TMI Blog2009 (7) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... of the submissions made by the assessee before the Assessing Officer, where the assessee himself has made a submission that amount of capital gain on shares was declared under the Voluntary Disclosure of Income Scheme meaning there by that the transaction was not disclosed in the regular return, it was never the case of the assessee that the transactions of sale and purchase of shares transacted through M/s. R. K. Aggarwal & Co. were genuine and the amount deposited in the bank account cannot be considered to be unexplained money introduced by the assessee by way of depositing in her various bank accounts, order of the Commissioner of Income-tax (Appeals) in confirming the addition upheld Unexplained credit or loans - whether the Assessing Officer can make the addition on account of unexplained credit or loans taken – Held that:- It is not clear whether in the course of reassessment proceedings the Assessing Officer recorded any other reasons after having noticed that the income to the extent of Rs. 1,35,00,000 had also escaped assessment - additions were made in the absence of details or confirmation of loans furnished by the assessee - Commissioner of Income-tax (Appeals) has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the issues raised in original grounds of appeal challenging certain additions confirmed by the Commissioner of Income-tax, we find it proper to decide first the issue raised in the additional ground by the assessee. 6. The relevant facts may be stated, in brief, as under : In this case, original return declaring nil income was filed by the assessee on March 31, 1998. The assessee has declared long-term capital gains on sale of property as well as shares, and the same was claimed exempted under section 54F of the Act. Information from the Deputy Director of Income-tax (Investigation), Gurgaon vide is letter No. DDIT (Inv.), GGN-0-03-1271 dated March 17, 2003 was received by the Assessing Officer regarding a bogus claim of long-term capital gains shown against sale/purchase of shares routed through bank account No. CA-3097, Corporation Bank, Karol Bagh, New Delhi, standing in the name of R. K. Aggarwal Co. 7. The Deputy Director of Income-tax (Investigation), Gurgaon stated in the information that the aforesaid account is in the name of R. K. Aggarwal Co. and the proprietor of the said concern is one Shri Satish Goyal with address 1748/55, Naiwala, Karol Bag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not genuine. The beneficiaries have taken entries by paying in cash an amount equivalent to the draft/cheque amount and certain premium on that. No sale/purchase of shares has taken place, the operation of this amount, i.e., Satish Goel also admitted that no genuine transaction/sale/purchase of shares has taken place though this bank account. He received cash from the beneficiaries, deposited in the bank account and then issued a draft/cheque to the beneficiary. During the period relevant to the assessment year 1996-97, Ms. Rainee Singh had credited the following sums in the following bank accounts maintained by her. Sl. No. Amount Bank branch Account No. 9. Rs. 3,00,000 Standard Chartered Grindlays Bank Ltd.,10, Sansad Marg, New Delhi 01SBP-0116000 16. Rs. 2,44,225 -do- -do- 25. Rs. 1,19,750 OBC, M-12, G.K.-II, New Delhi SB-200883 In view of the facts mentioned above, I have reasons to believe that the income of the assessee to the tune of Rs. 6,63,975 chargeable to tax has escaped the assessment for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment proceedings initiated under section 147 of the Act by the Assessing Officer. However, this issue has now been raised before us by way of an additional ground, which has been admitted for our consideration. 16. Learned counsel for the assessee has contended that the reasons recorded by the Assessing Officer for issuing notice under section 148 of the Act are not sufficient to entertain the belief that the income by way of credit in the assessee's bank account has escaped assessment within the meaning of section 147 of the Act. Learned counsel for the assessee also submitted that the Assessing Officer has issued a notice under section 148 of the Act without applying his mind to the information furnished by the Investigation Wing. He further pointed out that there is absolutely no mention about any application of mind by the Assessing Officer to the information supplied by the Investigation Wing and there is nothing to suggest anything in the reasons or note recorded by the Assessing Officer that there is an independent examination of the material collected by the Investigation Wing nor is there any independent conclusion arrived at by the Assessing Officer. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... averi Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC). 20. In the rejoinder, learned counsel for the assessee submitted that the Assessing Officer has not applied his mind to the materials or information supplied by the Investigation Wing but has merely reproduced the information received from the Investigation Wing, with a view to initiate reassessment proceedings under section 147 of the Act. 21. We have considered rival contentions of both the parties and have carefully gone through the orders of the authorities below. We have deliberated on various decisions cited by both the parties. 22. In the present case, the notice under section 148 was issued on March 28, 2003, pertaining to the assessment year 1996-97. Section 147 authorises and permit the Assessing Officers to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The scope of the expression "reason" in the phrase "reason to believe" has been considered recently by the hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. ( supra ) where the hon'ble Supreme Court has observed and held as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income of the assessee to the tune of Rs. 6,63,975 chargeable to tax has escaped assessment for the assessment year 1996-97". In the reasons recorded by the Assessing Officer, the Assessing Officer has mentioned the definite information about the amounts, which were credited in the assessee's bank account during the period relevant to the assessment year 1996-97. During the investigation made by the Investigation Wing, it was revealed that no sale or purchase has actually taken place as so admitted by Shri Satish Goel, proprietor of R. K. Aggarwal Co. At the stage of issuing notice under section 148, what is required is to see as to whether there was relevant material on which a reasonable person could have formed a belief that income had escaped assessment. In the present case, the relevant material noted by the Assessing Officer from the information received from the Deputy Director of Income-tax (Investigation) are undoubtedly relevant and sufficient material on the basis of which a reasonable person could have formed requisite belief as contemplated under section 147 of the Act. At that stage, it was not necessary for the Assessing Officer to conclusively prove the escap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. Insofar as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his 'reasons to believe' is nothing more than a report given by him to the Commissioner of Income-tax. As held by the Supreme Court in Chhugamal Rajpal v. S. P. Chaliha [1971] 79 ITR 603 (SC), the submission of report is not the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of section 147 of the Act. In this view of the matter, it is thus clear that the decision of the hon'ble Delhi High Court in the case of Atul Jain ( supra ) does not advance the assessee's case any further. 