TMI Blog2011 (8) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... rd is not available. - I.T.A No. 1202/Del/09 - - - Dated:- 19-8-2011 - BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER For the Appellant: Dr. B.R.R.Kumar, Sr. DR. For the Respondent: Shri Raj Kumar, CA ORDER PER DIVA SINGH, JM: This is an appeal filed by the Revenue against the order dated 4.2.2009 of CIT Meerut pertaining to 1999-2000 asstt. year. 2. The Department is in appeal on the following grounds :- Whether in the facts and circumstances of the case the Ld. Commissioner of Income-tax (Appeals), has erred in not considering the merits of the case and holding that initiation of Proceedings under section 147 are invalid? Whether in the facts and circumstances of the case, the Ld. Commissioner of Income-tax (Appeals) has erred in holding that the information about the bogus nature of a particular gift furnished by the donor s ITO would not constitute a valid basis for formation of belief that income has escaped assessment. Whether in the facts and circumstances of the case, the decision of another CIT(A) or a non-jurisdictional bench of the ITAT was binding on the Ld. CIT(A). 3. The relevant facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further claimed by the appellant that the letter dated 22.3.2006 did not accompany any evidence, reference of which has been made in the reasons recorded. The Assessing Officer therefore accepted the letter dated 22.3.2006 as gospel truth and without applying his own mind to the contents of the letter dated 22.3.2006 found it most convenient to issue notice to the assessee. Appellant submits that there may be no dispute that letter dated 22.3.2006 could be a source of information, but it cannot be appreciated that merely on the strength of letter without verifying the authenticity or correctness of the contents mentioned therein by the ITO 4(1), Agra and without himself having a look over the material, the reference of which was mentioned in the said letter the learned Assessing Officer only on the basis of borrowed satisfaction issued the notice disturbing the finality of the assessment which already stands concluded on account of non-issuance of notice under section 143(2) within the provided period of limitation. 4.3 Reliance was placed upon the following cases for the proposition that the exercise of the AO must contain the ingredients of a definite application of mind so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Information received from the Survey Circle that the assessee has got prepared a draft which was not accounted for in its books of accounts. It was submitted that on being challenged the Hon ble H.C. held as under: - In the instant case, it was undisputed that the Assessing Officer had initiated reassessment proceedings on the basis of information received from the survey circle that the assessee had got prepared a demand draft which was not accounted for in the books of account of the assessee. But the Assessing Officer has not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had, thus, acted only on the basis of suspicion and it could not be said that the same was based on belief that the income chargeable to tax had escaped assessment. The Assessing Officer has to act on the basis of reason to belief and not on reasons to suspect . The Tribunal had, thus, rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore, the issuance of notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction, a vital thing which when questioned needs to be examined by the appellate authorities. 4.13 The assessee placed heavy reliance on the following judgments as per pages 10 to 12 of the impugned order :- i) Ganga Saran Sons (P) Ltd. Vs. ITO (1981) 130 ITR 1 (SC) ii) ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) iii) Ganga Prasad Maheshswari Others vs. CIT reported at 139 ITR 1043 (All.) iv) Arjun Singh vs. Director of Income Tax reported in 246 ITR 363 (M.P) 4.14. Relying on the principles laid down in the above judgments it was contended as under vide para 23: 23. It was thus submitted by the appellant that the reasons recorded may be examined in the light of above guiding principles as evolved by the various courts. Assessee submitted that he wishes to demonstrate the relevancy of the reasons recorded qua the facts on records. Assessee further submitted that assessee does not intends to challenge the sufficiency of the reasons as recorded by the ITO but as held by various Courts the relevancy of the reasons recorded are open can certainly be questioned and are open for judicial scrutiny. Thus, the reasons recorded may kindly be examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts in a quasi-judicial capacity, the discipline of such functioning demands that he should follow the decision of the Tribunal or the High Court, as the case may be. He cannot ignore it merely on the ground that the Tribunal s order is the subject matter of revision in the High Court or that the High Court s decision is under appeal before the Supreme Court. Permitting him to take such a view would introduce judicial indiscipline, which is not called for even in such cases. It would lead to a chaotic situation. True it is that the dilemma of the Revenue is also real and substantial in such cases, but such a situation cannot be provided for by judicial interpretation by courts, but only by an appropriate agency. 