TMI Blog2016 (5) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... cided in favour of the assessee with this finding that the Assessing Officer was not justified to acquire jurisdiction to initiate reopening proceedings and the action of the Assessing Officer in this regard was not valid. The assessment framed in furtherance to the said initiation of reopening proceedings is thus also held as void ab initio and is quashed as such. - Decided in favor of assessee - ITA No. 115/Del/2012 - - - Dated:- 22-4-2016 - SHRI I.C. SUDHIR AND SHRI O.P. KANT For The Assessee : S/Shri Satyen Sethi A. Pandu, Adv. For The Department : Shri T. Vasudevan, Sr. DR ORDER PER I.C. SUDHIR: JUDICIAL MEMBER The Revenue has questioned first appellate order raising the issue as to whether the Learned CIT(Appeals) was correct in deleting the addition of ₹ 40,02,780 made by the Assessing Officer under sec. 68 of the Income-tax Act, 1961 treating the share application money as unexplained cash credits. 2. The assessee on the other hand has moved application under Rule 27 of the ITAT Rules, 1962 seeking permission to raise following ground: That in the facts and circumstances of the case and in law, the CIT(A) erred in upholding the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the burden lay upon the assessee was not discharged. He contended that report of the investigation wing does not show any linkage with the assessee to form a belief that any income chargeable to tax in the hands of the assessee has escaped assessment. The reasons to belief do not refer to the statement of alleged entry operators implicating the assessee. The Learned AR referred to the reasons to belief recorded by the Assessing Officer for initiation of the reopening proceedings with this submission that it is a apparent case of non-application of mind on the part of the Assessing Officer since similar figure have been repeated thrice against the same cheque No. dated 16.11.2002. He placed reliance on the following decisions: a) Signatures Hotel (P) Ltd., vs. ITO (2011) 338 ITR 51 (Del.); b) Sarthak Securities Co. (P) Ltd. vs. ITO 2010) 329 ITR 110 (Del.); c) Pr. CIT vs. G G Pharma India Ltd.- ITA 545/2015 order dated 08.10.2015 (Del.); d) ITO vs. Rajat Export Imports (P) Ltd., - ITA No. 2820/Del/2011 (A.Y. 2003-04) order dated 27.11.2015; e) Rasalika Trading Investment Co.(P) Ltd., vs. ITO ITA No. 3103/Del/2013 (A.Y. 2004-05) order dated 27.11.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor company, its acknowledgement of return, PAN, certificate of incorporation, ROC Data generated from the ROC Website, affidavit for payment of share application money supporting the identity of the investor company were filed and considering the same, the Learned CIT(Appeals) has righty deleted the addition in question. 9. We find that in its recent decision, the Hon ble jurisdictional High Court of Delhi in the case of Pr. CIT vs. G G Pharma India Ltd. (supra) has been pleased to summarize the jurisdictional requirement for initiation of reopening of the assessment under sec. 147 of the Act. The relevant paragraph Nos. 9 to 13 of the said decision are being reproduced hereunder for ready reference: 9. The Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were name-lenders and the transactions are bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as the decision of this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. v. CIT 308 ITR 38 (Del). The Court noted that a material change had been brought about to Section 147 of the Act with effect from 1st April 1989 and observed: 29. It is at once seen that the Amendment in Section 147 of the Act brought about a material change in law w.e.f. 1st April, 1989. Section 147(a) as it stood prior to 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has reason to believe that income of an Assessee has escaped assessment. However, the proviso to Section 147 of the Act provides a complete bar for reopening an assessment, which has been made under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 10. When we examine the reasons to believe recorded in the present case, reproduced hereunder, in view of the above de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional requirement is satisfied, a postmortem exercise of analyzing material produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. In the present case, the A.O. has not verified the information before banking upon it. We thus respectfully following the ratios laid down in the above decision of Hon'ble High Court hold that the initiation of reopening proceedings was not valid in the present case in absence of application of mind on the part of the Assessing Officer. As discussed above, the Assessing Officer has initiated the reopening proceedings solely based upon the information received from the Investigation Wing of the Department that the assessee was one of the beneficiaries and two entries from the entry operator. The issue raised in the ground under consideration is thus decided in favour of the assessee with this finding that the Assessing Officer was not justified to acquire jurisdiction to initiate reopening proceedings and the action of the Assessing Officer in this regard was not valid. The assessment framed in furtherance to the said initiation of reopening proceedings is thus also held as void ab init ..... X X X X Extracts X X X X X X X X Extracts X X X X
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