TMI Blog2017 (10) TMI 1377X X X X Extracts X X X X X X X X Extracts X X X X ..... nature - ITA No. 924/DEL/2015 - - - Dated:- 9-10-2017 - SHRI B.P. JAIN, ACCOUNTANT MEMBER For The Assessee : Shri Kapil Goel, Adv For The Revenue : Shri T. Vasanthan Sr. DR ORDER This appeal of the assessee arises from the order of the ld. CIT(A), Rohtak vide order dated 27.11.2014 for assessment year 2007-08. 2. Revised grounds of appeal were filed by the assessee, which are placed on record. Amongst various grounds of appeal taken by the assessee, main grievance and issue raised by the assessee-appellant before this Tribunal relates to validity of the proceedings under section 148 of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. Revised ground Nos. 1 and 1.1 were raised in the course of the hearing. Case law compilation running into 56 pages was also pressed during the course of hearing. 3. Facts, in brief, as narrated in impugned order are that on the basis of AIR information notice under section 148 of the act was issued by income tax officer Ward-2, Rewari on 16/03/2012 for the assessment year 2007-2008. The reasons recorded for reopening the case as reproduced on the very beginning of the order are again descri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantly the copy of the bank account which is made as basis of reopening was never gone through by the assessing officer while recording the purported reasons to believe. Without going to the contents of the entries in the bank account concerned merely deposits cannot be treated as income escaping assessment within the meaning of section 147/148 of the income tax act, 1961. 7.3 That reasons recorded in present case at best can be treated to be reason to suspect which is not sufficient for reopening the case under section 148 of the income tax act, 1961. While recording the reasons to believe merely relying upon financial information cannot be treated as good enough to reopen the case. There can be number of sources of cash deposits by the assessee in the bank account. Unless and until it is brought out in the reasons to believe as to how the cash deposits represent income from undisclosed sources same cannot give justification to reopen the case under section 147/148 of income tax act. The requirement of application of mind is missing in the present case on the face of it in the reasons recorded. It is cardinal principle of taxation that all receipts are not income and all income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enquiry letter and thus cannot be relied upon; that the proceedings initiated are based on surmises, conjectures and suspicion and therefore, the same are without jurisdiction; that the reasons recorded are highly vague, far-fetched and cannot by any stretch of imagination lead to conclusion of escapement of income and there are merely presumption in nature; that it is a case of mechanical action on the part of the AO as there is non-application of mind much less independent application of mind so as to show that he formed an opinion based on any material that such deposits represented income. Keeping in view the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. 10. This decision has been followed by Delhi tribunal in the case of Harmeet Singh in ITA No 1939/Del/2016 for assessment year 2008-2009, order dated 10/2/2017 enclosed at case law compilation in pages 1 to 28. Apart from aforesaid decision, the Delhi bench of ITAT decision in case of Bir Bahadur Singh reported at 68 SOT page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icate an income escaping the assessments and the factors which indicate a legitimate suspicion about income escaping the assessment. The former category consists of the facts which, if established to be correct, will have a cause and effect relationship with the income escaping the assessment. The latter category consists of the facts, which, if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. There has to be some kind of a cause and effect relationship between reasons recorded and the income escaping assessment. While dealing with this aspect of the matter, it is useful to bear in mind the following observations made by Hon ble Supreme Court in the case of ITO Vs Lakhmani Mewal Das [(1976) 103 ITR 437], the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement of the income of the assessee from assessment in the partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. 9. Learned Departmental Representative has referred to a number of judicial precedents in support of her stand that even deposits in the bank account, as having come to the notice of the Assessing Officer through AIR, can be reason enough for holding the belief that income has escaped assessment. She has relied upon the decisions in the cases of CIT Vs Nova Promoters Finlease Pvt Ltd [(2012)342 ITR 169] but then none of the questions before Hon ble High Court had anything to do with reopening of assessment and this decision can not, therefore, be taken as an authority on the legal issue which did not even come up for specific adjudication before Their Lordships. As for her reliance on Hon ble Supreme Court s judgment in the case of Phool Chand Bajrang Lal Vs ITO [(1993) 203 ITR 456], that was case in which Their Lordships concluded that the AO rightly initiated the reassessment proceedings on the basis of subsequent information, which was specific relevant and reliable, and after recording the reasons for formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecide the main legal issue in favour of assessee/appellant. Following this decision, whatever doubts have remained are cleared by the decision of this Delhi bench of tribunal in the case of Parveen Kumar Jain enclosed in case compilation at pages 29 to 38 the relevant extract of which is reproduced below: ....Further, the recourse of reopening u/s 148/147 is not to first issue the notice and then to proceed to investigate and find out if there was income assessable to tax which has escaped assessment rather it is pre requisite for issuing the notice u/s 148 that the AO on the basis of tangible material and information has legitimate reason to believe that income assessable to tax has escaped assessment. The belief must be based on a material which has direct nexus to the income assessable has escaped assessment and should not be guess work and to ascertain the same through the process of investigation. The provision of section 148/147 cannot be used such investigation to ascertain where income assessable to tax has escaped assessment. It is apparent that the reason for reopening was only on information of deposit of cash of ₹ 6 lac in the bank account. Therefore, the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. In the present case, what we find is that there is no nexus or live link between the material which had come to the notice of the Assessing officer, and the formation of his belief that there was escapement of income by the assessee which may be assessable to tax. Merely by mentioning the income of the assessee in the assessment year, and the investment made by him for the purchase of residential property, it cannot be concluded that the difference would automatically be the income which had escaped assessment. 13. The submission of learned counsel for the respondent-Revenue, that reading of the first paragraph of the reason records along with the third paragraph, would amount to the Assessing Officer concluding that the difference between the purchase price of the property and income of the assessee in that year was the reason for which reassessment no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening of the assessment held to be invalid therefore other grounds of the appeal become infractuous. 13. In the result the appeal of the assessee is allowed. 12. Apart from the above, the reliance placed by Ld. counsel for the assessee Sh. Goel on the decision of Hon ble jurisdictional Delhi High Court in case of Meenakshi Overseas reported at 395 ITR 677 is also supportive to the proposition that reasons recorded without independent application of mind, without tangible material, where link between the tangible material and formation of belief is missing, cannot be sustained. Following all these decisions to maintain consistency I have no hesitation in questioning the action of reopening under section 148 on basis of invalid reasons to believe. Accordingly, the legal ground raised is accepted and allowed. Other grounds are not dealt with which have become infructuous. 13. Before parting with this case, I draw the attention of the revenue authorities to the latest decision of Jurisdictional Delhi High Court in case of Sabh Infrastructure Ltd dated 25/09/2017 in W.P.(C) 1357/2016 wherein following guidelines are given in matter of reopening under section 148: 19. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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