30. The next case relied upon by learned counsel for the assessee is the decision of the hon'ble Delhi High Court in the case of United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317/125 Taxman 775 (Delhi) where it has been held that the existence of tangible material or information is a pre-requisite for initiating an action under section 147 of the Act, as amended with effect from April 1, 1989, and section 147 provides that the Assessing Officer must have reasons to believe that income has escaped assessment, i.e., there should be facts before him that reasonably give rise to the belief. There is no quarrel as to this proposition as so held by the hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. ( supra ). In the case before us, we have already pointed out that there were sufficient and relevant materials before the Assessing Officer to entertain a belief that income had escaped assessment within the meaning of section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 and 1995-96 in the declaration made under the Voluntary Disclosure of Income Scheme. Thus, it is not a case where the right to cross examination of any person of M/s. R. K. Aggarwal Co., has been denied to the assessee. The transaction effected through M/s. R. K. Aggarwal Co. has been accepted by the assessee by saying that the capital gain arising from these transactions has been disclosed under the Voluntary Disclosure of Income Scheme. 34. At this stage, useful reference is being made to the decision of the hon'ble High Court in the case of Vipin Batra ( Delhi ), where the information available with the Assessing Officer was held to be not vague or general in nature because it referred to bogus entries of long-term capital gain taken by that assessee from "M", the share broker, whose bank account number was identified. One of the bogus entries related specifically by name to that assessee, and the date of his taking the entry and his bank account number as well as amount had been specified in the reasons recorded. It has also been noted that in fact no sale or purchase of shares had actually taken place and the person who had operated the account of "M" admitted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ein the amount was credited. Thus, this case of Vipin Batra ( supra ) is applicable to the facts of the present case, and, thus, accordingly we hold that there were adequate and sufficient reason for the Assessing Officer to entertain a belief that income had escaped assessment, and consequently to issue a notice to the assessee under section 148 of the Act. 37. In the case of Vipin Batra ( supra ), the hon'ble Delhi High Court applied the law laid down by the Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) and in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456/69 Taxman 627 (SC). 38. In the aforesaid case of Vipin Batra ( supra ) the hon'ble Delhi High Court has observed that the truth or otherwise of the information received by the Assessing Officer was not a matter that is required to be considered by the court, and all that the court had to see is whether there was sufficient material and that it was not vague or of a general nature. The relevant para of the said decisions is as under (page 394): "We are satisfied, on the basis of the information disclosed in the reasons to believe recorded by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation received from the Deputy Director of Income-tax (Investigation), as incorporated in the reasons recorded by the Assessing Officer, in the light of which the Assessing Officer had entertained a belief that income had escaped assessment. The reasons recorded by the Assessing Officer for issuing notice under section 148 of the Act, were duly placed before the Commissioner of Income-tax as would be evident from the materials which were submitted by the Assessing Officer before the Commissioner of Income-tax for his approval. And after going through reasons recorded by the Assessing Officer, the Commissioner of Income-tax granted approval to issue notice under section 148 of the Act, by passing an order as under : "I am satisfied that for the reasons recorded separately for the assessment year 1996-97, this is a fit case for issuing notice under section 148 of the Act." 43. From the aforesaid order of the Commissioner of Income-tax it is clear that the Commissioner of Income-tax has applied his mind to the reasons recorded and then he found it a fit case to issue notice under section 148 of the Act. This is not the case where the Commissioner of Income-tax, has merely noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-97 is not accepted in as much as Voluntary Disclosure of Income Scheme declaration was made separately for the assessment years 1994-95 and 1995-96. The Assessing Officer therefore, made addition of Rs. 8,97,950 on account of unexplained cash introduced in the accounts in the name of bogus share transactions. On an appeal, the Commissioner of Income-tax (Appeals) confirmed the said addition. The case of the assessee before the authorities below was only that the addition of Rs. 8,97,950 could not be made in the assessment year 1996-97 as it has already been offered to tax under the Voluntary Disclosure of Income Scheme. This case so made out by the assessee has been rejected by the authorities below and in the light of the facts and circumstances of the case, we are also in agreement with the authorities below, that the amount introduced in the garb of share transactions in the assessee's bank account in the assessment year 1996-97 is not covered by the declaration made under the Voluntary Disclosure of Income Scheme. The declaration under Voluntary Disclosure of Income Scheme is not at all relevant to the income pertaining to the assessment year 1996-97. Thus, the assessee's con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions were cited to support the view that the aforesaid addition of Rs. 1,35,00,000 could not be a subject-matter of the present assessment made under section 147 of the Act by the assessee. 51. The learned Departmental representative, on the other hand, submitted that the assessee had raised this addition for the first time without establishing that no reasons in respect thereof were recorded by the Assessing Officer. 52. We have heard both the parties and have carefully gone though the orders of the authorities below. 53. It is not in dispute that the said plea shown now raised before us was neither taken before the Assessing Officer nor before the Commissioner of Income-tax (Appeals). This plea has now been raised before us. It is not in dispute that the issue raised is a pure question of law, which goes to the root of the matter whether the Assessing Officer can make the addition of Rs. 1,35,00,000 on account of unexplained credit or loans taken allegedly on Kuber group of companies in the present assessment proceedings initiated under section 147 of the Act. However, this question of law can be decided if the relevant facts necessary to decide this issue are availab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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