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TMI Blog2021 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO further noted that during the assessment year under appeal assessee had made transactions in commodity with Multi Commodity Exchange (MCX) amounting to Rs. 107,89,34,900/-. Further information was called from MCX u/s 133(6) of the IT Act which shows that assessee had trading in Market to Market (MTM) and result is showing loss of Rs. 16,747/-. This loss is not declared in the return of income. The AO, therefore, estimated the income of assessee at Rs. 5 lakhs for doing the business activity. The AO also observed that generally it is seen that the broker takes/uses the margin money for trading which is provided by the client for initial trading given to the broker to exposure upto ten times of the margin money. AO further observed that the first transaction of the assessee was to the tune of Rs. 1,14,90,600/-. Hence, the amount of Rs. 11,49,060/- is considered reasonable amount be given by assessee to the broker for transaction in MCX. The AO, accordingly, made the addition of Rs. 11,49,060/-. 4. The assessee challenged the reopening of the assessment as well as both the additions before Ld. CIT(A). The submission of the assessee are reproduced in the impugned order in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A), however, confirm the addition of Rs. 11,49,060/- because complete details of the broker have not filed. 5. Ld. Counsel for assessee reiterated the submissions made before authorities below and has referred to copy of the reasons recorded for reopening of the assessment, copy of which is filed at page 37 of the appeal paper which is reproduced as under: Name of Assessee SH. VIKAS CHOWDHARY Address of Assessee C-5/14, MODEL TOWN-III, DELHI-110 009 PAN ANHPC3520H Assessment Year 2011-12 Details of the Assessing Officer having jurisdiction over the Assessee Income Tax Officer, Ward 36(4), New Delhi. Reasons for reopening of assessment in the case of Sh. Vikas Chowdhary AY 2011-12 u/s 147 of Income Tax Act, 1961 Sh. Vikas Chowdhary S/o Sh. Surender Singh Chowdhary R/o C-5/14, Model Town, Delhi-110 009. The assessee has not filed his Income Tax Return (ITR) for AY 2011-12. 2. In this case, NMS information was pushed into the ITD system that the assessee during the FY 2010-11 had made transactions amounting to Rs. 07,89,34,990/- with National Multi Commodity Exchange. It has been noticed that the assessee had not filed his ITR for AY 2011-12. Since the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has escaped assessment. 9. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, the matter is put up before the Pr. CIT, Delhi-12 for obtaining sanction within the meaning of section 151 of the Income Tax Act, 1961. Sd/- (Income Tax Officer) Ward 36(4), New Delhi." 6. He has submitted that AO has not mentioned any figure of amount in the reasons which has escaped assessment. AO made estimate of turnover and income only which is not based on any tangible material and ultimately the AO received the information u/s 133(6) from MCX that assessee has suffered loss of Rs. 16,747/- and, as such, there were no escapement of income in the case of the assessee. The AO recorded incorrect and non-existing facts in the reasons for reopening of the assessment. AO did not apply his mind to the information. The AO did not bring any material on record as to how much investment is made by assessee for doing MCX business. He has submitted that issue is covered by several decisions of the Tribunal, copies of which are filed in the PB. He has, however, heavily relied upon the order of ITAT Delhi 'E' Bench in the case of Shri Natarajan Moni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,747/- in MCX transaction in the assessment year under appeal. Thus, assessee was not required to file the return of income u/s 139 of the Act in respect of the loss suffered by assessee in assessment year under appeal. Section 149(1)(b) of the Act provides that "no notice u/s 148 shall be issued for relevant assessment year, -- if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that year". The AO in the present case, based his reasons for reopening of the assessment as per NMS information pushed into ITD system and information called u/s 133(6) from MCX. None of these information have provided if assessee has earned income of Rs. 1 lakh or more. Rather it merely provides the amount of the transaction conducted by assessee on MCX and ultimately assessee suffered loss in MCX transaction, therefore, there was no reason for the AO to believe that income chargeable to tax for Rs. 1 lakh or more have escaped assessment. Thus, the conditions of section 149(1)(b) of the Act are not satisfied in the present case. