TMI Blog2021 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... njustified and is liable to be quashed. Reopening of the assessment is illegal, 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. As may also be noted here that the AO without any justification and without bringing any material on record as to which broker assessee has given margin money for trading has made addition of ₹ 11,49,060/-. When the AO does not know as to who is the broker to whom alleged amount is given, AO was not justified in making estimate based on general information that assessee has given the impugned amount to the broker for transaction in MCX. Since, it is an admitted case that assessee suffered loss in MCX transactions, therefore, there was no justification to make estimated addition - Decided in favour of assessee. - ITA.No.9742/Del./2019 - - - Dated:- 1-2-2021 - Shri Bhavnesh Saini, Judicial Member For the Assessee : Shri Kapil Goel, Adv. For the Revenue : Shri Prakash Dubey, Sr. DR ORDER This appeal by assessee has been directed against the order of Ld. CIT(Appeals)-12, New Delhi dated 30.10.2019 for AY 2011-12, challenging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. Thus, the AO did not apply his mind for recording the reasons for reopening of the assessment. The reasons are based on guess work only. No exact amount is specified in the reasons for escapement of income. No bank account or any tangible material is brought on record for recording the reasons for reopening of the assessment. No prior enquiry is made u/s 133(6) of the IT Act or 142 of the Act prior to recording the reasons. Since no amount is quantified, therefore, it could not be unexplained investment made by assessee. When foundation fails, the super structure falls. The assessee relied upon judgment of the Delhi High Court in the case of G G Pharma India (ITA No. 545/2015) and Meenakshi Overseas (ITA No. 692/2016), etc. It was submitted that there is no nexus or live link between the material which had come to the notice of AO to form the belief that there was escapement of income in the case of the assessee. Both the additions are made without bringing any material against the assessee. The assessee paid only ₹ 100/- for opening the DMAT account in M/s Karobaar Commodities Pvt. Ltd. from his saving bank account. The assessee has given petty amount in cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 3. As the assessee has not furnished his ITR for the assessment year under consideration, the verification of the information vis- -vis the assessee s ITR is not feasible. 4. Letter has been issued on 20/11/2014, 26/02/2015, 01/07/2016 and 06/10/2017 to the assessee for furnishing his/her response in Compliance Module on the e-filing portal at http://incometaxindiafiling/gov.in . It was categorically stated in all the above-referred letters that the response has to be submitted electronically and the procedure for the same was also explained. 5. In this case, no return of income was filed for the year under consideration and the assessee has not responded to the letters issued by the undersigned to file the ITR by the assessee. In view of the information that the assessee had made transactions amounting to ₹ 107,89,34,990/- with National Multi Commodity Exchange during the FY 2010-11, the assessee s case is clearly covered by the Explanation 2 to Section 147 of the IT Act, 1961. Hence, it is a case where it shall be deemed to be the case where the income chargeable to tax has escaped assessment, which amounts to or is likely to amount to ₹ 1 lakh or mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ince, the Ld. CIT(A) has already deleted the addition of ₹ 5 lakhs, therefore, on the same reasoning further addition of ₹ 11,49,060/- shall have to be deleted. 7. On the other hand, Ld. DR relied upon the orders of the AO and submitted that AO was having sufficient material on record to record the reasons for reopening of the assessment. 8. I have considered the rival submission and perused the material on record. It is well settled law that validity of the reassessment proceedings is to be determined on the basis of the reasons recorded for reopening of the assessment. The reasons are reproduced above. The AO as per NMS information which was pushed into the ITD system came to know that assessee has made transactions amounting to ₹ 107.89 crores with National Multi Commodity Exchange. No return has been furnished by assessee. The AO, therefore, deemed that income chargeable to tax assessment in a sum of ₹ 1 lakh or more has escaped assessment. The AO, however, in the assessment order has clearly mentioned that he has also called for information from MCX u/s 133(6) of the IT Act intimating that assessee has suffered loss of ₹ 16,747/-. Thus, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO has reason to believe that income chargeable to tax has escaped assessment for any assessment year. However, in the present case, there is no material what to say of tangible material is available on record to establish that AO has reason to believe if income chargeable to tax has escaped assessment. The information of loss receipt from MCX was not deliberately mentioned by the AO in the reasons. Thus, the AO did not have any definite material or information to record/reasons that there is an escapement of income in the case of the assessee. The AO recorded incorrect and non-existing facts in the reasons recorded for reopening of the assessment. The AO did not apply his mind to the material on record before recording reasons for reopening of the assessment. The AO also failed to verify the information so received due to non-application of mind, therefore, reopening of the assessment would be unjustified and is liable to be quashed. The same view has been taken by ITAT Delhi E Bench in the case of Shri Natarajan Monie Vs. ITO (supra) in which it was held as under: IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES E : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... putation 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 ₹ 1.20 crores. The A.O. issued detailed show cause notice to the assessee and after considering the reply of the assessee, made certain additions and computed the total income at ₹ 84,37,210/-. The net income of the assessee is computed as under : 1. Income from salary as discussed in para 3.1. ₹ 4,34,338/- 2. Income from interest as discussed in para 3.2. ₹ 1,59,237/- 3. Income from MCX business as discussed in para 3.3. ₹ 7,72,461/- 4. Income from unexplained cash deposits as discussed in para 3.4 ₹ 59,50,000/- 5. Income from unexplained cash credits as discussed in para 3.5(i). ₹ 9,85,000/- 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 11.02.2015 Reasons for initiating proceedings u/s. 147/148 of the Income Tax Act, 1961. Informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-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 ₹ 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 ₹ 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 ₹ 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 ₹ 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 ₹ 10 lakhs. It may als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot provide any information to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting ₹ 20,56,145 for ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation and no prima facie opinion formed re-assessment order invalid . 6.9. In the case of Sarthak Securities 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, appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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