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TMI Blog2013 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... Order of Commissioner dropping proceeding under section 12AA (3), being bereft of reasons, is no order in the eyes of law and therefore it is liable to be ignored. The Commissioner of Income Tax is directed to pass fresh reasoned order after hearing the petitioner. - writ petition dismissed with cost of Rs.10,000/- payable by the petitioner within a period of one month. - Decided against the assessee. - Writ Tax No. - 1629 of 2010 - - - Dated:- 27-5-2013 - Prakash Krishna And Manoj Kumar Gupta,JJ. For the Petitioner : Shubham Agrawal For the Respondent : C. S. C.,R. K. Upadhaya JUDGMENT (Delivered by Prakash Krishna, J) By means of the present petition, the petitioner has challenged the legality and validity of notice issued under section 148 of the Income Tax Act as also sought a writ in the nature of certiorari for quashing the order dated 11th of November, 2010 whereby the objection against the aforesaid notice has been dismissed. A further writ of mandamus directing the Additional Commissioner of Income Tax Range-II, Muzaffarnagar to drop the reassessment proceedings against the petitioner for the Assessment Year 2006-2007 has been sought for. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith regard to the source of corpus receipt by the petitioner as donation. The donor trust M/s. Nav Jyoti Vikas Sansthan who is alleged to have given donation to the petitioner assessee has no financial capacity to make such a huge donation. This fact came into surface during the assessment proceedings of one M/s. Bankey Bihari Educational Trust. The Additional Commissioner of Income Tax, Ghaziabad noticed that M/s. Nov Jyoti Vikas Sansthan paid a sum of Rs.15 Lakhs as donation to M/s. Bankey Bihari Educational Trust. On inquiry, it was noticed that M/s. Nav Jyoti Vikas Sansthan has no financial capacity to make any donation. The transaction was in the nature of accommodation entries and the donation given by M/s. Nav Jyoti Vikas Sansthan is not genuine. After conducting a detailed inquiry, it was found that the income of the petitioner has escaped assessment. The reassessment proceedings against the petitioner was set to motion on the basis of the relevant material and the said material has a nexus to the escapement of the income of the petitioner. Heard Sri Shubham Agrawal, learned counsel for the petitioner and Shri R.K. Upadhyay, learned counsel for the respondents. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the learned counsel for the parties and perused the record. The main thrust of the petitioner's counsel is that all the facts relating to donation by NJVS were disclosed during the assessment proceedings. The donations were received through cheques, a fact which is not disputed even in the reasons recorded for issuing notice under section 148. The argument proceeds on the footing that nothing was concealed by the petitioner. The Court was taken through the various notices issued by the Assessing Officer raising queries and their replies to impress upon the Court that the assessee filed the details of the corpus fund along with their complete names and addresses. The donations were received through bank transaction. Sri Madan Pal Giri, secretary of NJVS was produced to confirm the payment of donations. The affidavit on behalf of NJVS was also filed. The submission is that every thing was disclosed to the Assessing Authority. At this place, it is appropriate to reproduce the assessment order which is a very short document and shows the total non application of mind by the Assessing Authority. The assessment order though has been passed under section 143(3) of the Act, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been filed at the initial stage that is against the issuance of notice of reassessment. In a petition under Article 226 of the Constitution of India, the petitioner may challenge the validity of notice under section 147 on a very limited ground. The only limited issue which can be raised in writ petition is that the Assessing Authority could not form belief that the income has escaped the assessment. On a perusal, the reasons for issuing notice would show that during the assessment proceedings of one M/s. Bankey Bihari Educational Trust, the Additional Commissioner of Income Tax, Ghaziabad noticed that the said Trust shown to have received an amount of Rs.15 Lakhs as donation from NJVS and no confirmation for the donation was received by the Assessing Authority. He conducted the inquiries and found that the NJVS is having no capacity to pay the donation of Rs.15,00,000/- and the amount of donation given to the assessee is not genuine. The relevant part of the reasons to believe is reproduced below:- 3. "During assessment proceeding of M/s Bankey Bihari Educational Trust before the Shri Radhey Shyam, the Addl. Commissioner of Income Tax, Ghaziabad, it was noticed that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unil Associates which are directly or indirectly related with Mr. Mahender Gupta. The search action took place at the premise of M/s D.N. Kansal Securities Pvt. Ltd. Whose director is Sh. Manoj Kumar Gupta S/o Sh. Prahlad Saran Gupta by investigation wing Ghaziabad. SH. Manoj Kumar Gupta accepted in his statement for providing bogus entries and he offered his commission income in lieu of entry charges. This fact also proves that all the above banking channels were used as tool for introducing black money. vi It is concluded that the following bank account holder were utilized their bank account for depositing cash and issuing cheques to the different companies, trust societies to evade its tax liabilities. Sl. No. Name and persons/account holder Amount Financial Year Period 1 M/s Nav Jyoti Vikas Sansthan, HIG, J-3A, Sanjay Nagar, Ghaziabad Through the secretary Sh. Madan Giri Rs.1,81,05,000/- 2006-07 21.02.2006 to 16.09.2009 2 Vinod Kumar Gupta prop. Varun Trade Centre, 48, Prahlad Gari, G.T. Road, Ghaziabad Introducer M/s. Nav Jyoti Vikas Sansthan Rs.6,82,43,230/- 2005-06 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of