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TMI Blog2011 (6) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to section 148 and worthy CIT(A) has erred in confirming the same in favour of A.O. 4. Without prejudice to my above grounds of appeal, worthy CIT(A) has erred in confirming the illegality of the A.O. that he has illegally travelled beyond the scope of section 148, which is illegal as decided by the various High Courts and approved by the Hon ble Supreme Court. 5. That the worthy CIT(A) has erred in law and on facts in confirming the addition of ₹ 29,41,852/- out of capital accretion. 6. That the worthy CIT(A) has erred in law and on facts in confirming in disallowing 50% of sundry creditors amounting to ₹ 11,25,000/-. 7. That the worthy CIT(A) has erred in law and on facts in confirming in applying a rate of 8% and making an addition of ₹ 4,12,640/- as business income. 8. That the worthy CIT(A) has erred in law and on facts in confirming an addition of ₹ 78,145/- as non agriculture income. 9. That the appellant craves leave to add, amend or withdraw any grounds of appeal before or at the time of hearing of appeal. 3. Vide ground Nos.1 to 4 of the appeal, the assessee has challenged the validity of the reopening under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total income of the assessee. 45,57,637/- Agricultural income for rate purposes. 1,95,000/- 4. Aggrieved by the order of the A.O., the assessee carried the matter in appeal before the CIT(A). Before the CIT(A), the assessee raised the following additional grounds of appeal:- 1. That the reassessment order passed by the ld. A.O. is illegal and is devoid of any force of law in as much as the reassessment proceedings had been set in motion while the original return filed was still lying pending for disposal. 2. That the reasons recorded by the ld. A.O. are without application of mind in as much as he states that no return of income has been filed and he is resorting to section 148. 3. Without prejudice to my above grounds of appeal, he has illegally traveled beyond the scope of section 148, which is illegal as decided by the various High Courts and approved by the Hon ble Supreme Court. 4.1 The learned CIT(A) dismissed the additional grounds of appeal of the assessee, observing as under:- The additional ground No.(i) (ii), relate to the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the material collected by the A.O. and used by the A.O. must be confronted to the assessee for rebuttal. Shri R.C. Khanna, C.A., the learned counsel for the assessee, submitted that again it is an incurable legal infirmity in violation of principles of natural justice. The A.O. has accepted the report of the Vigilance Organization as a gospel truth without conducting his independent enquiries to verify the correctness of report about the assessee. Shri R.C. Khanna, C.A., the learned counsel for the assessee, also submitted that the reassessment proceedings are for the benefit of the Revenue and great onus is cast upon the Revenue in respect of reassessment proceedings beginning with the recording of reasons, obtaining of sanction from higher authorities where need be and above all to confine himself to the scope of reassessment proceedings as spelled out by him in the reasons recoded. Shri R.C. Khanna, C.A., the learned counsel for the assessee, also pointed out that the A.O. has specified that the proceedings are in respect of one FDR of ₹ 5 lacs and interest thereon amounting to ₹ 6832/-. However, the perusal of reassessment order will reveal that he has not made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he so-called reasons recorded. Shri R.C. Khanna, C.A., the learned counsel for the assessee, further submitted that the A.O. has not independently made up his mind on the basis of information received from the Vigilance Department. Shri R.C. Khanna, C.A., the learned counsel for the assessee relied on the decision of the Hon ble Delhi High Court in the case of C.I.T. Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del.). In view of the above, Shri R.C. Khanna, C.A., the learned counsel for the assessee, submitted that the reassessment order as well as the order of the CIT(A) upholding the reassessment proceedings as valid, may be quashed. 6. Shri Tarsem Lal, the learned D.R., while appearing for the Revenue, strongly supported the order of the A.O. and submitted that the A.O. was having material in his possession in the shape of letter received from the Vigilance Department, on the basis of which, the A.O. did form a belief and, therefore, the order of the CIT(A) may be upheld. 7. We have considered the rival submissions and have also gone through the material available on record. In the instant case, the A.O. initiated the proceedings under section 147/148 of the Act by reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point out that the so-called reasons recorded by the A.O. are mere information received from the J K Vigilance Organization during August through the office of the Additional Commissioner of Income tax, Srinagar Range, Srinagar. We may also point out that the so-called reasons recorded by the A.O. are un-dated, which means that the A.O. has not applied his mind while recording the reasons. In the so-called reasons recorded, the A.O. has also mentioned that As per records the assessee has not filed his return of income for the assessment year and as such I have reason to believe that the income of ₹ 5,06,832/- has escaped assessment for the assessment year under reference. The above observation noted by the A.O. is wrong and contrary to the records. From the assessment order dated 29-12-2006 passed under section 143(3) of the Act, it is clear that the original return in this case was filed by the assessee on 1-11-2004 declaring income of ₹ 1,44,800/- and agricultural income of ₹ 1,95,000/-. Subsequently, the notice under section 148 of the Act was issued to the assessee. In response to that, the assessee submitted that the return already filed on 1-11-2004 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. However, the Supreme Court in Rajesh Jhaveri [2007] 291 ITR 500 did not say that it was not necessary for the Assessing Officer to form a belief and that the mere fact that there was some material on record was sufficient. In the present case, we find that the first sentence of the socalled reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income tax (Investigation) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons: Thus, I have sufficient information in my possession to issue notice under section 148 in the case of M/s.SFIL Stock Broking Ltd. on the basis of reasons recorded as above. From the above, it is clear that the Assessing Officer referred to the information and the two directions as reasons on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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