TaxTMI 
TaxTMI 
2014 (7) TMI 291
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to the extent of 7.5% amounting to Rs. 2,73,887/- in respect of expenditure under various heads. 3. Revenue's appeal is against the part relief given by the CIT(A) on ground nos. 2 & 3 and are as under: "2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs. 3,23,00,550/- to Rs. 46,38,800/- and deleted the addition of Rs. 2,76,61,750/- made by the AO on account of unexplained cash deposits and not disclosing the same in the books of accounts. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition of Rs. 5,47,474/- to Rs. 2,73,887/- made by the AO on account of unaccounted expenditure not vouched properly and not verifiable." 4. Brief facts are: The assessee is the GSA for Saudi Arabian Airlines for passenger and cargo load and issues tickets to the various travel agents and direct passengers. During the course of its business the air tickets are sold in cash, issued on credit. Thus in regular course of business air tickets amounts are received in cash also. During the time of pilgrimage i.e. Haj etc. the assessee sells many air tic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 crores during the A.Y. 2002-03 out of which a large percentage are in cash and therefore the same is deposited in the books which is normal trade practice. A chart giving breakup of sales into passenger and cargo sales along with commissions earned thereon and the reasons for cash deposits are given herewith. As indicated in point number 1 above, we are annexing herewith copy of agreement between the firm and Saudia Airlines. The books of account of the assessee firm have been lost in a fire which took place in the office on 17/18 June 2003. We are enclosing herewith a copy of the FIR filed by the assessee firm for loss of books of account etc. 4.4. It was further contended that the fact that assessee is a duly recognized ticketing agent, books of a/cs were regularly maintained, duly audited by the CA; copies of bank statements and chart giving break up of sales in passengers and cargo segments were provided which fairly indicated that the alleged cash amounts were nothing but ticket receipts and were duly incorporated in books of accounts and deposited in bank. Besides, the balance sheet showed that the amounts collected from passen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....received qua sales of tickets which is evident from the corresponding purchase of tickets from the airlines (4) The entire ticket amount cannot be added as unexplained income of the assessee by any stretch of imagination as they are trading receipts only. (5) The fact that assessee's books of a/cs are duly audited, the sale of tickets is verifiable, the assessee earns a limited amount of commission, the entire amount of sales and the commission received tallies with the amount of tickets received in cash, all this evidence and the audit certificate cannot be ignored in the pretext of non-production of books of a/cs due to destruction in fire. The assessee has discharged its primary onus in terms of sec. 68 to explain the source of deposit by assessee owing purchase cash sale of air tickets. (6) The assessee has produced confirmations from various parties having paid in cash and as some of the parties having left for Saudi Arabia, are not traceable, their details were also furnished. 4.7. Ld. CIT(A) however, gave part relief by following observations: "I have gone through the assessment or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the PANs and addresses of the parties were duly marked to the AO who could have taken steps to further verify them in remand proceedings, but no effort was made by the AO to take any steps in this direction. It has already been submitted before me that most of these parties belong to the unorganized sector and a large portion of the sales have been made to the Haj related clientele whereby with a view to ensure receipt of money and reduce the risk of bad debts, payments in cash are insisted upon. Keeping in view the above and especially keeping in vie the facts that the cash deposits represent money received from debtors against the sale of passenger tickets, which has been corroborated by the documentary evidence filed before me and which has also not been refuted by the A.O. in any manner, I am of the opinion that it would not be correct to treat the said amount as unexplained money. This ground of appeal accordingly partly succeeds and the addition of Rs. 3,23,00,550/- is restricted to Rs. 46,38,800/-. The appellant firm gets a relief of Rs. 2,76,61,750." 4.8. Thus, the CIT(A) retained the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....false, vague and unreliable; assessing officer has recorded self contradictory reason and not recorded any satisfaction from his record that assessee has not recorded these transactions in its books of a/cs. Thus, the reasons recorded are absolutely false, have no connection with record. ED information being incorrect, on its own it cannot form a valid information for reopening without further proper verification on his part. The nonapplication of mind or purely a subjective satisfaction on the part of assessing officer make the reasons recorded having no valid basis what-soever for reopening. The assessee's return of income with all the relevant audit statements was already on the record. 5.2. The ld. Counsel further contends that the expressions 'reasons to believe' and 'income escaping assessment' have been interpreted by various courts. Accordingly there should be tangible material, valid information and a complete and direct link as to income escaping assessment so as to resort to the re-assessment provisions. It is also implicit in the above provisions that the reasons for resorting to the re-assessment proceedings should be duly recorded on valid and tenable r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee is to the effect that the information provided by ED was in first place totally wrong, in as much as from the assessee's statement and return of income it is apparent that the assessee disclosed all these cash transactions and bank deposits in its books of a/cs. ED is not a controlling or binding authority on assessing officer and a suspicion raised by the ED is required to be first verified. In order to make a belief as contemplated by sec. 147, assessing officer has to verify the information from assessee's record and come to a reasonable satisfaction that the suspicion raised in ED information is prima facie valid. In this case no such verification or application of mind is there which is evident from AO's self contradictory reasons as at one place it is mentioned that these transactions are recorded in books of accounts and at another place it is recorded that they have escaped assessment. The AO has blindly relied on the wrong information which at the most provides assumption by ED which is baseless from the record itself. 7.1. A simple look at the assessee's audited accounts and return of income would have satisfied AO that the assessee has disclosed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ra) has held that the amended words in section 147 i.e. "has reason to believe" are stronger than the words "is satisfied". The belief entertained by AO must not be arbitrary and it must be based on reasons which are relevant and material. The court though cannot go into the adequacy or sufficiency of the reasons but court can certainly examine whether the reasons are relevant and have bearing on the matter in regard to which the belief is exercised. 8.3. The Hon'ble Supreme Court in the case of Kelvinator India (supra) has also held that for assessing officer to reopen the assessment there should be tangible material to come to the conclusion and should have a live link with the formation of belief to come to a conclusion that there is escapement of income. 8.4. On similar lines, the Hon'ble Supreme Court in the case of Sheo Nath Singh 82 ITR 147 has held that the reason to believe must be that of a reasonable person based upon reasonable grounds; the assessing officer may act on direct or circumstantial evidence, but not on mere suspicion or vague information. If proper reason for his belief does not exist then the reopening of assessment will be without jurisdictio....