4.22. Vide ground no. 2 before the CIT(A) the assessee agitated that notice u/s 148 was never served on the assessee. The said issue is addressed vide para 31 of the impugned order. 4.23. Arguments on facts and law in regard to ground No. 2 are found discussed in para 32 to 34 at pages 18 to 21 of the impugned order. 4.24. It was submitted that the AO disposed the assessee s objection in regard to the service of notice holding that the notice was served by notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argued that the presumption cannot operate in favour of the department. It was submitted that no evidence has been brought by the department to show who has received the notice of the speed post and the assessee is prepared to file an affidavit in this regard if so desired. Accordingly, it was contended that the asstt. order made without a valid service of notice u/s 148 was stated to be void ab initio on the basis of the following judgments : (i) Venkat Naicken Trust vs. ITO (2000)242 ITR 141 (Mad.) (ii) Jagannath Prasad Ors. Vs. CIT Ors. (1977) 110 ITR 27 (All.) (iii) CIT vs. Satya Narain Poddar (1973) 89 ITR 136 (All.) (iv) Kunj Behari vs. ITO (1983) 139 ITR 73 (P H) (v) Gajendra Kumar Banthia vs. UOI (1996) 222 ITR 632 (Cal.) (vi) M.O. Thomas vs. CIT(1963) 47 ITR 775 (Ker.) (vii) Whirlpool India Holdings Lt.d vs. DDIT (2004) 1 SOT 165 (Del.) (viii) World Wide Exports (P) Ltd. vs. ITO (2004) 91 ITD 519 (del.) (ix) CIT vs. Rajesh Kumar Sharma (2008) 214 CTR (del.) 547 4.27. Thereafter vide paras 35 to 67 and the pages 22 to 34 the assessee advanced various arguments on merit. It was contended that the facts available on record were not consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uth against the assessee, which action is clearly hit by the aforesaid authorities. I am also persuaded by the decision taken by my counter part CIT(A)-II, Agra. In the following cases the learned CIT(A)-II, Agra had quashed the reassessment proceedings, copies available on records : (a) Preeti Agarwal vs. ITO 4(3), Agra dated 24.10.2008 (b) Mahesh Chand Agarwal vs. ITO 4 (2), Agra dated 24.10.2008 (c) Meera Rani vs. ITO 4(2), Agra dated 24.10.2008 (d) Meenu Rani Mittal vs. ITO 5 (2), Firozabad dated 22.10.2008 (e) Raj Kumar Mittal vs. ITO 5 (3), Firozabad dated 23.10.2008 (f) Kusum Kumari Mittal vs. ITO 5(2), Firozabd dated 23.10.2008 (g) Kunal Mittal vs. ITO 5(3), Firozabad dated 22.10.2008 (h) Ram Niwas Mittal vs. ITO 5(3), Firozabad dated 23.10.2008 The decision of mine would be in conformity with the view taken by the Hon ble ITAT, Agra Bench, Agra and with decisions as held by the Hon ble Apex Court in the case of Union of India vs. Kamalakshi Finance Corpn. Ltd. (supra) and by the Hon ble Allahabad High Court in K.N.Agarwal vs. CIT (supra) is binding on appellate authorities. Therefore, in the totality of facts and circumstances of the case as deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eiterated that it is a fact on record that the reopening was done purely on the basis of letter dated 22.3.2006 received from ITO Ward 4(1) on 28.3.2006 by fax. For this assertion attention was invited to paper book 2 so as to contend that the letter mentioned that one Shri D.K. Agarwal created certain trusts and has given gifts, donations etc. to donees having no relationship with the trust. 8.2. Apart from the arguments advanced before the CIT(A) on the basis of which the proceedings were quashed it was submitted that the assessee would further want to support the impugned order on certain other facts which are available on record. 