TMI Blog2020 (1) TMI 728X X X X Extracts X X X X X X X X Extracts X X X X ..... r taking the alleged bogus entries. The details of the bank transactions also are found absent. The reasons recorded by the AO is totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. Requirement under the law has not been made in the reasons recorded in the instant case to reopen the assessment and, therefore, the reopening and consequent reassessment is not valid in the eyes of law and, therefore, all the consequent proceedings are null in the eyes of law. No adverse view could have been taken against the assessee. The allegation of attributing illegal conspiracy/activities etc. is hurled without any basis and therefore, on merits as well as on the legal issue the assessee succeeds and, therefore, since the assessee succeeds in respect of the legal issues itself, since the AO did not satisfy the condition precedent for assuming jurisdiction to reopen the assessment, the notice issued u/s. 148 itself is null in the eyes of law and, therefore, all the subsequent proceedings are null in the eyes of law and therefore, the reassessment order is quashed and resultantly all the three appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee. 7. For that the assessment was based on statement recorded in course of survey which have no evidentiary value and hence the assessment was bad in law. 8. For that the Ld. CIT Appeals was not justified in upholding the changing the head of income of the income earned from commodities. 9. For that the assessment was based on third party statement and ignoring the evidences filed by the assessee. The action of the lower authorities was not justified and hence the assessment order be suitable modified. 10. For that the assessment was based on diametrically opposite findings in the assessment order. The action of the lower authorities were not justified and hence the assessment order be suitable modified. 11. The appellant craves leave to press new, additional grounds of appeal or modify, withdraw any of the above grounds at the time of hearing of the appeal. 3. The ground nos. 1 to 5 are against the action of the AO to reopen the assessment without satisfying the jurisdictional condition precedent as required under the law. Since the issue raised in all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee guessing for reason. Reasons provide link between conclusion and the evidence .. . Therefore, reasons are to be examined only on the basis of the reasons as recorded. And the reasons to believe escapement of income which is a condition precedent to unlock the original assessment should be that of the Assessing Officer (AO) and it should be independent or not borrowed or dictated by any other authorities. The Hon ble Supreme Court has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instructions, then it will be a case of failure to exercise discretion altogether. (1995) 5 SCC 302. 4. The next important point is that even though reasons as recorded may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly, at the stage of recording the reasons for reopening the assessment all that is necessary is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to escapement of the income of the assessee from assessment. 5. With the aforesaid ratio decidendi and principles quoted by the judicial precedents laid by the Constitutional courts in the back-drop, when I examine the validity of the reopening of assessment by the AO, first of all I have to examine the reasons recorded by the AO for reopening the assessment. The reasons recorded for reopening can be seen reproduced at page 3 of the assessment order wherein the AO had reproduced the letter of the assessee objecting to the reopening, from where I have culled out the reasons recorded by AO which is as under: An information regarding systematic evasion of taxes by clients/members of the NMCE during the different financial years by misuse of the NMCE Platform pertaining to FY 2009-10 through bogus commodity trading have been received from DDIT (Inv.), Unit-3(1), Kolkata. Based on the Forward Market Commission (FMC) report that clients/member of the NMCE were found to be involved in creating artificial volume and suspected evasion of income tax by misuse of NMCE platform. Departmental database was also checked to identify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment it came to notice that the assessee s is one of the beneficiary who have taken bogus profit during the assessment year and trading was done through suspended/penalized brokers/members and most of the clients are found to be shell/dummy entities and the statement of entry operators/individuals have been obtained wherein they have accepted that loss which was booked was bogus loss/profit to facilitate accommodation of bogus loss/profit to the beneficiaries. 7. So, from the aforesaid discussion, when I analyze the reasons recorded by AO to reopen the assessment on a standalone basis it is noted that the information the AO received generally speaks of evasion of taxes by clients/members of NMCE by misuse of NMCE platform for the year under consideration through bogus commodity trading which has been passed to him by the DDIT (Inv.), Unit-3(1), Kolkata. Thereafter, the AO refers to the Forward Marketing Commission s report about misuse of the NMCE platform which has given a report about certain clients/members involved in creating an artificial volume and suspected evasion of income tax. (So, I note that both the information from DDIT (Inv.) and FMC are general in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s about checking up the departmental data base from where he realized that M/s. Avenue Delaers Pvt. Ltd. is a shell company and are managed by entry operators from Kolkata like Shri Devesh Upadhyay and his statement was recorded who revealed that he was into providing accommodation entries to various beneficiaries. Here also there is nothing to point a finger at assessee s before me. Thereafter, the AO concludes that from the information which is in possession of the department the assessee is one of the beneficiaries who have taken bogus profit through suspended/penalized brokers/members. The conclusion of AO does not have any nexus with the information which he discussed in the initial paragraph of his reasons. The reason to believe does not spell out any connection of assessee s with M/s. Avenue Dealers and what wrongful conduct of assessee has been detected by the Investigation Wing or FMC is discerned from the reasons recorded. Moreover, I note from the said reasons recorded by AO that no where it is stated as to how the assessee got profit which he has derived from the commodity trading with M/s. Avenue Dealers Pvt. Ltd. and what is the connection of assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of the considered opinion that such requirement under the law has not been made in the reasons recorded in the instant case to reopen the assessment and, therefore, the reopening and consequent reassessment is not valid in the eyes of law and, therefore, all the consequent proceedings are null in the eyes of law. 9. Moreover, I note that the assessee had objected to the reopening by submitting letter dated 07.12.2017 which has not been disposed of by the AO by passing a speaking order as required by the Hon ble Supreme Court in GKN Driveshaft India Ltd. Vs. ITO 259 ITR 19 (SC). The Hon ble Calcutta High Court in Sahara India Commercial Corporation Vs. DCIT 2002 CTR 501(Cal) held that the order passed on objection was bad in law being a non-speaking order. In such a case, the assessee should not be sent to the appellate authority. The assessee company was entitled to get the speaking order. Therefore, the assessment order as well as the order passed on the objections was set aside. Therefore, on this score also respectfully following the decision of the Hon ble jurisdictional High Court the action of the AO cannot be sustained. Further it is also noted from a pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as accepted that Shri Gopal Prasad Agarwal, Smt. Manju Devi Agarwal and Smt. Payal Agarwal (appellants before us) are registered as clients being members of the Exchange had made transactions in the commodity future products and not in shares and the Chief Compliance Officer of the Exchange has also provided all the details of the transactions made by the appellants to the AO and the AO could not find out any adverse material against the appellants. It is also noted that the Exchange member M/s. PKC Commodities Ltd. had surrendered the membership of exchange on 03.02.2012 and the year under consideration before us is AY 2010-11. In the light of the above, no adverse view could have been taken against the assessee. The allegation of attributing illegal conspiracy/activities etc. is hurled without any basis and therefore, on merits as well as on the legal issue the assessee succeeds and, therefore, since the assessee succeeds in respect of the legal issues itself, since the AO did not satisfy the condition precedent for assuming jurisdiction to reopen the assessment, the notice issued u/s. 148 itself is null in the eyes of law and, therefore, all the subsequent proceedings are null i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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