Madan Pal Giri, secretary of NJVS was recorded. He was asked to explain the source of donations received by NJVS under question no.6. The reply given by the assessee is as evasive and as general as it could be. He replied that there are big iron merchants of Nav Jyoti Market, Ghaziabad who have given donations. He further states that he could not give the particulars of the doners and will give the reply only after consulting the income tax advocate. Even a man of ordinary prudence on such kind of statement will conclude that the genuineness of the transaction is not established by NJVS who in turn donated the amount to the petitioner. The case of the department that the real story, as a matter of fact, is that NJVS has not donated any amount to the petitioner and it was accommodation entries provided by Manoj Kumar Gupta who has so stated in his deposition, on 10% commission. However, at this stage of proceedings, it is not necessary for us to dwell upon any further and it shall be open to the petitioner to establish that the donations were genuine by producing cogent and relevant material. At this stage, we may refer the judgement of the Apex Court in the case of Assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case on hand, the Assessing Authority has recorded the reasons in great detail and portion of the reasons have already been reproduced above. It cannot be said even for a moment that the satisfaction recorded by the Assessing Authority that the income has escaped the assessment in any manner is not in accordance with law. It was then contended that the case on hand was within the proviso to section 147 of the Act and as the proceedings were initiated according to the petitioner after a period of four years from the end of the Assessment Year 2006-2007, the proceeding is bad as the assessee had disclosed all the material facts during the course of the assessment proceedings. The said argument is misconceived and proceeds on the wrong footing that four years period from the end of the Assessment Year 2006-2007 will come to an end on 31st of March, 2010. The phrase used in the proviso is - after the expiry of four years from the end of the relevant Assessment Year". Clearly, it postulates the starting up of four years period will be from the end of the Assessment Year i.e. for the Assessment Year 2006-2007, the Assessment Year will expire on 31st of March, 2007 and four years peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment by taking recourse to the provisions of section 147. A bare perusal of this judgment would show that the binding precedents of the Apex Court were not brought to the notice of the High Court. The Apex Court in the case of Rajesh Jhaveri Stock Brokers Private Limited (supra) has held that at the initial stage i.e. at the stage of notice, the only thing which is required to be seen is 'reason to believe', but not the established facts of escapement of income. In the case on hand, the assessment order as noticed herein above is stereotype order lacks material discussion on relevant issues. As a matter of fact, the assessment order is no order in the eyes of law. When the amount of taxable income and of tax payable thereon were not ascertained at all by the Assessing Officer, then, obviously it cannot be said that the Assessing Officer has formed any opinion with regard to the taxable income and of the tax payable and consequently, there would not arise any question of mere change of opinion. For the same reasons, the other decisions relied upon by the learned counsel for the petitioner are distinguishable on facts and are not applicable to the facts of the present case. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of Income Tax, Muzaffarnagar who passed the above order has dropped the proceedings for cancellation of registration without assigning any reason. The order being bereft of any reason cannot be treated an order in the eyes of law. One fails to understand what impelled him to do so. The order being bereft of any reason is no order in the eyes of law and is liable to be ignored being illegal and void. The petitioner's counsel was put to notice to support the order. The only reply he could give is that in the present petition the order dated 25.1.2008 is not in issue. We are not at all impressed by the said argument. When there as a transaction of Rs.1,57,00,000/- a speaking order even dropping the proceeding at least was required. We, therefore, hold that the petitioner cannot derive any advantage from the aforesaid order. The income tax authorities are required to administer the Act. The right to administer, cannot obviously include the right to mal-administer. Thus, we find no words to express anguish as what kind of governance it had been. There is another reason for ignoring the aforesaid order, dropping the cancellation proceeding of registration. The said order does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment not only bring disrepute to the department but also encourages the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonestly. An honest tax payer feels cheated. Let the matter be examined by the Chief Commissioner of Income Tax and appropriate departmental proceedings may be taken out against the erring officials. A copy of this judgment may also be sent to the Chairman of the Central Board of Direct Taxes for an appropriate action. Since in earlier part of the judgment, we have held that the order of Commissioner dropping proceeding under section 12AA (3), being bereft of reasons, is no order in the eyes of law and therefore it is liable to be ignored. The Commissioner of Income Tax is directed to pass fresh reasoned order after hearing the petitioner. The petitioner is directed to appear along with a certified copy of this order before the Commissioner of Income Tax, Muzaffarnagar within a period of one month before the Commissioner of Income Tax who will fix a date for further proceeding in the matter and will pass a speaking order giving reasons in accordance with law. Having regard to what has been s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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