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TMI Blog2016 (3) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... sion relied upon by the ld DR is not applicable in the facts of the present case because in the said case not only the accommodation entry were found by the investigation wing but the modus operandi was also detected and therefore it was found that the AO was having the sufficient material and information to form the believe that the income assessable to tax has escaped assessment. In view of the facts and circumstances as well as the decisions relied upon by the AR, the reopening is in the case of the assessee is not valid - Decided in favour of assessee - ITA No. 1331/Del/2015 - - - Dated:- 22-1-2016 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER For The Appellant : Sh. Kapil Goel, Adv For The Respondent : Dr. Anjula Jain, Sr. DR ORDER This appeal of the assessee is directed against the order dated 18.12.2014 of ld. CIT(A), New Delhi for the Assessment Year 2006-07. 2. The assessee has raised the following grounds:- Jurisdictional Grounds on validity of reopening proceedings y/s 148 1. That on the facts and in the circumstances of the case and in law, Ld CIT-A erred in not quashing the patently invalid reopening action u/s 148 which is full of err ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al' providing 'live nexus' with income escapement on just borrowed satisfaction without independent application of mind. (covered by Delhi ITA T A bench order in case of Bir Bahadur case dated 20/1/2015) That on the facts and in the circumstances of the case and in law, learned CIJ-A erred in not quashing the reopening action of Ld AO whereas affixture service of jurisdictional reopening notice u/s 148 as evident from page 6/7 of impugned order is patently bad. That on the facts and in the circumstances of the case and in law, learned CYT-A erred in not Quashing the reopening action of Ld AO where assessment having been framed u/s 143(3)/147 of the Act on basis of invalid issuance of notice u/s 143(2) dated 23.012014 without prior RO1 on records. 4. Argument on admission of the additional grounds are heard. Since all the additional grounds raised by the assessee are purely legal in nature go to the root of the matter therefore, in view of the of series of precedent including the judgment of the Hon ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT, 229 ITR 383, the additional grounds raised by the assessee challenged the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening and clearly mentioned that in this case information received from the investigation wing about the cash deposit of ₹ 6 lac in the bank account of the assessee maintained with Ramgaria Cooperative Bank Ltd. and the source of which are not commensurate with business activity of the assessee. Thus there was a fresh information and tangible material of deposit of cash in the bank account with the AO to form the believe that income assessable to tax has escaped assessment. She has contended that when the information was specific and not general or vague and referred to the transaction in the bank account of the assessee during the year under consideration then the sufficiency of reason and establishing on merits of the matter are not required at the stage of issuing of notice u/s 148. She has also relied upon the judgment of the Hon ble High Court in the case of CIT Vs. Nova Promoters Finlease Pvt. Ltd. 342 ITR 169. 7. The ld DR further contended that when the assessee has declared income at ₹ 12030 then the deposit of such a huge amount of ₹ 6 lacs in the bank account itself is sufficient to believe that the income assessable to tax has escaped. 8. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of passing the assessment order the AO was aware that return for the year under consideration filed on 31st March 2007. Therefore, it is clear that the AO proceed to reopen assessment on the basis of incorrect assumption of the fact that the assessee has not filed any return income for the year under consideration. This wrong assumption of fact also lead to the consequential reopening by the AO without verifying the record available with the AO as filed by the assessee being return of income and the other details and record along with return of income. Thus, it is clear that the AO reopen the assessment under wrong presumption of fact and without verifying the material information already available with the AO in the shape of return of income filed by the assessee. This fact of filing of return was also recorded by the learned Commissioner of Income-tax (Appeals) at Page 3 of the impugned order. Further, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening has observed in Para 16 to 19 has under:- 16. The facts of the aforesaid case are quite similar to the one on hand. In the present case also the reason for reopening is for further investigation to find out the source of investment for the purchase of the property, which is not permissible in law. 17. Further in the case of Income Tax Officer Vs. Lakhmani Mewal Das reported in (1976) 103 ITR 439, the Apex Court has held that the reasons for the formation of the belief 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 Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. 18. In the present case, what we find is that there is no nexus or live link between the material which had come to the notice of the Assessing officer, and the formation of his belief that there was escapement of income by the assessee which may be assessable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee could be said to be engaged in any business; all that is to be examined is whether the fact of the deposits, per se, in the bank account of the assessee could be basis of holding the view that the income has escaped assessment. The answer, in our humble understanding, is in negative. The Assessing Officer has opined that an income of ₹ 10,24,100 has escaped assessment of income because the assessee has ₹ 10,24,100 in his bank account but then such an opinion proceeds on the fallacious assumption that the bank deposits constitute undisclosed income, and overlooks the fact that the sources of deposit need not necessarily be income of the assessee. Of course, it may be desirable, from the point of view of revenue authorities, to examine the matter in detail, but then reassessment proceedings cannot be resorted to only to examine the facts of a case, no matter how desirable that be, unless there is a reason to believe, rather than suspect, that an income has escaped assessment. 9. Learned Departmental Representative has referred to a number of judicial precedents in support of her stand that even deposits in the bank account, as having come to the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no, doubt on the correctness of this proposition but then, as we have elaborately explained earlier in this order, the material must indicate income escaping assessment rather than desirability of further probe in the matter which may or may not lead to income escaping the assessment. On the basis of reasons as recorded in this case, such an inference about income escaping assessment, in our humble understanding, cannot be drawn. 11. The scope and jurisdiction of Section 148 was also discussed by the Hon ble jurisdictional High Court in the case of Pr. Commissioner of Income Tax Vs. G G Pharma India Ltd. (supra) in para 12 and 13 has held as under:- 12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of reopening of the assessment. Therefore the reopening of the assessment was found to be invalid as it does not satisfy the requirement of law that prior to the reopening of the assessment the AO has to apply his mind to the material and conclude that he has reason to believe that income of the assessee has escaped assessment. Applying the above proposition of law it leaves no doubt in the mind that in the case on hand the AO has reopened the assessment mechanically without application of mind to conclude that the said amount of ₹ 6 lac deposit in the bank account of the assessee constitutes the income of the assessee and the same has escaped assessment. The decision relied upon by the ld DR is not applicable in the facts of the present case because in the said case not only the accommodation entry were found by the investigation wing but the modus operandi was also detected and therefore it was found that the AO was having the sufficient material and information to form the believe that the income assessable to tax has escaped assessment. In view of the facts and circumstances as well as the decisions relied upon by the AR, the reopening is in the case of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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