TMI Blog2011 (8) TMI 867X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER 1. This appeal by the assessee is directed against order of the CIT(A)-V, Baroda dated 06-03-2009 for assessment year 1993-94. 2. The learned Counsel for the assessee did not press grounds No. 1 and 2 of the appeal. The same are accordingly dismissed. Grounds No. 3 to 6 of the appeal of the assessee read as under: "3. The learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 70,000/- made u/s sec. 69 of the I.T. Act, 1961 in respect of demand draft for Rs. 70,000/- purchased from Bharat Co-op. Bank Ltd., Fatehpura, Baroda. 4. The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the assessing officer in reopening the original assessment (intimation) u/s sec. 148 of the I. T. Act, 1961. 5. The learned Commissioner of Income Tax (Appeals) erred in not appreciating that the appellant could not produce books of accounts for verification due to the huge time lag of about 15 years. 6. Your Appellant prays that the order of the Learned Commissioner of Income Tax (Appeals) be set aside." 3. Briefly stated, the facts of the case are that the assessee is a kirana merchant. In this case originally the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-op Bank to attend on 25-07-2006 and produce register for issue of DDs. The register was verified by the AO and the entry of issue of DD No. 203886 issued to Mahavir Trading Co., favouring M/s Anand Enterprise for cash payment of Rs. 70,000/-was observed at serial no. 36 of the register on 18.08.1992. Thereafter, the AO vide his office letter dated 27.07.2006 informed the appellant the inquiries made by him and the outcome thereof and offer any comments by 07.08.2006 so as to incorporate the same in the assessment order. To this the appellant vide letter dated 03.08.2006 replied that its earlier submissions stand good and that the firm is not in possession of books of account for verification. Here it may be noted that after gathering vital information that the appellant has purchased DD for Rs. 70,000/- by paying cash, the AO put the same to the appellant to explain the sources, to which the appellant has avoided a reply. The onus is on the appellant to explain the sources, which it has not discharged. In the circumstances, the action of the AO in subjecting the addition of Rs. 70,000/- u/s 69 is confirmed. The action of the AO in reopening the original assessment ( i.e., inti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Delhi High Court in the case of Sarthak Securities Co. (P.) Ltd. v. ITO [2010] 329 ITR 110/195 Taxman 262 in which it was held as under: "Held, allowing the petition, that the formation of belief was a condition precedent as regards the escapement of the tax pertaining to the assessment year by the Assessing Officer. The Assessing Officer was required to form an opinion before he proceeded to issue a notice. The validity of reasons, which were supposed to sustain the formation of an opinion, was challengeable. The reasons to believe were required to be recorded by the Assessing Officer. Once the ingredients of section 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147. The Assessing Officer was aware of the existence of the four companies with whom the assessee had entered into transaction. Both the orders showed that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. Though con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorities below and submitted that information received from form the DDIT (Investigation) is valid and can be basis for reopening of the assessment. He has submitted that the AO applied his mind to the information received from the DDIT (Investigation), therefore, on mere typographical mistake reopening should not be held to be invalid. The learned DR also referred to section 292 B of the IT Act to say that u/s 148 of the IT Act the reasons are not invalid if three was mistake or defect therein. 7. I have considered the rival submissions. The facts noted above are not in dispute. The AO in the original assessment order dated 31-03-2003 noted that the case was reopened on the information received from the DDIT (Investigation), Baroda regarding demand draft purchased by the assessee from Baroda Traders Co-operative Bank Ltd. amounting to Rs. 70,000/- during the previous year relevant to the assessment year in question. Notice u/s 148 of the IT Act was accordingly issued on 23-05-2001. Copy of the reasons recorded for reopening of the assessment is filed on record in which the AO has mentioned that the DDIT (Investigation), Baroda received a TEP in the case of M/s. Topandas C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash payment. These facts clearly prove on record that the assessee did not purchase any draft from Baroda Traders Co-operative Bank Ltd., Hathikhana as is mentioned in the reasons recorded for reopening of the assessment as well as recorded in the original assessment order. Thus, the reasons recorded by the AO for reopening of the assessment are not mere typographical error in the reasons but factually incorrect reasons recorded by the AO for reopening of the assessment. The AO reopened the assessment on non-existing reasons. The AO failed to examine the information received from the DDIT (Investigation) before recording the reasons. Thus, the AO did not apply independent mind to the information received from the DDIT (Investigation) before recording the reasons for reopening of the assessment. The Hon'ble Punjab Haryana High Court in the case of CIT v. Atlas Cycle Industries [1989] 180 ITR 319/46 Taxman 315 held as under: "Held, (i) that the Tribunal was right in canceling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment." 7.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Prasant S. Joshi ( supra ). I may also further add here that in the reasons recorded for reopening of the assessment qua the assessee, there is no reference of M/s. Anand Enterprises in whose favour the assessee alleged to have got issued the demand draft. Since, there is no mention of M/s. Anand Enterprises in the reasons relevant to the assessee; therefore, findings of the authorities below are incorrect to that extent also. Since the recording of the reasons is the foundation of initiation of the proceedings u/s 148 of the IT Act, therefore, it would not be effected by the provisions of section 292B of the IT Act. Considering the above discussions, I am of the view that the AO proceeded for reopening of the assessment on non-existent and factually incorrect reasons and has not applied independent mind and did not verify the information received from the DDIT (Investigation) prior to recording of the reasons. Therefore, reopening of the assessment in the matter is clearly invalid and unjustified. The orders of the authorities below cannot be sustained in law. I accordingly set aside the orders of the authorities below and quash the reassessment proceedings. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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