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TMI Blog2021 (2) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... ders such an exotic herbs, such as Ashwagandha, peacock feather and a host of items namely pyaaz, Aalu, Adrak and Seb. After considering the contents and nature of information available, the A.O. proceeded to initiate the proceedings under section 147 of the I.T. Act, 1961 for the assessment year under appeal. Notice under section 148 was issued on 13.04.2011, in response to which, assessee stated that return filed originally may be treated as return filed in response to notice under section 148 of the Act. The audit report of the firm stated that assessee-firm is engaged in trading, of machinery and auto parts. The assessee submitted that it is a partnership firm since 2001 and is engaged in business of import and export of auto parts. It was submitted that assessee is an exporter of stainless steel utensils, household kitchenware, adopter sleeve, rubber solutions, spanner etc. The assessee has one major customer M/s Navastar Trading Pte. Ltd. Singapore and all the sale bills are related to this Company only. The assessee firm has two partners. The A.O. during the assessment proceedings noticed that assessee has submitted copies of two bank accounts (i) Account no. xxxx43750 maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,259/- on account of unexplained bank deposit. The Ld. CIT(A), however, confirmed addition of Rs. 52,00,500/- on account of unexplained cash deposited in bank account of the assessee. However, as regards estimation of net profit, the A.O. was directed to disallow 10% of the total expenses of Rs. 6,37,883/- only. Balance additions were deleted. Thus, the appeal of assessee was partly allowed. 4. In the present appeal the assessee has challenged both the additions on account of unexplained bank deposit in the bank accounts and estimated the net profit as above. 4.1. The assessee has filed an application for admission of the following additional ground : "On the facts and circumstances of the case the jurisdiction of the AO under section 147 is bad in law, as there is no independent application of mind to the vague material for reopening of a matter and clearly a case of borrowed satisfaction, which is bad in law. On the facts and under the circumstances of the case the assumption of jurisdiction is bad in law as there is no live nexus between the reasons recorded and belief entertained vis-a-vis escapement of income, as is evident that finally the AO has assessed other income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olved in trading banned items across the borders such an exotic herbs, such as Ashwagandha, peacock feather and a host of items wide named" pyaaz", "Aalu", "Adrak" and "Seb." After considering carefully the contents and nature of the information available before me, I have reason to believe that income chargeable to tax has escaped assessment in the case of M/s. VSR Enterprises for the assessment year 2008- 09. Hence, proceeding u/s. 147 of the I.T. Act, 1961 initiated by issuing notice under section 148. Notice under section 148 issued for the 2008-09." Sd/- Pawan Kumar Vashist Income Tax Officer, Ward-49(4), Room No.1407, 14th Floor, E-2 Block, Pratyaksh Kar Bhawan, Civic Centre, New Delhi - 110 002. 7.1. Learned Counsel for the Assessee submitted that assessee is a partnership-firm engaged in the business of trading and export of various products. The A.O. has accepted the business income declared by assessee from export business and no addition have been made on account of assessee being engaged in any smuggling activity. Whatever the amounts have been mentioned of Rs. 72 lakhs in cash and Rs. 1.82 crores received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons recorded for reopening of the assessment. It would also show that A.O. did not apply his mind to the information received from REIC through ITO, Ward-43(4), New Delhi. The A.O. without any basis has recorded wrong, incorrect and non-existing reasons for reopening of the assessment. The A.O. also did not mention in the reasons that as to how much amount, the income chargeable to tax has escaped assessment in the case for assessee for assessment year under appeal. All these facts clearly support the explanation of assessee that A.O. without any cause or justification recorded wrong, incorrect and non-existing reasons for reopening of the assessment. The ITAT, Delhi E-Bench, Delhi in the case of Shri Natrajan Monie, Gurgaon vs., ITO, Ward-2(5), Gurgaon vide Order Dated 07.12.2020 in ITA.No.1817/Del./2017, relying upon several decisions of jurisdictional and other High Courts has held 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. The O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consideration of Rs. 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 Rs. 84,37,210/-. The net income of the assessee is computed as under : 1. Income from salary as discussed in para 3.1. Rs. 4,34,338/- 2. Income from interest as discussed in para 3.2. Rs. 1,59,237/- 3. Income from MCX business as discussed in para 3.3. Rs. 7,72,461/- 4. Income from unexplained cash deposits as discussed in para 3.4 Rs. 59,50,000/- 5. Income from unexplained cash credits as discussed in para 3.5(i). Rs. 9,85,000/- 6. Income from profit on redemption of MF/FD as discussed in para 3.5(ii) Rs. 1,32,174/- TOTAL Rs. 84,37,210/- 3.1. The assessee challenged the reopening of the assessment as well as additions on merit before the Ld. CIT(A). However, the appeal of assessee has been partly allowed. 4. Learned Counsel for the Assessee referred to the reasons recorded for reopening of the assessment which have been provided to the assessee under RTI Act, copy of which is placed on record. He has submitted that A.O. in the reasons mentioned that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Information has been received through NMS (P-1 category that during the period under consideration, the assessee had made investment of Rs. 200000/- for purchase of mutual fund and transaction in commodity exchange contract of Rs. 10,00,000/- during the assessment year 2011-12. As per record assessee do not have file return of income for the Assessment year 2011-12. The income chargeable to tax amounting to Rs. 1200000/- which is chargeable to tax has escaped assessment and any other income found during the course of assessment proceedings which is chargeable to tax has escaped assessment. I have reasons to believe that the above said income/transaction of Rs. 1200000/- and any other income found during the course of assessment proceedings which is chargeable to tax has escaped assessment which needs examination in the light of the information in my possession. Notice under section 148 of the Income Tax Act, 1961 is being issued. Sd/- Shamsher Singh Income Tax Officer Ward 2(5), Gurgaon." 6.1. In view of the above reasons, the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction in commodity exchange contract of Rs. 10 lakhs. It may also be noted here that A.O. in the assessment order in para-2 has mentioned that assessee has made investment of Rs. 10 lakhs in purchase of mutual funds which fact is also incorrect and is contradictorily recorded in the reasons for reopening of the assessment for Rs. 2 lakhs only. The A.O. in the assessment order has also recorded same statement that assessee has made contract in commodity exchange exceeding Rs. 10 lakhs which fact was ultimately found incorrect by the A.O. himself and he has made part addition as against the income mentioned in the show cause notice. These facts clearly show that A.O. did not apply his mind to the information received through NMS and also recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee has also referred to page-14 which is supplied to the assessee under RTI which according to assessee was asked under the RTI Act. The first page of the RTI reply PB-10 shows that assessee has asked for the copy of the reasons for reopening of the assessment as well as details which are basis of reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 ITR 319 (P&H) held as under : "Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make the reassessment." 6.3. The Hon'ble Delhi High Court in the case of Pr. CIT vs., SNG Developers Ltd., [2018] 404 ITR 312 (Del.) in which it was held as under : "Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs. 95,65,510. It was unacceptable that the Assessing Officer persisted with his "belief" that the amount had escaped assessment not only at the stage of rejecting the assessee's objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee. Therefore there was non-application of mind on the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition : Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind. (ii) That the income derived by the assessee from an industrial undertaking to which section 10A applies could not be included in the total income of the assessee. Therefore, the petitioner was right in filing the return ..... X X X X Extracts X X X X X X X X Extracts X X X X
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