Parties: Dy. CIT  vs Shri. Bharat Chandra Seth/Anupama Seth
Date of Order: 24-09-2015

ORDER

PER SUNIL KUMAR YADAV:
These appeals are preferred by the Revenue against the respective orders of the ld. CIT(A) annulling the assessment orders passed by the Assessing Officer under section 147/148/143(3) of the Income-tax Act, 1961 (hereinafter called in short “the Act").

2. Through cross objections, the assessees, besides supporting the orders of the ld. CIT(A), has also raised a ground assailing the validity of the assessment orders on the ground that notice under section 143(2) of the Act has not been served within the prescribed period.

3. The facts in brief borne out from the record are that in both the cases, assessments were reopened on the basis of information received from the ADI that the assessees have introduced their own money under the garb of bogus gift to purchase shares of M/s Lala Kashi Nath Seth Jewellers Pvt. Ltd. in the case of Smt. Anupama Seth and of M/s Rohit Fin Cap Securities in the case of Shri. Bharat Chandra Seth. The Assessing Officer accordingly completed assessment under section 143(3) read with 147 of the Act resulting into addition on account of investment in shares.

4. The assessees preferred appeals before the ld. CIT(A) assailing the validity of the assessment orders on the ground that the assessments were reopened on the basis of information received from the ADI without application of his own mind. Besides, additions made by the Assessing Officer were also challenged. The ld. CIT(A), however, deleted the addition in both the cases.

5. The Revenue preferred appeal before the Tribunal and the Tribunal has noted that the ld. CIT(A) has not decided the issue of preliminary objection with regard to the validity of the reopening of assessment. The Tribunal accordingly set aside the order of the ld. CIT(A) with a direction to re-adjudicate the issue with regard to validity of reopening of assessment. On merit also the order of the ld. CIT(A) was set aside and the ld. CIT(A) was directed to adjudicate the appeal on merit also on the point of additions.

6. Consequently, the ld. CIT(A) has decided the appeal on the point of validity of reopening of assessment and has annulled the assessment on the ground that the Assessing Officer has reopened the assessment on the basis of report of the ADI without applying his own mind. The ld. CIT(A) did not adjudicate the issues on merit i.e. additions made by the Assessing Officer.

7. Aggrieved the Revenue is in appeal before the Tribunal with the submission that the Assessing Officer has reopened the assessment not only on the basis of ADI’s report but also after making proper verification.

8. The ld. counsel for the assessee, besides placing reliance upon the order of the ld. CIT(A), has invited our attention to the reasons recorded by the Assessing Officer for reopening the assessment with the submission that in the reasons recorded,the Assessing Officer has simply reproduced the information received from the Director of Income Tax vide his letter dated 31.3.2005. After reproducing the contents of the letter with the reasons recorded, the Assessing Officer has issued notice under section 148/147 of the Act. Therefore, from the reasons recorded nothing is borne out as to whether the Assessing Officer has applied his mind or not. Since the Assessing Officer has not applied his own mind before reopening the assessment, the reopening of assessment itself is invalid and the ld. CIT(A) has rightly annulled the assessment.

9. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the ld. CIT(A) has given a finding with regard to the validity of reopening of assessment. During the course of hearing, the reasons recorded by the Assessing Officer are placed before us and from its perusal we find that the Assessing Officer has simply recorded the information received from the ADI and after recording the contents of the letter, he simply issued notice under section 148 of the Act for reopening the assessment. From the reasons recorded, nothing is borne out as to whether the Assessing Officer has applied his own mind with regard to the escapement of income chargeable to tax. We have carefully examined the orders of the ld. CIT(A) and we find that the ld. CIT(A) has adjudicated the impugned issue in the light of various judicial pronouncements in which it has been held that wherever the assessment is reopened on the sole basis of information received from the ADI or any other agency and without application of mind by the Assessing Officer, the reopening itself is invalid. We are, therefore, of the view that in the instant case, when the assessment was reopened without application of mind of the Assessing Officer and simply on the basis of information received from the ADI, the reopening is not valid. The ld. CIT(A) has adjudicated the issue in detail in his order in the light of various judicial pronouncements and for the sake of reference, we extract the same as under in the case of Smt. Anupama Seth:-

