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TMI Blog2021 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... o received due to non-application of mind, therefore, reopening of the assessment would be unjustified and is liable to be quashed. Reopening of the assessment is illegal, bad in law and is liable to be quashed. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. As may also be noted here that the AO without any justification and without bringing any material on record as to which broker assessee has given margin money for trading has made addition of 11,49,060/-. When the AO does not know as to who is the broker to whom alleged amount is given, AO was not justified in making estimate based on general information that assessee has given the impugned amount to the broker for transaction in MCX. Since, it is an admitted case that assessee suffered loss in MCX transactions, therefore, there was no justification to make estimated addition - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of income. Thus, the AO did not apply his mind for recording the reasons for reopening of the assessment. The reasons are based on guess work only. No exact amount is specified in the reasons for escapement of income. No bank account or any tangible material is brought on record for recording the reasons for reopening of the assessment. No prior enquiry is made u/s 133(6) of the IT Act or 142 of the Act prior to recording the reasons. Since no amount is quantified, therefore, it could not be unexplained investment made by assessee. When foundation fails, the super structure falls. The assessee relied upon judgment of the Delhi High Court in the case of G&G Pharma India (ITA No. 545/2015) and Meenakshi Overseas (ITA No. 692/2016), etc. It was submitted that there is no nexus or live link between the material which had come to the notice of AO to form the belief that there was escapement of income in the case of the assessee. Both the additions are made without bringing any material against the assessee. The assessee paid only ₹ 100/- for opening the DMAT account in M/s Karobaar Commodities Pvt. Ltd. from his saving bank account. The assessee has given petty amount in ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26/02/2015, 01/07/2016 and 06/10/2017 to the assessee for furnishing his/her response in Compliance Module on the e-filing portal at http://incometaxindiafiling/gov.in . It was categorically stated in all the above-referred letters that the response has to be submitted electronically and the procedure for the same was also explained. 5. In this case, no return of income was filed for the year under consideration and the assessee has not responded to the letters issued by the undersigned to file the ITR by the assessee. In view of the information that the assessee had made transactions amounting to ₹ 107,89,34,990/- with National Multi Commodity Exchange during the FY 2010-11, the assessee's case is clearly covered by the Explanation 2 to Section 147 of the IT Act, 1961. Hence, it is a case where it shall be deemed to be the case where the income chargeable to tax has escaped assessment, which amounts to or is likely to amount to ₹ 1 lakh or more for above mentioned assessment year. 6. In view of the findings stated in para 5 above, the undersigned has reason to believe that the assessee's income for AY 2011-12 has escaped assessment within the meaning of section 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O was having sufficient material on record to record the reasons for reopening of the assessment. 8. I have considered the rival submission and perused the material on record. It is well settled law that validity of the reassessment proceedings is to be determined on the basis of the reasons recorded for reopening of the assessment. The reasons are reproduced above. The AO as per NMS information which was pushed into the ITD system came to know that assessee has made transactions amounting to ₹ 107.89 crores with National Multi Commodity Exchange. No return has been furnished by assessee. The AO, therefore, deemed that income chargeable to tax assessment in a sum of ₹ 1 lakh or more has escaped assessment. The AO, however, in the assessment order has clearly mentioned that he has also called for information from MCX u/s 133(6) of the IT Act intimating that assessee has suffered loss of ₹ 16,747/-. Thus, assessee did not earn any income or profit from MCX transaction. The loss suffered by assessee out of MCX transaction could never be considered as income chargeable to tax has escaped assessment. The AO did not refer to this statement in the reasons recorded for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come chargeable to tax has escaped assessment. The information of loss receipt from MCX was not deliberately mentioned by the AO in the reasons. Thus, the AO did not have any definite material or information to record/reasons that there is an escapement of income in the case of the assessee. The AO recorded incorrect and non-existing facts in the reasons recorded for reopening of the assessment. The AO did not apply his mind to the material on record before recording reasons for reopening of the assessment. The AO also failed to verify the information so received due to non-application of mind, therefore, reopening