8.3 The Assessment Order was assailed on the ground that there are various other shortcomings in the reasons recorded which would show that the reopening has been done in a mechanical basis. It was contended that it was a case of complete non application of mind on the part of the AO. Referring to the reasons recorded it was submitted that the reopening was done as per the department on account of the alleged bogus transactions of gifts from four trusts amounting to ₹ 20 lacs as would be evident from the page 2 which contains a copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- Dinesh K Agarwal (P) Fly (SP) Trust 2000000/- Total 8.6. Accordingly it was his submission that a perusal of the AO vis a vis the reasons recorded would show the bare fact that not only the donor trusts were entirely different but even the demand draft cheque Nos. were entirely different . This fact it was argued further supports the impugned order and the finding therein that how blindly and mechanically the AO has proceeded to reopen the concluded assessment. It was his submission that there was no application of mind of the AO. The argument advanced before the CIT(A) that the faxed information of ITO Agra was accompanied with no details on which the AO could have applied his mind was reiterated. It was argued that there was no material before the AO to disbelieve the assessee and treat the information of a different ITO as sacrosanct and correct as a gospel truth. 8.7. Reiterating again the arguments advanced before the CIT (A) which have been accepted in the impugned order it was his submission that the fax admittedly was received by the concerned ITO on 28th March, 2006 on the basis of it reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e non est. 8.8. Inviting attention to section 147 it was contended that section 147 mandates that other income can be charged to tax only alongwith the income for which reasons are recorded and if the income mentioned in the reasons is not relevant or is not concealed income then no other income can be taxed. It was contended that once the AO comes to the conclusion that income in respect of which he has issued notice was found explained his jurisdiction comes to a stop and he cannot tax any other income which comes to his knowledge subsequently after the issuance of the notice and thus when the income mentioned in the reasons is not found as escaped income no other income can be assessed u/s 148 For the said proposition reliance was placed upon ITO vs Lakshay Exim Pvt. Ltd. 131 TTJ (Del) 621. 8.9. In the context of the principle settled in ITO vs. Lakshay Exim reliance was placed on the following judicial pronouncements :- Authorities :- Cit Vs. Jet Airways India Ltd.331 ITR (Bom) 236 Cit Vs. Shri Ram Singh 217 CTR (Raj.) 345 Manoj Surgical Industries (2010)42 DTR (Indore)(Trib.)81 Cit Vs. Dr. Devendra Gupta 220 CTR (Raj.) 629 Cit Vs. Atlas Cycles Indu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the assessee on record it was re-iterated that in regard to the notice allegedly sent by post, is addressed as per record to the wrong address and the service of notice on Smt.Meenakshi Aggarwal is on a person not authorised by the assessee as such on a wrong person. Inviting attention to page 3 which is a letter addressed to the AO dated 23.11.2006. It was submitted that the assessee at the opening sentence itself states that that no notice u/s 148 has been served upon the assessee as such no return in compliance to the said notice was filed. Inviting attention to said letter it was submitted that it was stated that at the end of the letter that the proceedings are invalid and void ab initio as no notice u/s 148 has been served upon the assessee. 8.13 It was his vehement stand that right from the beginning the assessee has been consistently disputing the service of notice. The service of notice on any relative by the name of Meenakshi Aggarwal it was contended cannot be considered to be a valid service in terms of section 282 of the Income Tax Act. The notice it was submitted had to be served on the assessee and not on some lady mentioned as Minakshi Agarwal. It was cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to the residential address contended that in a small place like Bullandshahar mentioning of the address as 18/37 or 18/33 is not a major flaw and presumably the letter would have been received by the assessee as it has not been sent back unserved for the department. In regard to addressing the letter to M/s. Mohan Dairy, the only occupants would presumably be cows and buffallows as such the department may have considered it prudent to send the notice to the residential address by the post . It was also his submission that the AO has proceeded on his own satisfaction and the asstt. Order deserves to be upheld and the impugned order it was requested may be set aside. 10. We have heard the rival submissions and perused the material available on record. The judgments relied upon by the parties before the Bench and the orders of the co-ordinate Benches relied upon before the CIT(A) and before us by the Ld. AR as well as the Ld. DR have been taken into consideration. 