assessment proceedings on the basis of the wrong premise.
4.1 It has to mention here that Hon’ble Supreme Court has already laid down the following principles in the case of ITO VS. Lakhmani Mewal Das 103 ITR 437 for constituting the 'reason to believe' for the purpose of initiation of reassessment proceedings, which are to be strictly followed by AO being a quasi-judicial authority:- a) The powers of the AO to reopen an assessment though wide, are not plenary. b) The words of the statute are 'reason to believe' and not 'reason to suspect'. c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied.
./2019 d) The reasons to believe must have a material bearing on the question on escapement of income. It does not mean a purely subjective satisfaction of the assessing authority; the reason be held in good faith and cannot merely be a pretence. e) The reasons to believe must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the AO and the formation of belief regarding escapement of income.
4.2 It is further decided by Hon'ble Court in the case CIT vs. Kelvinator India Ltd 320 ITR 561 that for initiating the proceedings u/s 147, two conditions i.e. availability of tangible material and live link between these tangible material and formation of reason to believe that income has escaped assessment, must to be satisfied. Here in the case of the appellant, as discussed above, neither there is any correct and authentic tangible material in the possession of the AO nor could he establish any live link between the materials whatsoever in his possession and formation of belief for recording the satisfaction that appellant has escaped the assessment of any income and subsequently in the assessment order. It is clear from the reasons recorded that the AO failed to even ascertain the true and correct amount of income of escapement, which is main basis of forming belief to reopen the assessment proceedings. Only after initiation of reassessment proceedings, he tried to reconcile the aforesaid differences and reached altogether different conclusion by mentioning the name of Shri Ajay Sharma which is nowhere reflected while recording the satisfaction for initiation of reassessment proceedings. In such situation only, Hon'ble Kerela High Court in the case Parthas Info Park (P) Ltd Vs. ACIT 396 ITR 682, has held that re-assessment proceedings initiated against the assessee on a wrong premise, is unsustainable.
4.3 From the above, it is clear that the AO was neither having any tangible material in his possession for the purpose of initiating the reassessment proceedings in the case of appellant nor there was a proper application of mind on his part.
./2019 Whatever belief -has been formed by him for recording the satisfaction, is based on wrong facts in respect of amounts/transactions as well as the names of persons. The AO has merely taken that information into consideration and arrived at conclusion that the appellant has escaped the assessment of income even without caring that the figures and names mentioned by him are correct or not. This shows that the conduct of AO has been very casual and arbitrary. As held by Hon'ble Jurisdictional High court in the case Pro CIT vs Meenakshi Overseas Pvt. Ltd 395 ITR 677, the reopening of assessment u/s 147 of IT Act is a potent power not to be lightly exercised. It cannot be evoked casually or mechanically. The reasons recorded have to be based on some tangible material and that should be evident from a reading of the observations and the reasons must be self evident and must speak for themselves and the reasons to belief must demonstrate the link between .the tangible material and the formation of the belief or the reason to. believe that income escaped assessment. It has been further held by Hon'ble Court that the AO, being a quasi- judicial authority, is expected to arrive at a subjective satisfaction independently on objective criteria for recording the reasons to assume the jurisdiction u/s 147 of IT Act.
4.4 In view of the above, it is held that neither the AO was having any tangible material in his possession nor could he establish any live link between the said material and formation of belief nor could he apply his mind properly in the case of appellant. He has merely taken into consideration the wrong facts and formed a belief that the income has escaped assessment in the case of the appellant. In such situation, the initiation of assessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act are not valid in the case of appellant. Consequently, the reassessment proceedings in the said section are also held invalid. It is, therefore, held that reopening of assessment proceedings and subsequent assessment proceedings in the case of the appellant are bad in law and without jurisdiction and deserve to be quashed. I, therefore, quash the reassessment proceedings and allow the grounds taken by the appellant.
5. Since the reassessment proceedings in the case of appellant have been quashed, as above, the grounds taken by
We have heard both the parties and perused the records. We note that the ld. CIT (A) has carefully taken into account the defects in the reasons recorded. The reasons recorded was that AO was in possession of information received that in a search and seizure operation carried out in the case of AKN Group, a hard disk was found at the residential premises of Shri Naresh Gupta, Deed Writer & Advocate wherein it was mentioned that the assessee, M/s. Yamuna Builders Pvt. Ltd. had paid Rs.1.95 crore in cash to Shri Narpat Chand Jain during FY 2008-09 (AY 2009-10) for purchase of a property. The AO in later part of the reasons recorded itself has changed the figure of cash payment from Rs.1.95 crore to Rs.1.50 crore. Furthermore, in the assessment order, AO also changed the name of the recipient and held that the unexplained investment of Rs.1.95 crore is in the name of Shri Ajay Sharma and not in the name of Shri Narpat Jain as mentioned in the satisfaction note. On these facts, we are in agreement with ld. CIT (A) that reasons recorded and consequent assessment completed are full of contradictions giving wrong figures and wrong names in the case of assessee. It is also noted by ld. CIT (A) that during remand proceedings also, the AO was asked to reconcile the aforesaid figures of amounts and also the names but he failed to do so. basis of the wrong premise is correct. We note that in the above adjudication, ld. CIT (A) has properly appreciated the matter and referred to case laws. We are of the opinion that his order does not need any interference on our part. Hence, we uphold the order of ld. CIT (A). As regards merits of the case, we note that reopening has been found invalid and grounds on merits are only academic interest, hence we are not engaging into the same.
In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 27th day of April, 2023.