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 148 of the I T Act, 1961 was issued to the assessee on 11.02.2015, after duly recording the reasons. The assessee did not file his return of income. The A.O. issued statutory notice for completion of the assessment. The assessee filed information before A.O. which were discussed by the A.O. with the Counsel for Assessee. The A.O. noted that as per information available with him, assessee had received salary on which TDS had been deducted by the employer. The assessee has also made investment of Rs. 10 lakhs in the purchase of Mutual Funds and deposited cash of Rs. 52 lakhs in his ICICI Bank account in assessment year under appeal. Further the assessee had also made contract in commodity exchange exceeding Rs. 10 lakhs. During the course of assessment proceedings the assessee furnished copy of Form No.16, Form No 26AS, statement of his bank accounts maintained with different Banks, copy of the computation of income and documents relating to MCX business made with Aditya Birla Commodities Broking Ltd. The assessee also filed copy of the sale deed of property at Gurgaon Dated 21.03.2011 sold by assessee for a consideration of Rs. 1.20 crores. The A.O. issued detailed sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or more in commodity exchange and payment of Rs. 2 lakhs or more for purchase of units of mutual funds. He has submitted that these are incorrect information and did not relates to the assessee. He has, therefore, submitted that reopening of the assessment is illegal and bad in law and as such reopening of the assessment is liable to be quashed. He has submitted that no notice under section 142(1) or any query under section 133(6) have been issued. No letter have been delivered to the assessee. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below as regards reopening of the assessment. 6. We have considered the rival submissions and perused the material on record. It is well settled Law that validity of the re-assessment proceedings is to be judged with reference to the reasons recorded for reopening of the assessment. The copy of the reasons for reopening of the assessment are placed on record which reads as under : 1. Name and Address of the Assessee Monie Natrajan 1408, Beverley Part-II, DLF-II, Gurgaon. 2. PAN AAFPN2890N 3. Status INDL 4. Ward/Circle/Range Ward-2(5), Gurgaon 5. Assessment Year 2011-12 6. Date 11.02.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s totally wrong, incorrect and non-existing and thus the fact mentioned in the reasons recorded for reopening of the assessment as regards investment made in purchase of mutual fund is wrong, non-existing and incorrect. The A.O. has recorded wrong, incorrect and non-existing reasons for reopening of the assessment which is not permissible under Law. As regards the transaction in commodity exchange contract of Rs. 10 lakhs, Learned Counsel for the Assessee referred to para-3.3 of the assessment order in which the A.O. has made addition of Rs. 7,72,461/- on account of profit on the MCX business. The A.O. has also mentioned in the same para that in the show cause notice he has mentioned such income at Rs. 11,80,571/- which is appearing at page-3 of the assessment order, but, after examination this figure was also found incorrect and A.O. has ultimately restricted the addition to Rs. 7,72,469/- i.e., for income only but no addition is made of transaction of MCX Investment. Therefore, A.O. has recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment that assessee has made transaction in commodity exchange contract of Rs. 10 lakhs. It m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. to record reasons for reopening of the assessment as regards escapement of income for making the investment in purchase of mutual funds or transaction of different commodity exchange contract. Thus the entirety of facts clearly show that A.O. recorded wrong, incorrect and non-existing reasons for reopening of the assessment without application of mind. It may also be noted that A.O. himself has mentioned in the reasons that whatever information he has received through NMS needs examination in the light of information in his possession, but, he did not make any examination prior to recording reasons for reopening of the assessment and totally vague, non-existing, wrong and incorrect facts have been mentioned in the reasons recorded for reopening of the assessment. Further, the reopening of the assessment would be invalid if the A.O. wanted to make investigation out of information. Such exercise should have been prior to recording of the reasons. In support of our findings, we rely upon the following decisions. 6.2. The Hon'ble Punjab & Haryana High Court in the case of CIT vs., Atlas Cycle Industries [1989] 180 ITR 319 (P&H) held as under : "Held, (i) that the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew. There was nothing on record to show that the clerical mistake of substituting Rs. 20,56,145 for Rs. 69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed." 6.5. The Hon'ble Bombay High Court in the case of Siemens Information Systems Ltd., vs., ACIT & Others [2007] 293 ITR 548 (Bom.) held as under : "The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Co. (P) Ltd., 329 ITR 110 (Del.), the Hon'ble Delhi High Court held as under : ["No independent application of mind by the Assessing officer but acting under information from Inv. Wing - Notice U/s. 147 to be quashed". 6.10. The crux of the above Judgments had been that in case incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and A.O. failed to verify the information received due to non application of mind to information, reopening of the assessment would be unjustified and is liable to be quashed. Considering the totality of the facts and circumstances of the case and in the light of material on record, we are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. In view of the above, there is no need to decide other issues raised in the present appeal which are left with academic discussion only. Accordingly, appeal of the Assessee is allowed. 7. In the result, appeal of the Assessee allowed. Order pronounced in the open Court. ..... 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