10.1. On consideration of the facts and arguments thereon alongwith the legal principles canvassed before us by the parties before the Bench the undisputed facts which remain on record are that the information of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Kumar Aggarwal and Anil Kumar Aggarwal wherein the issue for consideration was the satisfaction of the AO based on information from AO Agra of bogus gifts for trusts created by Shri D.K. Agarwal on the basis of survey u/s 133A conducted on 22.4.2001 at the premises of Shri P.K. Aggarwal. The co-ordinate Bench dismissed the departmental appeal wherein the addition had been deleted on merit and considering the assessee s cross objection wherein the CIT(A) had upheld the proceedings u/s 147 the coordinate Bench relying upon CIT vs. Anita Jain and Vinita Jain s case reported in 299 ITR 383 held that the issue is covered by the principle set down in the said judgment in as much the AO accepted without verifying the correctness of the information received by him in a mechanical manner. The co-ordiante Bench has also relied upon Indra Prastha Chemicals (P) Ltd. vs. CIT 271 ITR 113 (All). In view of the peculiar facts and circumstances as they stand we are of the considered view that the departmental appeal does not have any merit. Being satisfied with the reasoning and conclusion arrived at by the CIT(A) and considering the same in the light of the settled legal principle the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mparison of the names of the bogus creditors with the list of those shown by the assessee was made by the ITO which was the investigation contemplated by the circular and when such names disclosed by the assessee were found in the list the ITO straightway recorded his prime facie positive belief that income had escaped assessment. In the facts of the present case as has been successfully demonstrated by the assessee that the names of the donors trusts in the information found has been verbatim recorded in the reasons and the assessee has never received gifts from those donor trusts. Moreover as per the reasons recorded the assessee was supposed to have received gifts by way of specific cheques and DDs amounting to ₹ 20 lacs and on a perusal of the assessment order page 3 it is seen that the gifts were received of ₹ 15 lacs. In this background the argument of the assessee relying upon the order of the coordinate Bench at Agra that AO has proceeded on borrowed satisfaction as no effort was made whatsoever to atleast to cross check the names of the donor and the amount of gifts received by the assessee. The fact that these were bogus gifts or genuine gifts would be an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of cash loan. Since the subsequent information was definite, specific and reliable notice for reassessment was held to be valid. The argument that it was a mere change of opinion was not accepted. When contrasted with the facts of the present case the record would show that the information of the different AO was suffering from inaccuracies and wrong facts which have been blindly accepted by the concerned AO as observed not only the basic names of the donors are entirely different even the amounts received as gifts is different. The fact that the entire exercise from receiving the information on issuance of notice is completed in a day supports the stand of the CIT(A) that the AO has proceeded on borrowed satisfaction in haste and mechanically and the present case cannot be guided by the principle laid down by the Apex Court wherein in the original assessment the claim had been allowed which was sought to be set aside on the basis of specific definite and reliable information.In the facts of Phool Chand it is seen that the concerned AO had formed his independent belief that income had escaped assessment. The concerned AO having entertained the doubts about genuineness o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted as correct and true contrary to what the record shows. The entire exercise having been completed in a single day leads us for the conclusion that the impugned order relying upon the order of the coordinate Bench in the facts as they stand has tobe upheld. In this background nothing has been placed by the department to canvass a contrary view except relying on the principles laid down in different judgments which proceed on facts peculiar to their own . In the facts of the Gujarat High Court in the case of Praful Chunilal Patel vs. M.J. Makwana/ACIIT, it is seen that the AO while making the assessment for the assessment year 1993-94 recorded his reasons in writing holding that income in 1991-92 assessment year had escaped assessment. By virtue of the fact that income chargeable to tax in the form of capital gains in respect of transfer was not taken into consideration. In view of the fact that the property was converted from capital assets to stock in trade and subsequently the property was sold to the firm and the capital gain arising from the transfer to the partnership firm had not been subjected to tax. As such in that background their Lordships of the High Court had an oc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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