of the assessment would be unjustified and is liable to be quashed. The same view has been taken by ITAT Delhi 'E' Bench in the case of Shri Natarajan Monie Vs. ITO (supra) in which it was held as under: IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES "E" : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.No.1817/Del./2017 Assessment Year 2011-2012 Shri Natrajan Monie, S-19/001, The Close South, Nirwana Country, Sector-50, Gurgaon. PAN AAFPN2890N vs. The Income Tax Officer, Ward - 2 (5), Gurgaon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,237/- 3. Income from MCX business as discussed in para 3.3. ₹ 7,72,461/- 4. Income from unexplained cash deposits as discussed in para 3.4 ₹ 59,50,000/- 5. Income from unexplained cash credits as discussed in para 3.5(i). ₹ 9,85,000/- 6. Income from profit on redemption of MF/FD as discussed in para 3.5(ii) ₹ 1,32,174/- TOTAL ₹ 84,37,210/- 3.1. The assessee challenged the reopening of the assessment as well as additions on merit before the Ld. CIT(A). However, the appeal of assessee has been partly allowed. 4. Learned Counsel for the Assessee referred to the reasons recorded for reopening of the assessment which have been provided to the assessee under RTI Act, copy of which is placed on record. He has submitted that A.O. in the reasons mentioned that assessee has made investment of ₹ 2 lakhs for purchase of mutual fund and transaction of commodities exchange contract of ₹ 10 lakhs in assessment year under appeal. He has submitted that A.O. has recorded wrong, incorrect and non-existing reasons and did not apply his mind to the material on record before recording reasons for reopening of the assessment. He has submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodity exchange contract of ₹ 10,00,000/- during the assessment year 2011-12. As per record assessee do not have file return of income for the Assessment year 2011-12. The income chargeable to tax amounting to ₹ 1200000/- which is chargeable to tax has escaped assessment and any other income found during the course of assessment proceedings which is chargeable to tax has escaped assessment. I have reasons to believe that the above said income/transaction of ₹ 1200000/- and any other income found during the course of assessment proceedings which is chargeable to tax has escaped assessment which needs examination in the light of the information in my possession. Notice under section 148 of the Income Tax Act, 1961 is being issued. Sd/- Shamsher Singh Income Tax Officer Ward 2(5), Gurgaon." 6.1. In view of the above reasons, the A.O. has mentioned that he has information received through NMS that assessee has made investment of ₹ 2 lakhs for purchase of mutual funds and transaction of commodity exchange contract of ₹ 10 lakhs in assessment year under appeal and thus, there is an escapement of income of ₹ 12 lakhs. The A.O. also noted in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for reopening of the assessment for ₹ 2 lakhs only. The A.O. in the assessment order has also recorded same statement that assessee has made contract in commodity exchange exceeding ₹ 10 lakhs which fact was ultimately found incorrect by the A.O. himself and he has made part addition as against the income mentioned in the show cause notice. These facts clearly show that A.O. did not apply his mind to the information received through NMS and also recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee has also referred to page-14 which is supplied to the assessee under RTI which according to assessee was asked under the RTI Act. The first page of the RTI reply PB-10 shows that assessee has asked for the copy of the reasons for reopening of the assessment as well as details which are basis of reopening of the case under section 148 of the I.T. Act, 1961. Page-14 is the material supplied by the A.O. which is the information summary in which information is supplied to assessee through CIB Code that there is a deposit in cash aggregating to ₹ 2 lakhs or more with the Banking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make the reassessment." 6.3. The Hon'ble Delhi High Court in the case of Pr. CIT vs., SNG Developers Ltd., [2018] 404 ITR 312 (Del.) in which it was held as under : "Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to ₹ 95,65,510. It was unacceptable that the Assessing Officer persisted with his "belief" that the amount had escaped assessment not only at the stage of rejecting the assessee's objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee. Therefore there was non-application of mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law." 6.4. The Hon'ble Delhi High Court in the case of Shamshad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition : Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind. (ii) That the income derived by the assessee from an industrial undertaking to which section 10A applies could not be included in the total income of the assessee. Therefore, the petitioner was right in filing the return by excluding the income in terms of section 10A." 6.6. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.) the Hon'ble Delhi High Court held as under: "In the present case too, the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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