“I have carefully considered the detailed submissions of the AR for the appellant and also gone through the order of the ITAT. It is seen that the assessment in the case of the Smt Anupma seth and Shri Bharat Chandra Seth were completed u/s 143(3)7147 vide order dated 20.12.2007 and 31.12.2007. The first para of the assessment order shows that " in this case the information has been received from DIT Investigation Kanpur vide his letter F.o. DIT (Inv) KNP/ UIO/Bogus Gift/ 02-037 2782 dated 31.03.2005. The AO on the basis of information recorded the reasons obtained approval and initiated the proceedings u/s 147/148. On the issuance of notice by the ACIT, .the AR for the appellant vide written submissions dated 12.03.2012 has stated that the ACIT Bareilly was not having any material except the letters received from the investigation wing and the jurisdiction over the case was lying with the ITO Shahjahanpur. The AR further mentioned in his written submissions that, "The ADIT, Kanpur had not enquired from Shri Pramod Chandra Seth. The source of source is not required to be proved by the assessee as held by the Allahabad High Court in the case of CIT vs. Lauharmal Goel (2005) 147 Taxman 448 and CIT vs. S. Kamaljeet Singh (2005) 147 Taxman 18 (Alld). Thus the main aim for reassessment was to investigate and to make roving enquires for which notice U/s 148 of the IT Act, 1961 had been issued. It is well settled law that the reassessment proceedings cannot be initiated for reason to suspect and these are not for investigation or for roving enquires The AR also filed copy of the ITAT's order in ITA No. 310/Lkw/2013 dated 07/06/2013 in the case of Shri Hira Lal Gupta, Prop Gupta Service Station Bawan, Hardoi. AY 2005-06 on similar issues. Keeping in view the entirety of the facts and circumstances, detailed written submission of the AR for the appellant and also the order of the ITAT (supra), it is clear that at the time of issuing notice u/s 148 in these cases the AO was only having the report of the ADII Kanpur.. Thus it is clear that there was only reason to suspect on the basic of the report of the ADL. From the reasons of re-assessment, it is clear that there is only mention of ADI, Kanpur's report without any independent opinion of the ACIT-1, Bareilly because he has not seen the return of income which was with the I.T.O-I, Shahjahanpur and the same was called for at a very late stage of the re-assessment proceedings. Thus there was only borrowed satisfaction and there was no material against the assessee with the ACIT Bareilly except the report of ADI, Kanpur. The ADI, Kanpur's report in note form was not supported by any material and even the statement of the assessee. The return of income was with the Office of the I.T.O-I, Shahjahanpur. Without any material and without even going through the return of income, there cannot be any reason to believe of the A.O. It was only reason to suspect on account of borrowed satisfaction. In arriving at this conclusion, reliance is placed on the following cases:

i)Shiv Nath vs. AACI reported in 82 ITR 147 (ii) ITO vs. Lakhmani Mewaldas reported in 103 ITR 437 (iii) Ganga Saran Lt vs. ITO reported in 130 ITR 1 (iv) Bhibhuti Bhusan Ghosh vs. ACIT reported in 203 ITR 556 (v) United Electric Pvt Ltd. vs. ACIT reported in 258 ITR 317 (vi) ACIT vs. O.P. Chawala reported in (2006) B SOT 252) Delhi (vii) Bawa Abhai Singh vs. DCIT (2003) 253 ITR 83 (2001) 117 Taxman 12 (viii)vs. Naveen Khanna (2008) 12 DTR222 (Del,Trib) (ix)vs. Nupam Kapoor (1995) 212 DTK 491 (P&H) x) CIT vs. SMC Sharebrokers Ltd. (2007) 288 ITR 345 (Del.) (xi)CIT vs. Atul Jain (2007) 164 Taxman 33 (Del.) xii)CIT vs. Pradeep Kumar Gupta (2007) 207 CTR 115 (Del.) and (xiii) CIT vs. Pradeep Kumar Gupta and others (2008) 303 ITR 95 (Del).

In view of the detailed discussion made in the foregoing paras, and keeping in view the various judicial pronouncements of the higher courts, and in the facts and circumstances of the cases, the action taken by the Asstt Commissioner of Income tax Bareilly u/s!47/ 148 is not found to be sustainable. Accordingly the assessment order(s) passed by the AO in the cases of appellants are annulled.”

10. Since the finding of the ld. CIT(A) is in accordance with the law and no infirmity is pointed out, we confirm his order.

11. Since the assessment orders are annulled, we find no justification to deal with the grounds raised in the cross objections. Accordingly, the cross objections of the assessees have become infructuous and hence dismissed.

12. In the result, appeals of the Revenue and cross objections of the assessees are dismissed. Order was pronounced in the open court on the date mentioned on the captioned page.